WorldCom’s financial scandal could have repercussions on entire communications industry and how it’s regulated, said Washington policymakers, analysts and others who follow sector. FCC Comr. Copps said scandal “should give us some pause at the Commission before we rely fully on [corporate] data” when reviewing applications for mergers and other financial changes. It might be better for FCC to do its own analysis, he said. One industry lobbyist warned that companies would have tougher time getting deregulatory action on Hill, for example broadband relief sought by Bell companies through measures such as Tauzin-Dingell, because Congress was expected to become much tougher on corporations in general. Randolph May, senior fellow at Progress & Freedom Foundation, said he had hoped WorldCom’s problems wouldn’t lead to backlash against deregulation because bankruptcy was “about accounting practices and human frailties, not regulatory policy.”

Tension between FCC Chmn. Powell and Comr. Martin is “extraordinary” and often complicates decision-making process at agency, according to lobbyists and others familiar with workings of agency’s 8th floor. Opinions vary on why 2 Republicans disagree fairly frequently. In interviews over last several weeks, some sources said it was because their regulatory philosophies varied greatly on many issues. Some called it personality conflict. Handful accused Martin of trying to grab power, view disputed by many other sources. Almost no one wanted to be quoted by name. “The problem is worse under the surface,” said source who described himself as “very informed.” He said “the problem is in the process. Even the routine becomes difficult with Martin’s office.” It won’t continue, he said, particularly since it has become public. “It’s one thing to squabble behind the scenes,” source said. “It’s unacceptable to do it in public.”

NextWave told U.S. Supreme Court in brief filed Fri. that FCC’s revocation of its PCS licenses for missed payment was “obvious violation” of Bankruptcy Code. Friend-of-court briefs included one by 7 members of Congress, including Senate Judiciary Committee Chmn. Leahy (D-Vt.) and ranking Republican member Hatch (R-Utah). In lengthy filing, bankrupt C-block bidder disputed arguments by Commission in its appeal of U.S. Appeals Court, D.C., ruling last year. FCC argued to high court earlier this year that nothing in Bankruptcy Code was at stake in D.C. Circuit’s NextWave ruling that barred agency from enforcing regulatory conditions on disputed wireless licenses. Sec. 525 of Bankruptcy Code bars govt. agencies from revoking licenses of debtor or bankrupt entity solely because they haven’t paid dischargeable debt. “The FCC’s only answer to the plain text of Sec. 525 is to spend page after page restating, in many guises, the single point that Sec. 525 should not apply because NextWave’s licenses were revoked for regulatory rather than pecuniary reasons,” NextWave said. “But Sec. 525 contains no regulatory exception for the FCC, express or implied, and creating one would be at odds with Sec. 525 and the code generally.”

Interoperability of communications and computer equipment that would be used by proposed Dept. of Homeland Security and by state and local first responders is one of top goals of White House plan, Office of Homeland Security Dir. Tom Ridge said Thurs. He appeared in separate hearings before Senate Governmental Affairs and House Govt. Reform committees to explain proposal by President Bush that would consolidate numerous federal entities and functions into one cabinet-level department. Department would consist of 4 units, including Information Analysis & Infrastructure Protection and Emergency Preparedness & Response divisions, latter of which would: (1) Develop communications technology interoperability programs and ensure “emergency response providers acquire such technology.” (2) Consolidate existing federal emergency response plans into “single coordinated emergency response plan.”

Four members of Congress and dozen public interest groups held jam-packed news conference in Washington Wed. to call for mandatory free radio and TV time for House and Senate candidates. Time would be provided through “vouchers” provided to candidates and paid for through annual spectrum fee levied against TV and radio stations. Proposal will be introduced later this year, supporters Sens. McCain (R- Ariz.), Feingold (D-Wis.), Torricelli (D-N.J.) and Rep. Meehan (D-Mass.) said at news conference hosted by New America Foundation and Alliance for Better Campaigns.

FCC filed in opposition at U.S. Appeals Court, D.C., late Mon. to emergency motion for partial stay by 2 state agencies that operate public TV stations. Central Wyo. College and Idaho State Board of Education had argued they were eligible to be exempt from auction of lower 700 MHz band because they were seeking spectrum for noncommercial educational broadcasting. Two agencies filed at D.C. Circuit last week after FCC didn’t act on June 12 request for similar action on auction that starts Wed. (CD June 17 p1). Central Wyo. and Idaho board sought partial stay that would affect only licenses in their state that they sought as part of lower 700 MHz auction. Commission argued that even partial stay of auction “would cause substantial harm” to many carriers that had qualified to participate. “The court should deny this last-minute motion to stay an important FCC auction that has been scheduled for more than three months,” agency said: “The motion was filed just 3 business days before the auction is to begin, even though the moving parties knew at least by May 8, 2002, that their plans to apply for this spectrum would be complicated by the scheduled June 19 auction date.” Commission also said 2 state agencies hadn’t shown that harm they might suffer if bidding went forward as scheduled would be irreparable. FCC said award of any licenses as result of auction would be subject to resolution of any pending petitions for review and “therefore could be undone if necessary.” Both state agencies were found not eligible to participate in auction by FCC Wireless Bureau. Bureau said licenses selected by these agencies are subject to resolution of pending issues raised by their applications, including determination of whether applicants for such licenses are noncommercial educational broadcast stations under provisions of Communications Act that stipulate competitive bidding authority doesn’t apply to such stations. FCC said in filing it decided on its own motion last week that noncommercial educational broadcasters aren’t eligible to apply for initial licenses for new services in lower 700 MHz band.

