Bush Administration Tues. released long-awaited 3G viability assessment under which Defense Dept. agreed to clear most of 1710-1755 MHz but said freeing additional 15 MHz beyond that was untenable between now and 2008. Result is that report finds way to clear 90 MHz of spectrum for advanced wireless services at 1.7 GHz and in 45 MHz of 2110- 2170 MHz, which is occupied by nongovt. users. That’s less than 120 MHz that NTIA and other Executive Branch agencies had left on table last fall for 3G evaluation, after taking 1770-1850 MHz occupied by DoD out of consideration following Sept. 11 attacks (CD Oct 9 p3). While spectrum is less than originally sought by industry, private sector and govt. officials at Commerce Dept. briefing touted outcome as providing certainty that allocation decisions and auction could be held in 2004-2005 time frame. Also Tues., Commerce Dept. released draft bill to create spectrum relocation fund to pay incumbent govt. users for relocating and modernizing equipment. Commerce Secy. Donald Evans said 3G assessment strikes “a necessary balance between our country’s economic growth and national security, as well as public safety.”

FCC Comr. Abernathy, in speech in San Diego, stressed importance of Commission’s secondary markets proceeding as “an essential piece in our future spectrum policy.” Abernathy spoke Sat. to FCBA Seminar West on future of FCC’s licensed spectrum policy, following speech she gave last week on unlicensed spectrum issues. “We must have secondary markets that will withstand judicial scrutiny if the property-like rights-driven model is to succeed,” Abernathy said. “We must overhaul the antiquated Intermountain Microwave test, we must speed spectrum transactions that do not raise competitive concerns and we must facilitate spectrum leasing.” Intermountain test refers to 40-year-old case interpreting Sec. 310(d) of Communications Act for evaluating wireless ownership transfers. Case has been interpreted to mean that licensee must keep relatively tight hands-on control of licensed property, making spectrum leasing difficult. FCC announced rulemaking on secondary market policy for spectrum last year, including questions on how to update transfer of ownership evaluations to ease secondary markets. If spectrum sharing is possible, FCC “should treat the subset of rights available as a ‘virgin’ spectrum resource,” Abernathy said. That would be potential scenario for non-mutually exclusive applications, which cover spectrum that FCC doesn’t have to auction. So if domestic satellite use can be made available without harmfully interfering or creating efficiency losses to incumbent terrestrial licensee, FCC “should get those rights into the hands of commercial interests” once certain incumbency issues are addressed, Abernathy said. Among questions agency must ask on incumbents is what “bundle of rights” does current licensee have and whether incumbent holds rights to spectrum use proposed by new operator. Where sharing isn’t possible, FCC must ask whether incumbent should be forcibly moved or if proposed new rights should be granted to incumbent, Abernathy said. “When granted discretion, I begin with the presumption that relocation of incumbent service providers is complex, imposes costs on the economy, takes time and may undermine investment incentives,” she said. “Moreover, I am generally very reluctant to insert government into the marketplace on the basis of some asserted ‘better understanding’ of what is the ‘right’ service offering in a band,” Abernathy said. In cases where govt. has relatively high level of certainty that new use has higher value than current use and that incumbent “would not rationally exercise the rights if they were granted to them,” govt. may be justifiably able to forcibly relocate incumbents if there is: (1) Failure of secondary market. (2) Irrational holdout problem. (3) “Temporal urgency.” Problem of irrational holdouts “is why government has eminent domain,” Abernathy said. Point is to bar individual property holder from “irrationally’ blocking asset from evolving to its best use. “This can be a real problem even in fully functioning markets -- so the Commission should be prepared on rare occasions to step in and force a lone holdout out of a band,” she said. Agency should do that only “reluctantly” and on case-by-case basis, Abernathy said. In other cases, forcible relocation may be warranted when there is “temporal urgency,” she said. “Sometimes markets take time, and in extremely rare circumstances the Commission may need to intervene to enable some new service essential to the public welfare,” she said.

