FCC voted 3-1 at Thurs. meeting to repeal wireless spectrum cap Jan. 1, 2003, and raise it to 55 MHz in all markets during transition period. Comr. Copps delivered impassioned dissent, arguing that “in almost every market in the country, companies have not reached the cap.” Both Bush Administration and CTIA had urged Commission not to implement transition period but to remove restrictions immediately. But FCC said “orderly” transition is needed to allow it to consider what guidelines are required to move from bright- line approach of cap to case-by-case review of wireless license transfers. To assure FCC that Justice Dept. will continue to review such mergers for anticompetitive behavior on case-by-case basis, Asst. Attorney Gen. for Antitrust Charles James wrote to Chmn. Powell Wed.: “The department will continue to safeguard competition through its enforcement activities in the industry and does not believe removal of the spectrum cap rules will diminish its ability to do so.” FCC also eliminated cellular cross-interest rule in urban markets, but kept restriction in place for rural service areas. Spectrum cap has been 45 MHz, except in rural areas, where FCC raised it to 55 MHz in 1999. Interim period raises it to 55 MHz everywhere.

N.J. Ratepayer Advocate urged state regulators to deny Verizon’s request for agency’s interLATA long distance entry endorsement because residential local competition was just about nonexistent in Verizon’s territory. Ratepayer Advocate Blossom Peretz spoke as N.J. Board of Public Utilities (BPU) opened hearings on Verizon’s Sept. 6 filing that claimed full compliance with Sec. 271’s 14-point open local market checklist and asked for BPU’s support. Peretz said Verizon by its own admission had 99.99% of residential local market in its territory, which translated to only about 300 residential customers out of 4 million that use local carrier other than Verizon. Peretz said only one CLEC in state courted residential customers, but not in Verizon’s territory. Rest, she said, don’t offer basic residential service. WorldCom representatives said Verizon’s local exchanges simply weren’t irreversibly open to competition as FCC required. WorldCom said most CLECs holding N.J. certificates weren’t actively providing service and most numbers they controlled hadn’t been assigned to customers. Verizon replied that Telecom Act requirements weren’t about market share of competitors or about their “poorly devised” business plans or other “extraneous issues” raised by opponents. Key issue, Verizon said, is whether it has eliminated barriers to local competition, which it said it had. It said KPMG Consulting’s favorable report on its N.J. operation support systems (OSS) illustrated that its markets were open to competitive entry. Verizon also said record in other states with Bell long distance service showed customers in both local and long distance markets had seen lower prices and more choices. Verizon said its long distance entry would be “great catalyst” for competition, not inhibitor to it.

Administration has ironed out proposed legislation that would reinforce terms of pending NextWave settlement agreement, on PCS licenses expected to be announced in matter of days. Draft of legislative language obtained by Communications Daily outlines proposed terms of pending agreement, including timing in which NextWave would receive $9.55 billion by Dec. 31, 2002. At that time, it immediately would pay $3.05 billion in federal taxes. Draft lays out payment road map in which govt. would be paid before NextWave, although carriers could pay after June 30, 2002, following FCC completion of all regulatory steps needed to award licenses. Draft appears designed to address concerns raised by Sen. McCain (R-Ariz.) last week on risk that settlement funds would be paid out by govt. before full agreement was final. Draft bill describes in detail how federal courts would be directed to handle any legal challenges involving disputed spectrum on expedited basis. Under settlement, govt. would be paid $10 billion and NextWave $6 billion, not counting all of its tax obligations (CD Oct 29 p1).

Group of House Commerce Committee leaders expressed “disappointment” with FCC decision that they said would allow “increased commercialization of public broadcasting licenses.” House Commerce Committee Chmn. Tauzin (R-La.), Vice Chmn. Burr (R-N.C.) and Telecom Subcommittee ranking member Markey (D-Mass.), told FCC Chmn. Powell that recent Commission action to expand use of alternate commercial fund- raising resources is contrary to Sec. 399B of Communications Act: “We are concerned that the Commission’s decision will accelerate a trend toward ‘creeping commercialism,’ an issue that has been the subject of oversight hearings in prior sessions of Congress and previously proposed legislation. We encourage the Commission to rethink the wisdom of this decision.”