House Judiciary Committee Thurs. passed bill expanding USA Patriot Act by establishing procedures for sharing federal intelligence, including that gathered by wiretaps and electronic surveillance, with state and local authorities. At same time, however, Chmn. Sensenbrenner (R-Wis.) and ranking Democrat Conyers (Mich.) sent letter to Attorney Gen. John Ashcroft demanding he and FBI Dir. Robert Mueller answer 50 questions on Patriot Act’s use by July 9. Sensenbrenner announced letter at markup involving questions raised by many committee members about reach of Patriot Act, adding sarcastically that letter was one that “I'm sure the Attorney General is going to be pleased to receive.” Committee on voice vote passed amended version of HR-4598 by Rep. Chambliss (R-Ga.) that had been negotiated with House Intelligence Committee and was considered on fast track to House floor consideration and passage.

Activision said after our Fri. deadline it completed underwritten public offering of 7.5 million shares of common stock that it had announced plan for early last week (CED June 6 p5). Company took hit after company announced plan for offering. Activision said all shares were offered for sale by it and Goldman, Sachs acted as sole underwriter. As planned, it said, $247.8 million was raised through offering. Proceeds are to be used for general corporate purposes, including for additions to working capital and financing of capital expenditures, joint ventures and/or strategic acquisitions. Commenting on closing of offering, Activision CEO Robert Kotick said: “We remain confident that the positive outlook for our business combined with our management depth, financial stability, strong infrastructure and product momentum should enable us to continue building our operating capability while enhancing shareholder value. Taking into account the increased number of shares outstanding after the offering, and based on the overall strength of the videogame industry, strong market performance of our titles globally and anticipated use of proceeds from the offering, the company reiterates its fiscal year 2003 guidance of earnings per share of $1.10 on net revenues of $890 million.” Shares in Activision dropped off last week after offering was first announced. Activision saw its shares drop Wed. 8.5% to $31.67 in midday trading on Nasdaq. Shares that morning later fell further, to $31.60, after dipping as low as $31.22. Closing price day earlier had been $34.61. Shares in company closed at $30.03 on Fri., opened at $30.03 on Mon. and increased to $31.31 by our deadline. In other Activision news, company boasted Mon. its first-person action game Soldier of Fortune II: Double Helix was “topping worldwide sell-through charts,” while Star Wars Jedi Knight II: Jedi Outcast was continuing to experience strong sales. Both titles were developed for company by Raven Software.

Hollywood finds itself on defensive in 2 new suits related to digital copy protection. On Thurs., 5 users of ReplayTV sued 28 studios to defend what they described as fair use rights of digital content received on their personal video recorders (PVRs), and Electronic Frontier Foundation, which facilitated suit, said case could be consolidated with existing case against ReplayTV owner SonicBlue. EFF Senior Intellectual Property Attorney Fred von Lohmann said case was “linked” with the digital rights management debate in Congress and suits by RIAA over peer- to-peer (P2P) Web sites in that all involve fair use differently interpreted. One concern raised by von Lohmann is possibility that judge could require SonicBlue to download software to user’s ReplayTV boxes, altering CE product already purchased by consumers. Separately, a Web site operator has sued MPAA, charging commercial interference, libel and defamation because it was forced to take down its site over what it termed false piracy charges by MPAA.

FCC didn’t do “thorough analysis” of cost data before voting to let ILECs raise subscriber line charges (SLCs), said Comr. Copps, who dissented on order that raised SLC cap to $6 (CD June 6 p7). Copps said Commission was required to carefully weigh ILECs’ forward-looking costs before determining whether SLC should be raised. However, “a significant number of carriers” submitted incomplete or questionable data and FCC didn’t do “its own independent analysis,” he said in dissenting statement. For example, he said, some carriers “submitted summary data without disclosing the inputs used, cost models that were not transparent or, in some cases, models that have been rejected by the state commissions.” In addition, he said, National Assn. of State Utility Consumer Advocates (NASUCA) filed data to show why cap shouldn’t increase, but used model that FCC “has cautioned may have limits in establishing costs.” Copps said there may be case for increasing cap because “in all probability, there are many areas of the country in which forward-looking costs exceed $5 [former cap].” However, “we need to obtain the data and conduct our analysis before we act,” he said. Copps said he also was concerned about disparities in line charges between rural and urban consumers. Bells have flexibility to vary those charges, and Copps said he would like Commission to take closer look at resulting geographic disparities. Order released late Wed. concluded that “even the most conservative estimate of forward-looking costs shows that a substantial number of lines exceed both the current $5 SLC cap and the… $6.50 SLC cap” set to go into place next year. FCC said that raising cap didn’t mean SLC would rise for all customers. Consumers Union (CU) said Congress should investigate whether FCC action complied with Telecom Act. Consumers were promised more local competition in return for deregulation but haven’t seen it, group said. “People are paying more for local phone service but we don’t see any real competition.” CU said that 2 years ago, SLC was only $3.50 per month and next year it’s scheduled to rise to $6.50 -- 86% increase in 3 years. “The little guy really got the short end of the stick in this case,” said Michael Travieso, Md. People’s Counsel and chmn. of NASUCA’s Telecom Committee. FCC action “will unnecessarily increase local telephone costs,” he said.