October 2015

The Senate is poised to take up a controversial cybersecurity bill that has drawn the ire of privacy advocates. Senate Majority Leader Mitch McConnell (R-KY) said he plans to begin debate on Oct 20 on the Cybersecurity Information Sharing Act (CISA), which would encourage private companies to share information about cyberthreats with each other and with the federal government. "We intend to pass the cybersecurity bill," Majority Leader McConnell said. "It enjoys significant bipartisan support and we think it's important. And we intend to see it through to completion hopefully early next week."

Before leaving for the August recess, Senators reached an agreement to vote on the bill as well as 22 amendments, which touch on everything from privacy protections for individuals to liability protections for companies. The vote, however, was post-poned, as the Senate dealt with other time-sensitive issues like the debt ceiling and President Barack Obama's nuclear deal with Iran. With no time agreement, voting on 22 amendments could take far more time than the Senate has to spare. For that reason, the bill's co-sponsors, Senate Intelligence Committee Chairman Richard Burr (R-NC) and Ranking Member Dianne Feinstein (D-CA), are working with other Senators to bundle a number of amendments together into a single "manager's" amendment. "There'll be some of the 22 that find their way [into the manager's amendment]," Chairman Burr said. "Probably eight or nine."

Verizon Communications plans to participate in 2016's incentive auction of 600 MHz broadcast TV spectrum, but the company is more interested in acquiring higher-band spectrum for capacity, according to a senior Verizon executive. Verizon CFO Fran Shammo noted that Verizon first deployed LTE using nationwide, contiguous 700 MHz spectrum. "That doesn't mean that we can't operate with 600," he said. "But 600 and 700 don't play well together. There's a lot of interference. So where we have 700 there would be a lot of work to deploy 600 MHz spectrum."

Shammo said there are areas where Verizon could use more lower-band spectrum, "but it's probably not the top priority. We like the higher band like AWS." There has been speculation that Dish Network and Verizon could strike a deal for Verizon to get access to Dish's spectrum, most of which sits around the 2 GHz band. The companies would need to strike a deal soon ahead of the Federal Communications Commission imposing anti-collusion rules that prohibit discussions of spectrum agreements ahead of the incentive auction, or would otherwise need to wait until the latter part of 2016 to make a deal after that auction ends.

[Commentary] Over the past five years the Federal Communications Commission either has, or has sought to, undermine a large part of the bi-partisan deregulatory achievements of the past two decades. On Oct 16, the FCC added on more item to this growing list when the Wireline Competition Bureau issued an Order launching an investigation into the contract terms of Special Access services offered by the nation’s largest phone companies (including AT&T, Centurylink, Frontier and Verizon). At the heart of the matter are claims by the large phone company customers (e.g., Sprint, Level 3, Windstream, BT Americas, XO, and so forth) that they are no longer happy with the terms of their contracts, including the terms for volume discounts that require the buyers hold relatively stable their purchases over the contract horizon.

The earlier FCC data request on pricing was, in the end, so limited that it will shed little light on the service. This new investigation will eventually reach its own dead end -- it’s targeted to a diversion and the deals it will study are too complex for regulatory control. What the Commission’s Investigation Order does do is signal once more to investors that this Administration is committed to shifting value out of the network core. As a result, investors will increase their assessment of risk in the sector with predictable consequences -- less competition and less investment.

Verizon may be selling off a sizeable piece of its wireline network base to Frontier, but the service provider will have a concentrated fiber-to-the-home (FTTH) base allowing it to effectively compete with Altice when the France-based company completes its Cablevision acquisition. Speaking to investors during the carrier's third-quarter 2015 earnings call, Fran Shammo, CFO and EVP of Verizon, said that it has surpassed its FiOS FTTH build commitments and will continue to invest in its overall wireline network.

"With the three divestitures in the South, they were more or less footprints that were not contiguous to anything else and most of that property was copper not fiber," Shammo said. "When we look at the East Coast, we'll have covered over 70 percent of the footprint with our FiOS product and we're very committed to it." Shammo added that "we're investing over $4 billion in our wireline company a year so that shows our capital commitment from a capital investment perspective."