Proposed merger of AT&T and Comcast Cable would likely have impact on “competitive terrain,” Senate Judiciary Antitrust Subcommittee Chmn. Kohl (D-Wis.) and ranking Republican DeWine (O.) said in letter to FCC Chmn. Michael Powell and Justice Dept. antitrust chief Charles James. Letter outlines “concerns” the senators have with merger, but doesn’t say DoJ or FCC should reject merger. While merger doesn’t seem to raise traditional antitrust issues related to geography overlap of services, it does involve other questions about “competitive effects of this complex merger” on issues such as content diversity, set-top boxes and Internet market, letter said. Company as sizable as AT&T- Comcast could affect diversity of programming and content, letter said. If deal is approved, 3 largest cable companies would control 65% of cable market, letter said. “Such a concentrated market raises the concern that a small number of cable companies can act as a ‘gatekeeper,’ i.e., that a programmer would be unable to successfully market its product without the approval of one or two large companies,” letter said. Such situation would pose threat to innovation and diversity in both news and entertainment, letter said. Senators urged careful investigation of content issues. Also, market share of merged company could affect market for set-top boxes, letter said, adding that Telecom Act of 1996 has yet to produce competitive market in this area. “We trust that if allowed to merge, AT&T-Comcast would lead industry efforts to encourage a truly competitive market” for set-top boxes, letter said. Merged AT&T-Comcast Cable could have ramifications on Internet content market, letter said: “For example, the law does not prohibit cable companies from blocking access to Web sites or charging individual Web sites a fee before allowing consumers access to them, and we have heard allegations that such conduct is occurring in certain markets.” Comcast has said it hasn’t used such tactics, letter said, but it was important that Comcast continue to avoid anticompetitive behavior. Size of merged company also would affect broadband market, letter said, and AT&T-Comcast already had begun arranging for additional ISP choices on their joined system. “We believe that more progress in this area is necessary to promote long-term competition in this market,” letter said. Letter followed a Sept. 19 hearing before the Antitrust Subcommittee at which James updated Kohl and DeWine on the merger (CD Sept 20 p7). Both panel members expressed concern about the continuing consolidation of media outlets.

Cal. PUC’s controversial decision to support SBC/Pacific Bell interLATA long distance entry contains seeds of what could blossom into federal-state legal conflict over whether FCC Sec. 271 long distance approval for interstate service automatically confers approval for intrastate long distance service as well. PUC’s 4-1 vote for Sec. 271 support (CD Sept 20 p3) also marked first time in recent history that compliance with certain 271 checklist points was in doubt because parties weren’t certain what compliance requirements were.

AT&T and Comcast announced Tues. that key deadline had passed on their proposed cable merger without action by Justice Dept., indicating deal had won Justice approval by default, but DoJ officials said companies should hold off on celebrating. Agency still could step in at any time until investigation was officially completed, they said. They said they hoped that would be soon, but until then, and until FCC approved merger, transaction couldn’t go forward.

NAB and Directors Guild of Canada weighed in with pleas to Canadian regulators against Internet retransmission of broadcast TV and radio, while some users urged hands off. Deadline for latest round of comments to Canadian Radio-TV & Telecom Commission was Fri., though mailed submissions continued drifting in this week. Anyone can reply by Oct. 4 to comments made in initial round. Commission is charged with issuing policy report by Jan.

CLECs are girding for fight to stop SBC/Ameritech from raising its unbundled network element (UNE) rates, with AT&T and CLEC trade group ASCENT leading initial opposition. AT&T asked Mich. PSC to dismiss SBC/Ameritech application to more than double UNE rates in state. Ameritech said revised cost studies showed current rates for UNEs and UNE platform service were far below cost, violating federal Telecom Act and forcing it to subsidize its competitors. AT&T said Ameritech presented new cost study using “inappropriate methodology” rather than update of its 1999 study. AT&T also said Ameritech failed to provide coherent explanation of why its costs had changed so much since 1999, nor why its new cost model’s dramatically higher costs were more accurate depiction of its expenses. AT&T said Ameritech hadn’t justified its proposed increase in UNE-P rate to $34 monthly from $14.44. It said some proposed increases in nonrecurring charges were astronomical, such as 2,400% boost in line migration fee when no network changes were involved -- fee would rise to $8.84 from 35 cents. AT&T cited other nonrecurring fee boosts of 200-800%. Ameritech responded that its studies provided accurate and lawful depiction of its costs and demonstrated that its ability to maintain work force and network investment would suffer unless it could recover its costs to provide service. Meanwhile, ASCENT sent letters to Mich. PSC and other 4 Ameritech state commissions urging them to resist Ameritech’s “aggressive campaign” to control competition by increasing its UNE rates. Group said federal court decisions in last year had shown “fallacy” of claim that total element long run incremental costing (TELRIC) inhibited incumbents’ network investment. ASCENT expressed doubt that current UNE rates were below Ameritech’s costs and urged state commissions to “consider once again the wealth of data” showing competitive value of appropriately priced UNEs and weakness of Ameritech’s claims. Ameritech also has pending petition in Ill. for UNE rate increase and has indicated it planned to seek UNE boosts in all its states.

