CommLawBlog : Broadcast & Communications Lawyers & Attorneys : Fletcher Heald & Hildreth Law Firm : Telecommunications, FCC Regulation, Communications Act

The Universal Service Fund (USF) – it’s not just for telephone service anymore.

For more than a decade, the Universal Service Fund (USF) has subsidized (1) telephone lines in places where there isn’t enough of a business case for phone companies to build and operate them, and (2) monthly telephone service for people who couldn’t afford it. 

That’s not good enough anymore, according to the FCC. 

As the Commission sees it, high-speed Internet – broadband – is a necessity, not a luxury. Accordingly, the FCC is looking to re-direct some USF funds to support broadband. Most likely, this will take the form of a monthly discount on broadband for low-income households.

In moving broadband way up on the list of life’s essentials, the Commission may be getting ahead of many consumers. Affordability is undoubtedly one factor in broadband adoption, but there may also be a number of people who just don’t think it’s that important, or not worth the hassle, or too much of a privacy risk, or any number of other concerns. To change their minds, the FCC has decided to use a ploy familiar to the criminal element: it’s going to test how much free or discounted Internet Joe Consumer needs to get hooked on broadband.  As with any pusher, the FCC’s apparent hope is that eventually the consumer will become addicted and willing to cough up the full price.

Accordingly, in February, the Commission announced (in its overhaul of the USF Lifeline program) that it would be setting up a Pilot Program “to test how the Lifeline program could be structured to promote the adoption and retention of broadband services by low-income households”. And now, with a public notice released April 30, 2012, the Wireline Competition Bureau has followed up on that plan. The Bureau is making $25 million available to eligible telecommunications carriers (ETCs) to carry out “field experiments” on customers.

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[Blogmeister’s Note: This is the second in a series of posts by Bob Butler on the Fine Art of Telecom Transactions. In the first installment, he cautioned about the needs to plan early and to understand the structure ad interrelationships of the deal documents. In this and upcoming installments, he moves on to factors to watch out for in the drafting process.]

Tip No. 3 – Understand and Accommodate the Impact of Regulation

Telecommunications services are still regulated in various ways at the federal, state and local level in the U.S., and to even greater extents in many foreign jurisdictions. The good news is that such regulation will rarely give a vendor an excuse not to meet your reasonable requests for service or specific contract terms.  The bad news? Governmental regulation may still in some respects limit your vendor’s flexibility in providing the service; it can also increase costs (for both the vendor and, more importantly, you) through taxes and specialized levies such as universal service fund payments. 

What makes matters more difficult is the fact that the regulatory landscape is shifting in various, not necessarily predictable, ways. Contrary to what we’ve generally seen in the past two decades, the recent trend is to increase regulation for some previously regulated service, and to start to regulate previously unregulated offerings such as Internet and other IP services. These changes, which are occurring both in the U.S. and in other countries, can undermine the enforceability of previously negotiated terms, and they can complicate negotiations that are still underway.

To avoid the potential pitfalls created by the uncertainties of regulation, it’s important to conduct due diligence so that you understand the effect that both existing and potential regulation could have on your deal. And an essential added safeguard is an effective material adverse change (MAC) clause to permit you to make appropriate adjustments should regulatory changes, whether or not anticipated, adversely affect your interests after you’ve signed the deal.

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Last month we reported on an FCC action that may mark the end of the decade-long “white space” proceeding authorizing the operation of some unlicensed devices in the broadcast television bands. The Commission’s Third Memorandum Opinion and Order (3rd MO&O), released in early April, disposed of a handful of petitions for reconsideration of the agency’s 2010 decision which had in turn tweaked technical “white space” specs adopted back in 2008. The 3rd MO&O has now been published in the Federal Register, which means that, barring any extraordinary intervening event (like the issuance of a stay – the approximate likelihood of which is pretty much zero), the rules as modified last month will take effect on June 18, 2012. 

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Public interest communications “law firm and advocacy organization” closes up shop

Media Access Project (MAP), a long-time player in the soap opera that is communications law, has left the show. As of May 1, MAP suspended operations “after evaluating the difficult funding environment facing MAP and other progressive public interest groups.”