Short-message service (SMS) developer Target Wireless filed petition with Federal Election Commission asking for exemption from disclosure requirement for federal candidates who use text messaging over wireless phones to pitch their campaigns. Target Wireless said FEC was expected to take up its petition, which would apply to congressional and presidential candidates, Aug. 15. Because maximum character capacity for each SMS text message sent to digital phones can’t exceed 160 characters, petition said that fine print of current federal disclosure requirements, which include who is paying for message, would take up all the available message space and leave no room for candidate’s main message. Target Wireless Pres. Craig Krueger said such messages would be made available only on “opt-in” basis so that wireless subscribers wouldn’t be spammed by unwanted political ads. He told us that presidential candidate in 2000 had expressed interest in using SMS as advertising tool but viewed disclosure requirements as making that medium impractical. He declined to disclose which presidential hopeful had explored this possibility, although he said it was one of 2 major party candidates. Company is relying on precedent of FEC’s already having granted exceptions to disclosure requirements on ground of limited space for bumper stickers, skywriting, water towers and novelty items such as pens and pencils. Point of petition is to allow candidates to “leverage new communications vehicles to promote their candidate,” Krueger said. Company petitioned FEC in May for advisory petition concerning exemption request for SMS messages on digital phones. Target Wireless told FEC that it has standing to make request because it plans activities starting in 2002 to deliver political messages to “hard-to-reach mobile audience.” FEC filing outlined potential activities that included Target acting as broker of wireless ads between political parties or candidates and content providers such as broadcasters like CNN and Fox. Under this scenario, Target said it would receive commission for placing wireless ad. Another possibility would be Target acting as broker between content provider and wireless networks to facilitate relationship between candidates and content providers, company told FEC. In such cases, Target said it could broker arrangement between content provider and wireless carrier. Another possibility raised by company is that it would be agent for candidates seeking federal office. “Target Wireless has had discussions with political candidates about wireless advertising, but has been unable to proceed further because of the uncertainty of the application of the FEC’s disclaimer exemption to such communications,” filing said. Target Wireless’s petition to FEC argued: “Because wireless devices can receive and communicate messages to a massive mobile audience with consistent regularity, wireless can be used … as an advertising tool that is capable of reaching a unique, mobile audience for which traditional cable and modem-based applications are not well-suited to deliver.”

FCC Comr. Copps proposed 3-part proceeding Thurs. that would (1) develop strategy for avoiding major telecom service disruptions, (2) determine tactics for how FCC should react when telecom company failed, and (3) assess Commission’s authority to do job. Copps said agency must use its current authority to reduce chances of accounting irregularities, market misdeeds, corporate mismanagement. FCC shouldn’t do job of SEC and protect against securities irregularities, he said, but must reexamine its accounting requirements and reliance on corporate-furnished data in light of revelations at Enron, WorldCom, Adelphia and others. “I'm concerned that when it comes to something like accounting, that we're moving in precisely the wrong direction,” he said. He cited pending further rulemaking proposing to roll back and then eliminate accounting rules. “This is not the time to eliminate those protections. It’s not the time to make it harder for us to audit these companies. It’s not the time to handcuff the states in trying to do their job of oversight, too,” he said.

Sens. Kohl (D-Wis.) and DeWine (R-O.), respectively chmn. and ranking member Judiciary Antitrust Subcommittee, expressed concerns to FCC Chmn. Powell about his comments that he could be supportive of WorldCom merger with Bell company. “We do not believe that the present economic difficulties in certain segments of the industry justify a relaxation of carefully established principles against combining local and long distance phone companies, nor do we believe such consolidation furthers the goals of the 1996 Telecom Act,” said July 16 letter. They said Powell’s comments appeared to be based on “failing firm” rationale, which permits mergers when industry is in dire economic strait that normally would be considered anticompetitive. “We are far from that situation,” they said. “Although WorldCom may be on the verge of bankruptcy, it likely has genuine reorganization prospects, and we should encourage WorldCom’s efforts to maintain its place in the market rather than offer the false hope of an early way out via merger.” Potential WorldCom-Bell merger would raise difficult Sec. 271 issues in many states. “At the very least, such a merger would raise complicated competition and customer service issues,” letter said. “At the worst, it could effectively unravel the core concepts of the Telecom Act.”

State regulators Wed. reiterated their position that they be free to modify any FCC national list of unbundled network elements (UNEs) that incumbent telcos must offer to their competitors. In teleconference with reporters, several regulators also called for establishment of federal-state joint conference on UNEs to ensure FCC and states didn’t start working at cross purposes. Wed. was deadline for reply comments in FCC’s triennial UNE review. In comments filed late in day, consumer groups and CLECs also urged Commission not to reduce number of mandatory national UNEs or allow any new restrictions on UNE availability. ILECs on other hand, said it was clear that UNEs weren’t as vital as they once were.