License Exempt Alliance (LEA) urged FCC to reject petition for reconsideration by Telesaurus Holdings on Commission’s spread spectrum order that was designed to improve spectrum sharing by unlicensed devices operating at 902-928 MHz. Rules benefit wireless ISPs and equipment vendors because they promote new digital technologies and efficient operation of frequency-hopping spread spectrum systems, said LEA, which is part of Wireless Communications Assn. Telesaurus asked FCC to defer applying May order to license-exempt services in band until FCC acted on pending petition for rulemaking by Progeny LMS. Progeny owns Location & Monitoring Service (LMS) licenses in band and asked FCC earlier this year to relax certain restrictions on type and content of message and spectrum aggregation. Progeny sought changes in limits on types of services LMS operators could offer. Company asked FCC to revisit safe harbor rule that protected license-exempt operations by defining situations in which they wouldn’t be assumed to cause harmful interference to LMS operations in that band. LEA raised concerns about Telesaurus proposal to do away with all license-exempt operations in 902-928 MHz. It opposed any delay in rules for license-exempt services to give FCC time to examine proposals by Progeny and Telesaurus that could limit all license-exempt operations in band. LEA argued that order on which Telesaurus was seeking reconsideration didn’t involve LMS service, FCC’s LMS rules or regulatory status of license-exempt operations at 902-928 MHz. LEA said order would further FCC’s spread spectrum rules by allowing continued development of new wireless devices that could operate in license-exempt bands. “With no supporting arguments save for its anti-Part 15 rhetoric, Telesaurus would have the Commission reverse field and mark a path toward restricting or even eliminating license-exempt operations in the 902-928 MHz band and therefore nullify all it has done to promote such operations,” LEA said. Intersil and Symbol Technologies also opposed Telesaurus petition, calling it “speculative.” Petition failed to demonstrate FCC should alter finding that increased modulation flexibility for Part 15 wasn’t in public interest, Intersil and Symbol said. Agere Systems also disputed arguments of Telesaurus and Progeny, saying petitions marked “attempt by LMS licensees to radically change the LMS from what it was intended to be when it was established by the Commission.”

As expected, Sen. Landrieu (D-La.) introduced legislation Tues. that would order FCC to grant licenses in 12.2-12.7 GHz range on basis of merit, not licenses (CD Sept 6 p11). Bill, Emergency Communications & Competition Act (ECCA) (S-2922), apparently is designed to aid Northpoint, which seeks to share spectrum with DBS service providers in that range of spectrum. In Senate floor speech, Landrieu said bill was essential to ensure rapid deployment of Multichannel Video Distribution & Data Service (MVDDS), which will provide competition for both cable and broadband services. It has several notable co-sponsors, including Senate Minority Leader Lott (R-Miss.), Senate Commerce Communications Subcommittee ranking Republican Burns (Mont.), Senate Judiciary Committee Chmn. Leahy (D-Vt.), Senate Small Business Committee Chmn. Kerry (D-Mass.). Other co-sponsors are Sens. Baucus (D-Mont.), Dodd (D-Conn.), Mikulski (D- Md.), Gregg (R-N.H.). Bill was sent to Senate Commerce Committee, of which Landrieu isn’t member. She said FCC decision to subject MVDDS providers, and not satellite companies, to auction process was “discriminatory tax on an innovative new technology.” She also said auction process was producing effects opposite of original intention. “In this case, industry incumbents can use the auction to block the introduction of new competition.” Under ECCA, applicants that can demonstrate through independent testing that technology won’t cause harmful interference to DBS operators would be granted licenses. Bill also would require services to build out systems within 5 years, not 10 now required by FCC. Parties that apply for licenses under that provision would have to assume specific public interest obligations, including full must-carry of local television stations, Landrieu said. Also, 4% of system capacity must be set aside for other purposes, such as telemedicine and distance learning. ECCA would require MVDDS licensees to air Emergency Alert System warnings, Landrieu said, which often aren’t seen by DBS viewers. Licensees would have to make transmission systems available to national security and emergency preparedness personnel in national emergency, she said. Landrieu said Consumers Union supported legislation since it would foster competition with cable, which she said had raised rates 45% since it was deregulated in 1996. “MVDDS can go head-to-head with incumbent cable systems everywhere, and I believe that this good old-fashioned competition will result in lower prices and better service for consumers -- even those who don’t choose to subscribe to MVDDS,” Landrieu said. Legislation also has been endorsed by National Grange, farm and rural public interest organization, she said. Burns said bill would give rural TV viewers in Mont. opportunity to get local TV stations, where DBS providers don’t offer local TV to residents.