Founded in 1973, MAP assumed a variety of roles over the course of its 39-year history. To some it was a tough litigator, a thoughtful advocate, and a mouthpiece for a wide range of interests that might not otherwise have had a mouthpiece. To others, it was a self-promoting buttinsky given to advancing positions of questionable (if any) validity. A seemingly constant presence in the mainstream press, it could be a total pain in the tail to those with whom it disagreed. Many – maybe even most – “industry” representatives may have disagreed with many – maybe even most – of MAP’s positions and tactics. But MAP, apparently indefatigable and unquestionably resourceful, made its voice heard, for better or for worse.

MAP prevailed in a number of important cases before the Commission and the courts and succeeded in swaying legislative policy. But MAP’s more lasting impact will likely be the fact that it spawned, directly and indirectly, a new generation of like-minded organizations that will carry on MAP’s work into the 21st Century. The ongoing work of those organizations will be MAP’s true legacy.

The demise of MAP has a particular, personal, effect on this blogger.

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Internet expert returns to co-head Internet Law and Policy Group.

Fletcher Heald & Hildreth, P.L.C. is pleased to welcome Kathy Kleiman back into the FHH fold.  Kathy was an associate with the firm in the 1990s, but she left to explore the then-just-developing world of Internet Law (but not before she had co-founded the firm’s Internet Law Group, one of the first of its kind).  She now returns as FHH’s Internet Counsel to co-lead its Internet Law and Policy Group. 

To say Kathy is well-suited for the job is an understatement.  She helped found the Internet Corporation for Assigned Names and Numbers (ICANN), the organization that coordinates the domain name system without which the Internet wouldn’t be the Internet.  Kathy was a key drafter of the domain name dispute policy everyone uses today, and an editor of many sections of the rules governing new top-level domains.  She has traveled to ICANN meetings in more than a dozen countries on six continents and spoken on Internet Free Speech, intellectual property protections, fair use, privacy and due process around the world.

Kathy is Beantown-educated – Harvard undergrad, BU law (both with honors, thank you very much).  She currently lives in Falls Church, Virginia, where she dabbles in community leadership and politics when she’s not tending to her two kids.  In what passes for free time chez Kleiman, she is also producing a documentary about the six women who programmed ENIAC, the world’s first modern computer, and thus founded the field of modern programming. (Want to know more about Kathy’s background? Check out her extensive résumé here.)

Kathy will be working with clients on a wide range of projects relating to: domain name conflicts; challenges and opportunities likely to be encountered in connection with new top level domains; website protections; and Free Speech and intellectual property issues in the Internet age.  And, if the Blogmeister has anything to say about it, she’ll be a regular contributor here.

She can be reached at 703-812-0476, by email at Kleiman@fhhlaw.com, or at Skype ID Kathy.kleiman.

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[Blogmeister’s Note: In January Fletcher, Heald & Hildreth welcomed Robert Butler into the fold. Bob – whose extensive bio can be checked out here – has decades of experience in telecom contracting, the fine art of identifying a client’s telecom needs and negotiating to secure the capacity and services to meet those needs without (a) over-buying (i.e., ending up with more services or capacity than you want), (b) under-buying (i.e., getting less than what you really need), (c) over-paying, or (d) exposing yourself to unnecessary potential liabilities. Bob has graciously put together a set of tips that any party looking to deal with a telecom provider should keep in mind. The following -- which presents the first two of Bob's Top Ten Tips -- is the first of five installments.]

Buying telecommunications and related services presents a different kind of contracting challenge.  Such services are, of course, absolutely essential in the modern marketplace. But successfully arranging for just the right services is a far cry from buying paper clips at Office Depot.

Start with the expanding universe of constantly developing high tech products available, all swimming in a dense alphabet soup of acronyms – VANs/WANs, VPNs, VOIP, ISDN, DSL, ATM, MPLS, DS1s, 2s, and 3s, OC-1/10s, etc. Recognize that those products include a mix of regulated and unregulated offerings. Throw in the reality that many routine transactional documents often still include (at least in the initial go-round) contractual artifacts from a long gone monopoly era. Appreciate the fact that one’s particular situation often demands unique contractual provisions addressing specialized needs or concerns. And don’t forget the importance of minimizing exposure to liability that could arise from myriad potential worst case scenarios.

The bottom line is that a steady and experienced hand is indispensable to securing a customer-friendly deal. The following are prime examples of areas in which an experienced hand can and should assist anyone looking to arrange for telecom services.

