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

Better late than never, FCC tosses five-year-old petitions for reconsideration of 700 MHz rules.

700 MHz licensees who have been holding their breath and turning blue while waiting for the FCC to rule on petitions for reconsideration they filed more than five years ago may now gulp some air.   The FCC has taken a quick break from its usual tasks of unleashing broadband and unlocking spectrum to act on that lingering bit of unfinished business.  

In August, 2007, the FCC released its 700 MHz Second Report and Order (2nd R&O) establishing the critical service rules that govern licensing and operations in the 700 MHz band.   As could be expected, the 2nd R&O caused dismay to some industry players, leading ten companies to file petitions for reconsideration addressing, by our count, more than 20 different aspects of the 2nd R&O. The petitions, all filed in September, 2007, languished while the Commission conducted auctions, ultimately awarding 700 MHz licenses worth billions of dollars. In fact, so much time has gone by that the first build-out deadline for those licenses (i.e., June 13, 2013) is fast approaching. The FCC must have decided that it should probably rule on the petitions that had challenged many of the build-out parameters from the get-go.

For example, for many 700 MHz licenses, the build-out rules require that 35% of a market’s geography be covered at the first benchmark. This contrasts sharply with the usual population-based coverage requirements that apply in most other services. The distinction is critical for carriers who find themselves required to provide service to geographic areas where there are no people, often at greater expense than would be necessary to serve areas where people are actually clustered. Many 700 MHz licensees now feverishly building out their markets could have used relief from this requirement, as was requested by a number of the petitioners.

But it was not to be.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

FCC transmutes mobile satellite licenses into terrestrial/satellite licenses.

We reported in last May’s edition of FHH Telecom Law that the FCC had proposed to alter the satellite licenses held by affiliates of DISH Network to allow terrestrial operations.   DISH had bought the licenses out of bankruptcy proceedings, the satellite-oriented mobile communications business having proven not to be a viable business model, at least in this band for the original holder of the licenses. In connection with that acquisition, DISH urged the FCC to modify its licenses to permit (in addition to the Ancillary Terrestrial Component  (ATC) of those licenses) terrestrial service without any concomitant obligation to provide satellite service. 

The FCC had already made such terrestrial-sans-satellite service possible in 2011 by reallocating the pertinent 2 GHz band to permit, on a co-primary basis, both satellite communications and terrestrial fixed/mobile communications. All that remained was for the Commission to create technical and service rules for the new terrestrial service in this band (to be dubbed AWS-4) and modify the licenses accordingly. The Commission has now done that by a Report and Order issued just in time to be placed under DISH’s Christmas tree.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

FCC opens inquiry into whether, and how, and how much, wireless spectrum holdings should be limited.

It’s undeniable that a small handful of carriers control an overwhelming amount of mobile spectrum in the U.S. Many observers of the communications landscape believe that that intense concentration has reached alarming proportions. Unfortunately, to date federal regulators have not tended to be among those hand-wringers.

As a result, Verizon and AT&T, and to a lesser extent Sprint and T-Mobile, have increasingly gobbled up huge chunks of spectrum both through auctions and in secondary market transactions, leaving only the crumbs for smaller carriers to squabble over. Often the FCC auctions the spectrum in increments covering huge territories – Regional Economic Area Groupings (REAG) or Major Economic Areas (EA) – that span as many as ten states. Such vast areas are too big for a small or medium sized carrier to handle and usually more than even the largest carriers can hope to build out in a reasonable timeframe.   So a considerable amount of spectrum lies moldering in the larders of the largest carriers for a rainy day while smaller carriers cannot fulfill their customers’ basic needs.

Now the FCC has decided to take a fresh look at its policy on mobile spectrum holdings. In a Notice of Proposed Rulemaking released in September (and published in the Federal Register in early October) , the FCC has opened a far-ranging and much needed inquiry into all aspects of the spectrum accumulation issue.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Commission acknowledges numerous competitive downsides to deal, but still says “No Problem”

In recent years the FCC could justly be accused of never having met a merger it didn’t like. While regularly grousing, huffing, and puffing about consolidation in the wireless industry, the FCC has just as regularly approved all mergers and acquisitions that came before it, with the notable recent exception of the AT&T/T-Mobile merger. This “raise eyebrows but approve” policy is one of the reasons that the wireless industry in the United States is more consolidated than at any time since the break-up of the old AT&T more than 25 years ago.