Three federal judges said Thurs. they found arguments on both sides confusing as they tried to sort out WorldCom complaint about how FCC enforced pricing conditions attached to 1997 Bell Atlantic-Nynex merger. FCC had approved merger subject to several conditions, including one requiring Bell Atlantic (now Verizon) to offer forward-looking prices to competitors seeking use of its facilities. WorldCom filed complaint with FCC later that year saying Bell Atlantic didn’t make good on pricing requirement. However, FCC delayed acting on it and finally denied it last year, saying condition was moot because forward-looking pricing now was law of land under Telecom Act and court rulings. In oral argument Thurs., Chief Judge Douglas Ginsburg and Judges David Sentelle and Raymond Randolph hammered WorldCom with questions about why court shouldn’t defer to FCC’s judgment. They asked why WorldCom thought condition hadn’t been met through interconnection agreements overseen by state regulators under Sec. 251-252 of the Telecom Act, as FCC contended. When WorldCom attorney Jodie Kelley suggested FCC could have made one pricing decision in response to complaint so WorldCom wouldn’t have to go to 7 different states through interconnection process, Randolph said that raised even more confusing jurisdictional questions. Kelley also argued that WorldCom was denied refunds and damages called for under merger conditions but not available through state route. Nor, she said, do state commissions have authority to rule on whether Bell Atlantic violated merger order. Court also grilled FCC attorney Rodgers Citron about how FCC could refuse to act on WorldCom complaint since merger conditions existed apart from state interconnection pricing process. “What enables you to deprive [WorldCom] of what you supposedly granted in the merger conditions,” Ginsburg asked Citron. Citron said agency “surveyed the landscape” and determined CLECs already were being provided with forward- looking pricing. “I don’t see what relief [WorldCom] could get from the Commission that they haven’t already gotten from the states,” he said. Judges also asked WorldCom’s Kelley whether FCC could have provided remedies that states couldn’t and she said only FCC had authority to provide damages and remedies such as revocation of licenses called for in merger conditions document.

AT&T asked FCC to adopt performance measures, reporting requirements and “meaningful remedies” to assure ILECs offer interstate special access services in fair manner. Company told Commission in petition filed Tues. that its proposal would complement performance measurement system FCC was contemplating for ILEC provision of unbundled network elements (UNEs). AT&T said long distance companies and CLECs had “desperate need for special access services provided by ILECs” but special access provision was “routinely marred by delays, poor quality and discrimination in favor of the ILECs and their retail customers.” It’s particularly important that FCC act because “unlike UNEs, for which jurisdiction is shared with state commissions, interstate special access problems are uniquely the responsibility of this Commission.” Poor providing of special access can hinder CLECs’ attempts to compete as much as can poor UNE provisioning, AT&T said. Saying FCC is expected to move forward on metric system for UNEs, AT&T said “a regime that addresses UNEs, and ignores special access will be doomed to failure.” AT&T said it expected ILECs to counter its request by pointing out that FCC must have considered special access market competitive because it gave ILECs pricing flexibility for that market. “Any such argument would be wrong,” AT&T said, contending that FCC didn’t say special access services were competitive but rather determined that sometimes there were “circumstances under which incumbents will be granted a measure of pricing flexibility.” AT&T officials said BellSouth raised its rates this week for special access services in areas where it had been granted pricing flexibility, which AT&T said indicated BS still had market power in those areas. BellSouth spokesman said FCC clearly agreed there was competition in those areas. “That’s why it gave us pricing flexibility.”