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Meanwhile, FCC cranks up the Paperwork Reduction Act process

If you’re thinking about asking the FCC to reconsider its recent decision to move TV public files to an FCC-maintained cloud-based online system – or maybe if you’re more inclined to ask the courts to take a look at that decision – your deadlines for doing so have now been set. The Commission’s Second Report and Order, which we reported on last month, has now been published in the Federal Register. That means that (as dictated by Section 1.429 of the rules) petitions for reconsideration are due to be filed with the Commission no later than June 11, 2012.

On the other hand, thanks to 28 U.S.C. §2344, petitions for judicial review may be filed by July 10. Those can technically be filed with any of the federal courts of appeals, but heads up. If you’re hoping to have a particular circuit review the FCC’s order, you need to be mindful of the judicial lottery process and Section 1.13 of the rules. As implemented by the Commission, that process requires that, to be part of the judicial lottery, a petitioner has to file with the FCC’s General Counsel within 10 days of the Federal Register publication (in the case of the Second Report and Order in the public file proceeding, that would be May 21) a copy of its petition for review with the court of appeals of its choosing; that copy must bear a date/time stamp from that court proving that it was in fact filed. In other words, if you’re going to be picky about what circuit should hear the appeal, you’ve got to act much faster than the rules would otherwise allow.

This flurry of procedural dates does not, however, mean that the new public file rules are going to become effective in the immediate future. Before that can happen, the FCC has to run the new rules through the Paperwork Reduction Act (PRA) process, a process which the Commission has also just cranked up with a Federal Register notice. If you have any PRA-related thoughts to offer, you’ve got until June 11, 2012 to lob them in to the Commission. After that, the Commission will bundle up all the comments it receives and ship them over to the Office of Management and Budget, along with a supporting statement explaining why it think the new rules are consistent with the PRA. (The rules will then go into effect 30 days after the FCC announces in the Federal Register that OMB has approved the rules.  Check back here for updates on that score.)

By the way, according to the notice, PRA-related comments are supposed to address:

• whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility;
• the accuracy of the Commission's burden estimate;
• ways to enhance the quality, utility, and clarity of the information collected;
• ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology; and
• ways to further reduce the information collection burden on small business concerns with fewer than 25 employees.

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Announcement of OMB approval expected soon

If you’re planning on building a new tower, or significantly modifying an existing tower, in the foreseeable future, listen up. The Commission’s Wireless Telecommunications Bureau has issued a public notice laying out the new registration procedures that have been adopted (but not yet implemented) to provide pre-registration notice-and-comment opportunities relative to environmental considerations. We have previously reported on the new procedures; the public notice puts a little more meat on the procedural bones we have already described.

Who needs to worry about this? You do, if you’re:

planning to build any new tower that would have to registered through the FCC’s Antenna Structure Registration (ASR) system. The only exceptions are for (a) towers to be built on sites for which some other federal agency has responsibility for environmental review or (b) cases in which an emergency waiver has been granted.

modifying an existing registered tower by (a) increasing its overall height by more than 10% or 20 feet, or (b) adding lighting to a previously unlit structure, or (c) modifying existing lighting from a more preferred configuration to a less preferred configuration. (Helpful tip: the “most preferred” configuration is no lights at all; the least preferred is red steady lights. Anything else falls in the middle.)

amending a pending application involving either of the foregoing situations and the amendment would (a) change the type of structure, or (b) change the structure’s coordinates, or (c) increase the overall height of the structure or (d) change from a more preferred to a less preferred lighting configuration or (e) an Environmental Assessment is required.

If you’re in one of those categories, here’s what the Bureau will expect you to do once the new process takes effect.

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In its sprawling Report and Order and Further Notice of Proposed Rulemaking on the Universal Service Fund (USF) and Intercarrier Compensation, released last November, the Commission adopted (among a lot of other things) a number of changes to the various reporting requirements. Those requirements affected certain carriers, including competitive eligible telecommunications carriers (ETCs) and incumbent local exchange carriers. (Last December we described how many, but not all, of the extensive changes would affect wireless providers.)