Verizon Wireless asked U.S. Court of Federal Claims to grant summary judgment on issues it was raising in litigation against U.S. govt. on pending NextWave license payment obligations. Verizon Wireless has mounted parallel challenges in U.S. Appeals Court, D.C., and Court of Federal Claims involving FCC decision to retain small amount of deposits from Jan. 2001 NextWave re-auction and to hold carriers to their bid obligations until pending U.S. Supreme Court case plays out. One key difference in Court of Federal Claims suit is that Verizon Wireless is seeking damages against govt. for not releasing it from what it argues are now void contract obligations connected to NextWave re- auction bids. If Claims Court were to grant latest Verizon request, filed late Mon., that could pave way for case to be decided before Supreme Court ruled on FCC appeal. At high court, govt. is challenging D.C. Circuit ruling last year against agency’s decision to cancel NextWave’s licenses for missed payment. Verizon Wireless has been pushing for either congressional or court relief of its more than $8 billion in NextWave re-auction obligations. Some analysts have suggested that govt. ultimately would release re-auction winners from collective $16 billion in bidding commitments, in part because even Supreme Court ruling siding with govt. could result in several more years of litigation of outstanding issues before D.C. Circuit (CD Sept 5 p11). Summary judgment by Federal Claims Court, if granted, could lead to decision on auction overhang before Supreme Court rules after Oct. 8 oral argument, industry observer said. In motion for summary judgment, Verizon told court that “there are no genuine issues of material fact” and that carrier should be “entitled to judgment as a matter of law.” Following last year’s D.C. Circuit ruling, FCC returned PCS licenses to NextWave. Earlier this year, Commission agreed to return all but 3% of total winning bids and kept liability intact for outstanding auction obligations of winners, which would come due if FCC were to prevail in court cases that upheld Jan. 2001 re-auction. Verizon described auction process as constituting “contract that requires prompt delivery of the licenses at the close of the auction.” It told court that FCC’s failure to deliver licenses in timely way was “a material breach of the auction contract, entitling Verizon Wireless to recission of the contract and refund of its entire down payment.” FCC’s failure to deliver PCS licenses that it auctioned in Jan. 2001 in timely manner gives Verizon Wireless right to rescind its auction “contract” with Commission and receive full down payment for licenses, carrier said. Verizon cited auction public notice in arguing that FCC had committed to return down payments to bidders if licenses became unavailable. Separately, Verizon Wireless filed opposition to FCC motion to stay proceedings in Court of Federal Claims until D.C. Circuit and Supreme Court issued their rulings in case. Govt. had argued that suit that had yet to play out at D.C. Circuit and Supreme Court could moot issues that were before Federal Claims Court. Govt. also argued that lawsuits pending in other courts could produce conflicting decisions. In objecting to stay motion, Verizon Wireless said cases before Claims Court and Supreme Court were different. High court will not rule on whether licenses should be awarded to Verizon Wireless but will examine only whether Sec. 525 of U.S. Bankruptcy Code barred FCC from cancelling NextWave licenses as part of its regulatory obligations under Communications Act, Verizon said.

Congressional intent and FCC’s authority were key issues Fri. in oral argument before U.S. Appeals Court, D.C., on constitutionality of Commission’s video description rule, with Judge Harry Edwards citing earlier decisions by same court that he said presented “a problem” for FCC’s position. In those nonbroadcast cases, court ruled against positions of other agencies claiming they had authority in certain areas of jurisdiction unless specifically prohibited by Congress.

Bell companies were lobbying FCC at stepped-up pace late last week seeking to ease agency’s rules requiring Bells to share unbundled network elements (UNEs) with competitors at TELRIC-based prices and particularly to end competitors’ use of UNE platforms (UNE-P). Chief executives of both SBC and BellSouth met with FCC officials, while CompTel sent letter to Chmn. Powell questioning Bells’ reliance on analysts’ reports to urge cuts in UNE list.