FCC denied petition from Litigation Recovery Trust to reconsider approval of Telenor’s acquisition of Comcast from Lockheed Martin. Commission approved applications by Lockheed Martin Global Communications to assign certain Title 2 common carrier authorizations and Title 3 radio licenses held by Comcast to Telenor on Dec. 18, 2001, as part of transfer of Comsat acquisition. LRT argued that transfer of control violated ORBIT Act because Telenor was able to increase stake in former govt. signatory Inmarsat. LRT also said Telenor won contract to provide telecom services to NATO by underbidding by $8 million carrier that previously held contract. Bid raised questions about Telenor relationship with Norway, LRT said. Commission said change in ownership wouldn’t affect competitive market in U.S. and LRT had failed to present clear and convincing evidence violation had occurred. Comr. Copps disagreed, saying foreign govt. control represented “serious threat to competition” and acquisition by Telenor could give it “significant market power” that could be “used to cross-subsidize competitive services.” Commission’s “unrelenting march toward allowing more and more foreign control of U.S. licensees runs counter to what should be the U.S. goal of promoting global telecom market,” Copps said. Result of 79% of indirect foreign ownership is highest level of govt. control of U.S. license allowed in Commission history, he said.

FCC Chmn. Powell, in news conference after Tues. agenda meeting, described how Commission was adjusting to economic environment in which telecom bankruptcies were becoming more common. Commission has been examining procedures that allow it to pass information on to other federal agencies “should something come coincidentally into our possession that would raise questions about violations of securities and banking laws,” he said. To that end, FCC is examining proposing formal memoranda of understanding with SEC and potentially other agencies that would help to make routine process by which such information was made available. Powell said such MOU arrangements had been made in other policy areas, including EEOC-related issues. Addressing WorldCom’s scandal, Powell told reporters it didn’t appear that “the possibility of significant disruption of services is imminent. We don’t think the current financial troubles, even if they lead to a bankruptcy situation, present a catastrophic situation for consumers.”

FCC at its agenda meeting Tues. gave wireless industry one-year extension to provide local number portability (LNP) in 100 largest Metropolitan Statistical Areas, turning down request by Verizon Wireless for forbearance on Nov. 24 deadline. Adoption of order came despite differences among commissioners over how much additional time was warranted, with Comr. Abernathy dissenting in part, saying she believed delay until 2004 was justified. Comr. Copps voted for item, but said he would have preferred shorter delay than one year as providing “ample time to solve all LNP, pooling and public safety concerns.” If Commission hadn’t acted by July 26, forbearance petition would have been granted automatically. Comr. Martin backed decision to give wireless industry extra year, but said he disagreed with legal standard that FCC used to assess Verizon’s forbearance petition. One-year delay marked compromise between arguments of state PUCs and others that little or no extension was warranted and requests by carriers for longer time.

Verizon Wireless CEO Denny Strigl told National Governors Assn. meeting in Boise, Ida., that to ease “crisis of confidence” in telecom sector, govt. should release NextWave re-auction winners from commitments to pay $16 billion. In March, Commission returned 85% of deposits from Jan. 2001 re-auction but concluded that winning bidders such as Verizon should continue to be held to nearly $16 billion in potential auction obligations until pending Supreme Court review of NextWave case played out. Last year, U.S. Appeals Court, D.C., reversed FCC decision to revoke bankrupt carrier’s licenses for missed payment, overturning re-auction results and provoking govt. appeal to U.S. Supreme Court. “It is bad enough that we have to remain on the hook to the government, to the tune of $16 billion, for spectrum that it cannot deliver,” Strigl said. “Worse, investment firms see our industry as having a $16 billion liability that is impacting their willingness to raise or loan capital.” Earlier this year, House Telecom Subcommittee Vice Chmn. Stearns (R-Fla.) introduced bill that would compel FCC to return remaining 15% of deposits to bidders in NextWave re- auction and allow each bidder to wipe out its license rights under NextWave re-auction to free it from remaining payment obligations. “When FCC Chairman Powell was appointed to the President’s Corporate Fraud Task Force last week, he confirmed how critical it is for government to act on the severe capital crisis straining the telecom industry,” Strigl said. Were Commission to remove $16 billion overhang of payment obligations over NextWave re-auction, he said, “if the FCC ever gets the spectrum back, it can re-auction it then.” Strigl also called for easing “burdensome” regulations at federal and state level. As example, he cited wireless local number portability mandate, for which Verizon Wireless has petitioned FCC for forbearance. Commission is to vote on that request at agenda meeting today (Tues.). Strigl said that mandate, which takes effect Nov. 24, was designed to make wireline carriers more competitive, he said, but “wireless is already fiercely competitive. And when the rule was written, I'd suggest no one gave thought to how it would work. Today, wireless customers can expect to get a working phone number in minutes. That expectation will increase to days with local number portability.” Strigl also cited recent Cal. PUC proposal for consumer protection rules that he said would cost Verizon Wireless “tens of millions of dollars a year in paperwork.” As example, he said proposal would require customers to physically sign for any changes in their service plan, meaning that simple alterations could take days instead of hours.