FCC

Looks Like USF Reform Delayed Until Next Year

Bernie — Wed, 03 Dec 2008 09:45:42 -0500

Anticipation has been building for the past few months about universal service fund (USF) and intercarrier compensation (ICC) reform. The FCC was originally set to vote on historic changes to the multi-billion dollar telecom settlement process this past Election Day. The debate was then delayed to December 18th. Now December 18th looks unlikely, since the FCC just extended the public comment deadline on USF reform until December 22nd. The debate and its resulting reform has huge implications for the competitive landscape and the telecom industry as a whole. USF and ICC are revenue lifelines for hundreds of telecom service providers across the U.S., and also help fuel pitched battles between telecompetitors.

This delay all but ensures reform won’t be addressed until the new Obama administration is in place. FCC Chairman Martin has spearheaded the reform movement, but his days as chairman are numbered. Safe to say, the reform agenda will probably look somewhat different when democrats become in charge of the FCC, and have more power to shape the agenda and debate. Some were suggesting that this reform movement was going to be Martin’s “swan song” as he departed the FCC. Looks like he’ll have to find some other cause to champion in his few remaining weeks.

Verizon-Alltel Merger Provides Roaming Guarantees

Bernie — Tue, 04 Nov 2008 11:56:00 -0500

The “horse trading” effect was strong at the Portals, headquarters of the FCC, today. Today’s historic FCC meeting was delayed by over four hours as dealmaking between commissioners took place before their votes were counted on issues with significant competitive implications. One of those decisions will potentially create the largest wireless service provider in the U.S., as Verizon’s merger with Alltel was approved. Assuming it still makes financial sense, Verizon will surpass AT&T as the biggest wireless kid on the block, with 70 million+ subscribers. Conditions that were placed on the merger include divestiture of additional markets, including the entire states of North and South Dakota and guaranteed roaming requirements.

The roaming requirements are of particular interest because of their impact on the wireless sector competitive environment. Roaming revenue is crucial to the cash flow of smaller rural and regional wireless carriers. These same carriers feared that the market power of a company the size of the new Verizon could simply change the rules on roaming and dictate unfavorable, and perhaps crushing, terms. Those interests pushed for hardline roaming requirements to be attached to any merger approval. What they got was four years. The FCC’s approval of the merger is contingent on the new Verizon guaranteeing that both Verizon’s and Alltel’s current roaming agreements will remain in place for at least four years. The devil is in the details, and the exact terms of these contingencies won’t be fully understood until the final ruling is examined. Some will ask that while four years does provide some stability, what happens in year five?

Upcoming FCC Meeting Holds Huge Competitive Implications

Bernie — Thu, 16 Oct 2008 16:48:32 -0400

Decisions made at the upcoming FCC meeting on November 4th could significantly impact telecom’s competitive landscape. The tentative agenda includes two huge wireless merger approvals, a vote on the “whitespace” unlicensed spectrum order, and revamping of the intercarrier compensation system used among telecom carriers. The wireless merger decisions include the Verizon – Alltell and Clearwire-Sprint sprint deals. The “whitespace” inititiave uses spectrum in the “whitespaces” between television channels that will be freed up upon the digital TV transition. This spectrum is prized because of its good propogation and the significant amount of spectrum that will be available. There is significant opposition from broadcasters and established wireless carriers, including T-mobile, who argue that the use of this spectrum will create serious interference problems for their services. Here’s a breakdown on some of the potential implications if these initiatives pass muster on the Nov. 4th meeting.

Implications from the Verizon-Alltel deal include:

A combined Verizon-Alltel will create the largest wireless carrier in the U.S., surpassing the current number one carrier AT&T
As a condition of the merger, the new entity will have to shed numerous rural markets (approx 100 at last count), opening the door for potentially new competitors in those markets

Implications of the Sprint-Clearwire deal include:

Formation of a true nationwide WiMAX operator, who could potentially offer a third broadband pipe option into the home
Empowerment of several large cable companies to offer their own branded broadband wireless service
A first to market lead of months (maybe years) over other 4G competitors

Implications of the “whitespace” initiative include:

The potential empowerment of numerous competitors who can offer yet another broadband wireless option, who some call Wi-Fi on steroids
Potential interference with existing wireless carriers and broadcasters that will have to be resolved
Potential for a plethora of new wireless devices and applications that are designed to take advantage of the new connectivity.