Because many of the modified reporting requirements involved “information collections” subject to the Paperwork Reduction Act, they could not take effect right away. Rather, they had to be reviewed and approved by the Office of Management and Budget. That process has now been completed, according to a notice published in the Federal Register. As a result, a number of the rule changes adopted last fall have now become effective or applicable as of May 8, 2012.

The rules that have become effective are: Sections 54.312(b)(3); 54.313(b); 54.313(h); 54.314; and 54.320(b). The rules that have become applicable are: Sections 54.305(f); 54.307(b) and (c); and 54.313 (a)(1)-(a)(6).

Additionally, the Federal Register notice provides official notification to ETCs and other unspecified stakeholders that information required to be filed pursuant to Section 54.313(a)(2)-(6) and (h) must be filed by July 2, 2012.  Section 54.313 sets out the annual reporting requirements for high cost recipients.

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$300 million to be available for areas with poor broadband access

Following up on the landmark USF Order last fall in which it first adopted a plan to distribute Universal Service Fund money for broadband build-outs, the FCC has released a Public Notice setting out the basic ground rules for the “reverse auction” by which the money will be distributed. The Notice fills in some important gaps in how the whole process is supposed to work.  

As we have previously reported, the FCC is proceeding for the first time with an unusual reverse auction under which rights will be determined by the party which bids the lowest amount for the area in question.   In this case, carriers will be bidding to provide service to relatively high cost parts of the country provided they receive certain subsidies.   The company asking for the lowest subsidy to do the job will get the money and the attendant service obligation. Many of the key features of this auction remain subject to petitions for reconsideration, but the Wireless Bureau is nevertheless plunging forward to set the ground rules on the assumption that the auction will proceed largely as laid out in last fall’s USF Order.

In addition to the usual provisos, warnings, disclaimers, and notices that accompany every FCC auction, the Public Notice alerts us to the following:

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Commission adopts skeletal preliminary rules for sharing, but leaves plenty of important details to be worked out in future proceedings

And so it begins.

The Commission has adopted the first minimal rules paving the way for the repacking of the TV broadcast spectrum. The new rules are, at most, preliminary guide markers. In that respect they’re much like the seemingly inconsequential surveyor’s stakes that quietly appear as an early harbinger of the heavy-duty construction teams that will eventually re-shape the idyllic pastureland into a ten-lane highway. Like those surveyor’s stakes, they mark the beginning of a process that will likely lead to dramatic changes in the landscape.

As everyone by now knows, the Commission (with Congress’s clear support) is intent upon repurposing a substantial chunk of the spectrum currently used for over-the-air television broadcasting. The goal is to free up UHF spectrum for broadband use. The full technical details of how the FCC might hope to accomplish that have not been revealed (and may not even have been fully formulated as yet). But you’ve got to start somewhere, so the Commission has now taken its first step.

In its recent Report and Order (Channel Sharing Order), the Commission has opened the door – at least for the purposes of the incentive auctions that Congress has authorized – to permit channel-sharing by full-power and Class A TV licensees. (The Commission will consider channel sharing in non-auction contexts in a later rulemaking.) The channel-sharing concept, under which multiple TV licensees would share a single six MHz channel, arose a couple of years ago. It was also an integral component of the spectrum portion of the “Middle Class Tax Relief and Job Creation Act” (which the FCC refers to as the “Spectrum Act”) the Congress enacted last February. 

According to the new rules, when channel-sharing eventually becomes a reality, it will be subject to the following general considerations:

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Commission reverses decision released in January, 2012, but still defers further consideration of TTS technology

Back in January the Commission released its Fifth Report and Order (5th R&O) in its long-running effort to modernize the Emergency Alert System. Under the new rules (many of which became effective on April 23, 2012), EAS participants are required to be able to convert CAP-formatted EAS messages into messages that comply with the EAS Protocol requirements, following the procedures for such conversion as set forth in the EAS-CAP Industry Group (ECIG) Implementation Guide. 

One notable exception, though, involved the Guide’s provisions concerning text-to-speech (TTS) conversion. The Commission was not confident in the accuracy and reliability of current TTS technology. Additionally, the FCC figured that it might be preferable to require TTS conversion software to be utilized by the originators of EAS messages, rather than by EAS participants – the goal being to minimize the risk of “differing, and thus confusing” audio messages that might otherwise result.

Bottom line in January: the FCC mandated that TTS conversion would not be permitted, notwithstanding the ECIG Implementation Guide.

