July 2013

AT&T's 4G-LTE network has been rated faster than Verizon's network by four independent studies. Its coverage area is growing rapidly, and it will be available to just as many Americans as Verizon's 4G network by the end of next year. That's a far cry from where AT&T was just a few years ago.

After failing to anticipate how much bandwidth iPhone users would suck up with app downloads, Web browsing and video streaming, AT&T saw its 3G network became practically unusable in major cities such as New York and San Francisco. AT&T has consistently been rated the worst network by Consumer Reports readers since the iPhone launched six years ago. The network has ranked dead last in the magazine's customer satisfaction survey for three straight years. But perception and reality are diverging.

The political clout of Michael Peevey, president of the California Public Utilities Commission, could be waning.

This year, Peevey and the commission he has led since 2002 have been the target of legislative inquiries for the way it regulates for-profit electric, natural gas and telephone companies, limousine services and private water companies. Lawmakers are up in arms about perceived sloppy budgeting, alleged conflicts of interest and proposed punishment for Pacific Gas & Electric Co., whose safety procedures have been under scrutiny after the 2010 fatal natural gas explosion in San Bruno. Peevey, 75, of LaCañada Flintridge is even having trouble with his own commission members, all appointed by Gov. Jerry Brown. He was named to the PUC by Gov. Gray Davis and reappointed by Arnold Schwarzenegger.

On July 5, the Federal Communications Commission released an order allowing the applications of SOFTBANK CORP. (“SoftBank”), its indirect subsidiary Starburst II, Inc. (“Starburst II”), and Sprint Nextel Corporation (“Sprint” and, together with SoftBank and Starburst II, the “Applicants”) to transfer control to SoftBank and Starburst II of various wireless licenses and leases, domestic and international section 214 authorizations, earth station authorizations, interests in submarine cable licenses, and cable television relay service station licenses held by Sprint and its subsidiaries, and the various wireless licenses and leases held by Clearwire Corporation (“Clearwire”). The Applicants also requested a declaratory ruling that it is in the public interest for the foreign ownership of Sprint and its licensee subsidiaries to exceed the 25 percent foreign ownership benchmark in section 310(b)(4) of the Communications Act of 1934 (the “Act”).

Based on the record and the FCC’s review of the competitive effects of the proposed transactions – the acquisition of Sprint by SoftBank and Sprint’s acquisition of 100 percent of the stock of Clearwire – the FCC finds that approval of the transactions will serve the public interest. The FCC notes at the outset that the investment by SoftBank in the U.S. market differs from wireless transactions in which two domestic competitors with overlapping service areas or spectrum holdings are seeking approval to merge, thereby eliminating an existing competitor. Rather, SoftBank, which has no attributable interests in any spectrum licenses in the United States, is seeking approval, inter alia, to use approximately $16.64 billion to purchase shares from existing Sprint shareholders, and plans to provide an additional $5 billion to Sprint that it can invest in its network and use to provide wireless broadband service.

The FCC finds that these proposed transactions are not likely to result in competitive or other public interest harms in the provision of mobile wireless services. In addition, the FCC anticipates that the proposed transactions likely will result in key public interest benefits, acceleration of deployment of advanced mobile broadband services and enhanced competition in the mobile wireless market, through the increased investment by Softbank in the Sprint and Clearwire networks.
Further, the FCC finds that the indirect foreign ownership of Sprint and its licensee subsidiaries by SoftBank complies with section 310(b)(4) of the Act. Finally, in response to petitions for reconsideration, the FCC affirms that the Wireless Telecommunications Bureau properly processed as pro forma the applications that were filed to effectuate the transfer of the shares in Clearwire held by Eagle River Holdings, LLC to Sprint. Thus, the FCC concludes that the transactions are in the public interest, and approves them subject to the conditions contained herein.

Revelations of U.S. spying on Chinese universities and businesses risk undermining cybersecurity talks with China scheduled for next week. The Obama Administration had hoped to press China on the issue during the fifth round of the U.S.-China Strategic & Economic Dialogue. Instead, it finds itself on the defensive amid former contractor Edward Snowden's allegations that the National Security Agency has been spying not only on the Chinese government but on universities, students and businesses as well. “The U.S. in the cyber arena is trying to draw a bright red line,” said Kenneth Lieberthal, a former senior director for Asia at the White House who's now with the Brookings China Center. “I think the Snowden revelations clearly give China an increased opportunity to muddy the waters.”