The implications of intercarrier compensation (ICC) reform are really too complex and lengthy to list in a blog post. ICC is a set of rules that dictates how telecom carriers compensate each other for interconnecting calls. It’s a myriad of state and federal rules that is so complex that the reality of this being resolved at this upcoming FCC meeting is laughable. There are billions of dollars at stake and entrenched special interests of large and small wireline carriers, wireless, Internet, and cable companies, most of whom have powerful influence in Washington. If there ever were a contentious issue in telecom policy, this is it. It’s going to take real leadership to reform the system, and with a new administration on deck, it’s highly unlikely that this issue will be dealt with in any meaningful way until next year. If reform does happen, and that’s a big if, it could fundamentally change the telecom system as we know it, with winners and losers, and probably a lawsuit or two to boot. Should be an interesting meeting

Is Broadband Access a Civil Right?

Bernie — Tue, 22 Jul 2008 10:27:44 -0400

The FCC recently conducted a hearing on the future of broadband and digital media at Carnegie-Mellon University in Pittsburgh. Among the typical fanfare at FCC meetings like this, an interesting point of view emerged from FCC Commissioner Michael Copps. In his opening remarks, Copps likened broadband access to a civil right. In regards to broadband, Copps says, “no matter who you are, where you live, how much money you make, whether you are young or old, rural or inner city, healthy or dealing with a disability, you will need—and you are entitled—to have these tools and services available to you. I think it’s a civil right; I really do.” I wonder where he thinks broadband get’s placed in the civil rights pecking order. Maybe before the right to vote, but after liberty.

We all know that broadband’s adoption is slowing. We also know that the more educated and affluent you are, the more likely you are to have broadband in your home. Probably the biggest challenge to broadband ubiquity is cost. Cost both to network providers for building it out, and to the end user for purchasing it. Until such time that those costs are dramatically lowered (either through free market economics or regulatory subsidies), this new “civil right” will certainly not be available to everyone. Is Copps likening of broadband to a “civil right” entitlement realistic? If so, how will we breakthrough through the current slowing broadband penetration rate to achieve it?

Congress: Wireline to Wireless Porting is Too Slow

Bernie — Mon, 21 Jul 2008 10:08:30 -0400

In the hyper competitive world of wireless, telephone numbers can be ported to competing carriers within hours. Several members of Congress have written the FCC, demanding comparable portability timelines for wireline to wireless number portability. Currently, porting a number from a wireline carrier to a wireless carrier can take up to four business days. To address the issue, Senate Commerce Committee Chairman Daniel Inouye (D-Hawaii) and Vice Chairman Ted Stevens (R-Alaska) introduced the Same Number Act (S.1769) which would “…require the commission to establish number portability performance standards for all voice service providers.”

RCR Wireless is reporting that members of Congress have written the FCC, urging this issue to be addressed by “month’s end.” FCC Chairman seems to be in agreement, at least in principal. He’s quoted in the RCR article as saying, “I think it would be a good thing for the commission to try to address, to harmonize our local number portability [guidelines] so the amount of time of taking a number from carrier to carrier is shortened and consistent from platform to platform.” The issue adds more fuel to an already ugly fire, from a wireline carrier’s point of view (especially those who don’t have wireless assets). Wireline substitution, in favor of wireless, is the revealing reality of the today’s competitive landscape. Making it even easier and more seamless for consumers to cut the cord makes the implications even more intense.

Verizon Loses Again

Bernie — Fri, 18 Jul 2008 09:47:40 -0400

Verizon lost its stay request concerning their win back marketing saga. Cable companies filed a formal complaint with the FCC claiming that Verizon was illegally trying to “court” customers back after they decided to switch phone service to a competing cable company. In a strange turn of events, the FCC Enforcement Bureau sided with Verizon, but FCC commissioners voted in favor of the cable companies. Verizon then appealed to the U.S. Court of Appeals for the D.C. Circuit, which voted 2 to 1 to reject Verizon’s stay request, which in effect keeps the FCC decision in place and prevents Verizon from using these win back tactics. It’s a rare loss for a large incumbent, and a big win for its cable competitors.

Verizon: Not So Fast FCC, Cable

Bernie — Tue, 01 Jul 2008 23:43:26 -0400

Verizon intends to have the last word on their “winback” marketing tactics. They were recently rebuffed by the FCC and told to stop contacting customers to attempt to win them back after receiving a competitor number porting request. Verizon filed a petition with the U.S. Court of Appeals for the District of Columbia, seeking to stay the recent FCC decision. Verizon is using the first amendment right of free speech as the core of their argument, arguing the FCC decision violates this right. Verizon is also arguing the decision violates section 222(b) of the Communications Act of 1996. Look for this to drag out for a while. Get the details from this Light Reading post.