By mustering up its resolve to derail the AT&T deal, the Commission gave hope to progressives that the FCC and Department of Justice had gotten some trust-busting mojo. But the FCC seems to have now retreated back into its “anything goes” posture. The most recent example is its approval of Verizon’s acquisition of large chunks of AWS spectrum across the United States.

In a blockbuster deal, Verizon proposed to acquire a host of AWS licenses from SpectrumCo (composed of several major cable companies) and Cox Cable, who had bought the licenses in a 2006 FCC auction. The cable companies had intended to use the spectrum to launch their own wireless operations in competition with the major cell phone carriers. After years of trying unsuccessfully to develop a workable business model, however, they decided to throw in the towel and sell out to Verizon. In a separate component of the deal, Verizon sought to acquire 30 or 40 PCS and AWS licenses from Leap Wireless in exchange for Verizon’s 700 MHz license in Chicago. When it became clear that there was some pushback from the Commission, Verizon quickly entered into a deal with T-Mobile to offload 47 of the AWS licenses it would otherwise be getting from the cable companies. This lessened Verizon’s spectrum agglomeration considerably in key markets.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Broadcasters launch effort to promote greater alien ownership in broadcasting (while H.G. Wells rolls over in his grave).

Hot on the heels of the FCC’s recent liberalization of the restrictions on alien ownership of common carrier licensees, a group dubbed the Coalition for Broadcast Investment (the Coalition) has filed a petition seeking similar leeway for broadcast licensees.  The Coalition is an ad hoc group comprised of minority-oriented station owners as well as some of the largest multi-station group owners in the country.   The Coalition’s petition is styled as a “Request for Clarification” of the Commission’s policy with respect to alien ownership of broadcast stations, but it’s effectively a petition for a declaratory ruling on the issue presented.

Our regular readers will remember that in August the FCC released an order designed to clarify the power of the Commission to authorize significant indirect, non-controlling foreign interests in common carrier licensees. The August order addressed the fact that, as interpreted by the FCC, Section 310(b)(3) of the Communications Act bars aliens from indirectly owning 20% to 50% of a radio licensee but Section (b)(4) permits indirect alien ownership – with prior FCC approval – of controlling interests in radio licensees.   The FCC dealt with this odd anomaly by “forbearing” from enforcing the Section 310(b)(3) restriction on non-controlling alien interests. 

There were two catches to this solution.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The Communications Act imposes complex limits on alien ownership. The FCC’s historical interpretation of those limits has made them even more complex. The Commission has now revisited that interpretation – with mixed results.

We reported last year that the FCC initiated a rulemaking proceeding to consider how it might facilitate foreign ownership of licensed common carriers.   And we reported last spring that, in the initial rounds of that proceeding, the FCC received some industry feedback that its foreign ownership rules were limiting or hindering foreign investment unduly. As FCC veterans know, the Communications Act imposes certain restrictions on the ownership of broadcast and common carrier licenses by aliens. Specifically, Section 310(b)(3) of the Act forbids aliens from directly owning more than 20% in such licenses. Section 310(b)(4) precludes aliens from controlling a company that directly or indirectly owns more than 25% of such a license unless the FCC approves the ownership. 

Three score and 18 years after the Act came into being, the FCC has now taken a fresh look at those provisions.   It had previously decided that Section (b)(3) actually applies to indirect ownership interests even though, unlike Section (b)(4), Section (b)(3) doesn’t say that. The FCC has interpreted Section (b)(3) to apply when the alien entity does not control the licensee, while (b)(4) applies only when the alien does control. Non-controlling alien ownership interests between 20% and 50% were out of luck since an alien with an indirect 30% ownership interest would exceed the permissible level for non-controlling entities banned by (b)(3) but would not have the control necessary to permit the ownership to be approved. 