FCC Comr. Martin said Wed. there could be need for “reasonable and minimal” transition if Commission relaxed wireless spectrum cap, issue expected to be on agenda for Nov. 8 meeting. “There might be a way to do that in some minimal transition period so we figure out how we're then going to be doing a case-by-case analysis in this context where we haven’t done it as much because we've had a prophylactic rule,” Martin told press breakfast in his 8th floor office. Bush Administration, in letter last week from NTIA Dir. Nancy Victory to FCC Chmn. Powell, had called for immediate repeal of wireless spectrum cap, which is set at 45 MHz in most markets and 55 MHz in rural areas. CTIA Pres. Tom Wheeler this week reiterated his group’s call that cap be rolled back immediately, although apparently early draft proposal circulating on 8th floor of agenda item would have provided transition period of 12-18 months during which ceiling would be raised to 55 MHz everywhere. Martin said “generally the Commission should be moving toward the kind of case-by-case analysis where you are able to look at the actual impact in the market that is occurring.”

BellSouth (BS) told N.C. Utilities Commission (NCUC) it continued to meet the 12 Sec. 271 competitive checklist points on which agency cleared carrier 3 years ago and now has fully complied with remaining 2 points on which agency flunked BS in that unsuccessful bid. BellSouth made statement as NCUC opened hearings, set to run through Nov. 5, to update record in company’s interLATA long distance entry case. BS said CLEC complaints about pricing and delivery of unbundled network elements and other wholesale services went well beyond what was required of incumbent by Telecom Act. “There are seven FCC Section 271 decisions that explicitly set forth the requirements of the checklist,” said Cindy Cox, BS senior state regulatory dir. “All this commission need do in this proceeding is determine whether BellSouth meets those requirements.” She said many issues raised by CLECs in 1998 had since been addressed in arbitration cases and other dockets and no longer should be factors in 271 case. Also testifying were economists who said BellSouth’s long distance entry would benefit public through lower prices and more choices in both long distance and local exchange service. But CLEC and IXC interests said BellSouth’s long distance entry wouldn’t be boon to competition but rather would be knockout blow to competitors, already struggling due to economic downturn, because of BellSouth’s overwhelming local exchange dominance. They also contended BS still wasn’t giving them proper high-volume wholesale service and billing as required by Telecom Act. Current hearings were delayed from original May date because of similar complaints from CLECs then. NCUC also wanted to wait for operation support system (OSS) test results from other BellSouth states. BS recently received favorable OSS test report in Ga., but competitors said NCUC should wait for results of OSS testing now under way in Fla. because that program better addressed key technical issues such as BellSouth’s ability to handle large volumes of CLEC service orders. Fla. test results are due in late Dec.

Three FCC commissioners agreed Fri. that Commission probably should take some action to encourage deployment of broadband services. Addressing broadband summit sponsored by NARUC and National Exchange Carrier Assn. (NECA), Comrs. Copps, Abernathy and Martin all said FCC had role in eliminating regulations that acted as disincentives to broadband build-out. Beyond that, Copps, lone Democrat, seemed to take more proactive role as he questioned what was so wrong about govt. involvement in such major business development. Martin, on other hand, pushed elimination of sharing rules that he said discouraged carriers from expanding their own facilities. Abernathy saw possible role in encouraging timely rural deployment. Commissioners were among numerous industry and govt. representatives, including Bruce Mehlman, asst. Commerce secy. for technology policy, who offered views about state of broadband and wisdom of govt. involvement in stimulating its rollout. Mehlman outlined for National Summit on Broadband Deployment “critical questions” that faced Administration in that area as well as regulatory issues confronting network build-outs at state and local levels.

SBC said Mon. its income dropped 31% to $2 billion in 3rd quarter and revenue 15% to $11.3 billion, forcing it to cut “several thousand jobs” and reduce capital spending 20% next year. SBC Chmn. Edward Whitacre blamed poor results on “tough economy” and “adverse and uncertain regulatory environment.” Economically, “overall conditions have worsened in recent months, making for one of the most challenging business environments in recent memory,” Whitacre said. On regulatory side, “SBC today is in many respects more heavily regulated than ever,” despite passage of Telecom Act, he said.