Free Broadband Wireless Debate Continues

Bernie — Mon, 23 Jun 2008 11:17:07 -0400

The FCC is seeking comments on its plan to auction AWS-3 spectrum with a mandate that the winner provide free broadband wireless coverage to 95% of the population after 10 years of winning the license. The mandate would require the licensee to set aside at least 25% of their network capacity to provide broadband service of 768K downstream (or better), free of charge. In addition, the licensee would have to filter out content that would be objectionable to children and families. This FCC Further Notice of Proposed Rulemaking focuses on AWS spectrum in the 1915-1920 MHz, 1995-2000 MHz, and 2155-2180 MHz bands.

This rulemaking looks to be a breeding ground of lawsuits, should it move forward as presently discussed. There is huge opposition on multiple fronts. Existing AWS spectrum holders, including T-mobile claim considerable interference challenges to this plan. Considering the billions T-mobile is spending on both AWS spectrum and a 3G build out, they certainly plan to be heard on this issue. Additionally, all broadband carriers (wireless or otherwise) are not exactly thrilled at the “free” service mandate associated with this auction. After all, it’s kind of hard to compete with free. A wireless 768K service certainly does not send shivers down the backs of providers of multi-megabit broadband service offerings, but it’s the precedent that is scary. A contrarian view says that such a development might actually be beneficial to broadband carriers. Consumers who choose a 768K service certainly won’t be pleased with it for long. Perhaps it will serve to whet their broadband appetites for something more robust, and lead them to better and fee based broadband services. Whatever the case, expect this issue to get a lot of opposition and a ton of debate before ever seeing the light of day.

FCC to Side With Cable Against Verizon

Bernie — Fri, 20 Jun 2008 12:11:38 -0400

Verizon lost one at the FCC. Cable competitors brought a complaint against Verizon regarding some customer win back tactics being used by the phone giant. The complaint alleged that upon receiving a telephone number porting request to a cable competitor, Verizon would contact the customer in question and try to “win them back.” Cable companies claim such tactics were not only unfair, but illegal. The FCC issued a Memorandum Opinion and Order against Verizon and in support of the cable companies complaint. It's somewhat of a surprising development, considering the FCC's own enforcement bureau came out with an opinion siding with Verizon. Apparently several FCC commissioners were not impressed with that opinion.

Verizon did fire back against the original complaint, and issued a complaint of their own regarding the process to switch video service providers. Verizon claims that the process for video switching requires the customer to initiate action with the existing provider, whereas a telephone switch does not. Both points seem to be valid. Whatever the process, it should be comparable and equal. Both telcos and cablecos should have an equal chance to “eat each others lunch.”

Interim USF Cap May Slow Wireless Substitution in Rural Areas

Bernie — Sun, 04 May 2008 00:00:00 -0400

The FCC recently instituted an interim cap on universal service funding (USF) for competitive eligible telecommunication carriers (CETCs). CETCs are primarily wireless carriers who have qualified for USF subsidies. These subsidies have been somewhat of a catalyst for building out wireless infrastructure in rural areas. The CETC issue has created controversy because CETCs have been getting USF support based on the costs of the incumbent wireline provider in the territory they want to overbuild with wireless. Wireline infrastructure is much more costly to build than wireless, and thus CETCs have been gaining somewhat of a “windfall,” because they receive subsidies based on a higher cost model than what their actual costs are. It has led to accelerated growth in the high cost fund of the USF program. CETC support was about $1.5 million in 2000 and close to $1 billion in 2007. The cap will be in place until more comprehensive USF reform takes place.

Pivot Media estimates annual wireless substitution rates to average about 2.3% for small rural wireline carriers and 5.7% for larger multi-state rural providers. An argument can be made that the past CETC USF structure certainly contributed to these growing wireless substitution rates. According to Bennet and Bennet’s Rural Spectrum Scanner, “…annual support for competitive ETCs will be capped at the level of support that they were eligible to receive in each state during March 2008. States may still designate additional ETCs, but the new entrants will have to share diluted support with established competitive ETCs.” This interim cap may slow additional rural wireless deployments, and thus temporarily slow wireless substitution in rural areas. Many rural carriers have identified wireless substitution as their most immediate competitive threat.