That decision was apparently news – and disappointing news, at that – to the FCC’s EAS regulatory partner, the Federal Emergency Management Agency (FEMA). FEMA fired off a petition for reconsideration, pointing out that, by prohibiting TTS conversion by EAS participants, the FCC was discouraging development of TTS technology. What’s worse, the lack of TTS conversion capability could “possibly disrupt dissemination of National Weather Service alerts, delay retrieval of referenced audio files in alerts, and impact the ability of jurisdictions with limited resources, or those with certain, already implemented CAP alerting capabilities, to issue CAP-formatted alerts.”

FEMA’s position was seconded by a number of state and local emergency management agencies, as well as the Commission’s own Communications Security, Reliability and Interoperability Council.

That was enough for the Commission. It has revised its rules to permit, but not require, EAS participants to follow the ECIG Implementation Guide with respect to TTS. In so doing, the FCC made clear that it was still not prepared to embrace the ECIG’s adoption of TTS software configured in EAS equipment to generate the audio portion of an EAS message; rather, consideration of that particular item has been deferred.

With the publication of the rule change in the Federal Register, that change takes effect May 7, 2012.

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The FCC has performed that annual rite of spring – its announcement of proposed regulatory fees for 2012. These are the reg fees that, for the vast majority of Commission regulatees, will be due and payable by a to-be-announced date (probably sometime in August or September). As with most ritual activities, there are no real surprises here: the rates are, with very few exceptions, proposed to go up. 

In general, the Commission figures that broadcast-related reg fees should get bumped up between 4-7% or thereabouts, depending on the type of facility in question and the market in which it’s located. There are some exceptions, though. For example, commercial VHF TV stations in Markets 51-100 would enjoy a nearly 9% reduction (amounting to $2,205) compared to last year’s fee, if the FCC’s proposal holds. And fees for UHF stations in Markets 11-25 would drop $1,000 (about 3%) from last year’s levels.

We’re attaching a grid providing the proposed 2012 fees along with some comparative information showing the changes from the fees actually imposed last year. (Red entries reflect 2012 fees that would go up over last year’s fees; the small handful of green entries reflect fees that would go down this year.)

As always, the Commission is giving everybody a chance to comment on the proposed fees. If you’ve got something to say about the proposals, you’ve got until May 31, 2012 to file comment with the Commission. Reply comments may be filed until June 7. 

Over and above the fees themselves, this year’s Notice of Proposed Rulemaking (NPRM) contains a couple of elements of interest.

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If you don’t think you can meet the January 1, 2013 deadline, NOW is the time to ask for a waiver.

Do you operate a commercial or public safety private land mobile radio system in the VHF (150-170 MHz) or UHF (450-470 MHz) bands?  If so, you must convert your systems to “narrowband” operation by January 1, 2013.  If you don’t, you face the possibility of interference from other users, FCC fines, or losing your license.  If you can’t make the switch by the deadline, now is the time to seek a waiver from the FCC to ask for an extension

Licensees have been on notice for about ten years of the impending narrowbanding deadline.  Most radios purchased since the late 1990s already have narrowband capability (i.e., they operate on 12.5 kHz channels or equivalent efficiency) and only need to be reprogrammed.  However, most older radios are destined for the trash heap.

The FCC will entertain requests for temporary waivers of the deadline.  Last year, the FCC spelled out what it wants to see in a waiver request, including reasons why the licensee cannot meet the deadline, its funding requirements, a description of what steps have been taken so far to comply, a schedule of work that must still be completed, and evidence that the delay will not harm other licensees in the region.

Until last week, land mobile radio licensees in the so-called “T-Band” (470-512 MHz) were also subject to the narrowband deadline (broadcasting industry readers may recognize the band as the home of TV channels 14-20, which is shared with land mobile radio in 11 major metropolitan areas).  However, since Congress has now mandated that spectrum occupied by public safety licenses in the T-Band be auctioned within nine years, the FCC relieved all licensees in that band of any narrowbanding obligations.  On the flip side, the FCC also imposed a freeze on applications for new T-Band systems and certain modifications to existing systems.  In a nutshell, the freeze bars any modifications that would expand the service area of a T-band system; it does not preclude adding units to existing systems or making other changes that do not expand the system’s service area.

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