This interpretation presented a strange anomaly: an alien could indirectly own a controlling interest in a company so long as the FCC approved it, but an alien couldn’t own a non-controlling interest between 20 and 50% under any circumstances.  And indirect non-controlling  interests between 20% and 25% fell even deeper into the Twilight Zone – they seem to be fully permissible under (b)(4) without any FCC approval at all, but completely and irremediably banned under (b)(3). Commissioner Pai recognized this problem in his statement accompanying the Order – the Commission’s interpretation of the statute leads to “absurd” results.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

CommLawBlog’s Curmudgeon-in-Residence observes modern society . . . and doesn’t necessarily like what he sees.

Public safety officials are becoming increasingly concerned about a new cellphone-related hazard.  This time it’s not the problem of driver distraction, which has prompted numerous states to restrict, or even ban, texting or handheld phone use while driving.   No, in this case it’s pedestrian cellphone users who are getting run over in greater and greater numbers due to pedestrian distraction.  Researchers at Stony Brook University, the University of Illinois at Urbana-Champaign and the University of Maryland have identified the growing problem of, and dangers to, distracted walkers.

We here at CommLawBlog can attest to the phenomenon.   Frequently we find ourselves driving toward an intersection or stretch of road where we unquestionably have the right of way, only to find a pedestrian strolling across the road, oblivious to the traffic around him, chattering animatedly on his phone.  He or she doesn’t bother to stop, look or listen (at least not to us).  Instead, he/she just saunters off across the street in perfect confidence that the traffic will halt, veer around, or perhaps levitate over the saunterer as long as he/she is talking into the magic device.

What’s going on?

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

$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:

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Carrier socked with potential $819,000 fine for not offering enough hearing aid-compatible phones

The FCC has been extraordinarily vigilant about enforcing the requirement that telecom carriers offer their customers certain minimum numbers of hearing aid-compatible handsets.   This requirement arose in 2008 when the Commission established a gradually increasing quota of acoustically coupled and inductively coupled handsets which carriers must make available to hard-of-hearing customers. The idea is that hearing-impaired folks must have a broad range of handsets of different feature levels to select from.

Although the FCC alerted the industry repeatedly to the requirements of Section 20.19 of the rules, T-Mobile seems to have seriously dropped the ball. According to a recent Notice of Apparent Liability (NAL), T-Mobile came up way short: as many as 33 acoustic hearing aid compatible handsets short in 2009 and 2010, and 14 inductive handsets short in that same period. These shortfalls were clear on the face of the annual report that T-Mobile (like other carriers) must file with the FCC detailing, among other things, the handsets they offer. The NAL doesn’t explain how T-Mobile could have failed to take steps to bring itself into compliance when its own disclosures apparently showed a shortfall in the required handsets.

The price tag for this problem?  $819,000.

Several things are notable about the NAL which, we hasten to mention, is only a preliminary set of allegations, not a final determination. T-Mobile will still have plenty of opportunity to plead its case to the Commission.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Commission contemplates forbearance approach to direct alien ownership limits.

Last fall we reported on an FCC Notice of Proposed Rulemaking in which the FCC is considering how to simplify the application of the foreign ownership restrictions that appear in the Communications Act.   After digesting the comments submitted in that proceeding, the FCC has asked for more input. It seems that a number of commenters were concerned about the interplay of Section 310(b)(3) of the Act with Section 310(b)(4).

Section 310(b)(3) strictly forbids ownership of a broadcast or common carrier licensee by a corporation which is more than 20% owned by aliens or their representatives or by foreign governments or foreign corporations.   In other words, no more 20% of the licensee entity itself may be owned by aliens or their representatives. Section 310(b)(4), however, permits licensee entities to be owned by companies that are themselves owned by aliens or their representatives, so long as the FCC OKs the ownership. In other words, indirect ownership of licensee entities by any quantum of aliens is permissible as long as the FCC approves it.   These provisions have long been thought to define two separate classes of ownership, direct and indirect, with distinct restrictions applicable to each.

Apparently Verizon – a company whose Cellco Partnership subsidiary has significant foreign ownership – pointed out that the FCC’s 2004 effort to provide guidance on these matters actually confused things. Those 2004 guidelines seemed to treat indirect interests in licensees as being subject to the strict 20% prohibition of 310(b)(3) rather than the more liberal 25% provision applicable to indirect interests under Section 310(b)(4). Verizon correctly noted that this makes no sense, and the FCC seems to have heard Verizon’s plea.

• Email This
• Print
• Comments
• Trackbacks
• Share Link