New FCC Chmn. Powell laid out broad agenda Tues., stressing need for competition, deregulation and regulatory restraint. Agency should take “judicious” rather than “quasi-legislative” role, he said in his first news conference, citing examples in which FCC’s job primarily was to implement policy. While declining to discuss specifics of priorities such as streamlining FCC procedures, he repeatedly sounded theme of allowing competitive forces in market to take hold. “I do not believe that deregulation is like the dessert that you serve after people have fed on their vegetables as a reward for the creation of competition,” he said. Deregulation is critical to facilitate competition, “not something to be handed out after there’s a substantial number of players in the market,” he said.

FCC asked for comments by Feb. 20 on CLEC access charge issues raised in U.S. Dist. Court, Alexandria. Acting in suits brought by several CLECs against AT&T and Sprint, court Jan. 5 referred to FCC issues involving obligation of interexchange companies (IXCs) to purchase CLEC access service. As part of referral process, AT&T and Sprint filed petitions Jan. 19 seeking FCC ruling on 2 key issues: (1) Whether there is any regulation or law preventing IXCs from refusing to use certain access services. (2) If not, what steps IXCs must take to avoid ordering access service or canceling service after it has been ordered. Replies are due March 2. Court has stayed remaining issues in case, pending FCC ruling, until July 19.

Look for new FCC Chmn. Powell to act fairly early in his tenure to institute measures to improve Commission’s operations, his senior adviser Peter Tenhula said Thurs. at ComNet’s annual “Town Meeting” panel moderated by attorney Richard Wiley. Asked by Wiley what regulatory initiatives Powell would undertake first, Tenhula said question was hard to answer because Powell’s first priority may be to improve agency’s operations. He said some 80% of FCC’s agenda is “reactive instead of proactive,” such as responding to petitions for rulemaking or acts of Congress, and Powell thinks agency “should be prepared to act on those quickly and efficiently.” Nearly everyone who came in to see Powell and his staff in his first week complained about “process,” such as delays in getting action or items becoming “stuck” in pipeline, Tenhula said.

While countries such as Japan and Mexico are starting to remove obstacles to competition, serious problems persist, telecom companies and equipment makers told U.S. Trade Representative’s (USTR) office. USTR sought comments in Jan. as part of annual review on effectiveness of U.S. trade agreements involving telecom products and services, including World Trade Organization’s (WTO) basic telecom agreement. Commenters also pointed frequently to competition hurdles in European Union (EU) member states, urging U.S. in some cases to seek stricter implementation of existing EU directives. Concerns raised by telecom companies, which in part centered on interconnection rates, provide road map of lingering telecom market-opening issues that would face USTR under Bush nominee Robert Zoellick.

FCC’s closely watched C- and F-block auction closed Fri., raising $16.9 billion, of which more than half will be paid by Verizon Wireless. Verizon and designated entities that have ties to Cingular and AT&T Wireless accounted for 83% of net revenue in auction of 422 licenses that started Dec. 12. Verizon filled in spectrum gaps in critical N.Y.C. market. It bid $8.78 billion for 113 licenses, nearly $4.1 billion of that for two 10 MHz licenses in N.Y. Revenue from auction surpassed lower end analyst expectations of $11 billion and surpassed record of $9.6 billion raised in 1996 C-block auction. Industry observers said Fri. they expected some large carriers’ financial arrangements with designated entities would draw challenges after bidders filed more detailed information with FCC on ownership structures. More broadly, several sources said they expected close of auction to refocus attention on wireless spectrum cap.

E-rate supporters are preparing concerted opposition to provision in President Bush’s education reform package that would roll e-rate into larger technology plan and potentially alter its funding structure. Program to subsidize school and library Internet connections currently is funded at $2.4 billion annually through surcharges on long distance bills, called “Gore tax” by its detractors since former Vice President pushed hard for its inclusion in Telecom Act and for program to be funded at high level by FCC. Moving program into Education Dept. and requiring annual appropriations “would be a major step backwards, and I will fight it aggressively,” Sen. Rockefeller (D-W.Va.) said. “It would utterly change the program,” said spokesman for Sen. Snowe (R-Me.).

As expected, FCC has embarked on reexamination of whether there is continued need for spectrum cap and cellular cross- interest rule for commercial mobile radio service providers. Notice of proposed rulemaking (NPRM) issued late Wed. (CD Jan 23 p1), but approved by FCC last Fri., seeks comment on whether wireless market has changed significantly since last time agency examined issue in 1999, when it decided to keep spectrum limits intact to safeguard competition. Point is to examine whether competition has grown to extent that spectrum restrictions can be lifted or relaxed, NPRM said. Questions in notice included role FCC plays in examining market impact of wireless deals vs. purview of Dept. of Justice.

PanAmSat began 6-month beta test of high-speed Net/36 network designed to deliver IP audio, video and data to ISPs with goal of starting commercial service by midyear. Beta test is using 1-2 transponders aboard PanAmSat Galaxy satellite, Qwest Communications DSL service in western U.S. and Excite@Home cable modem network on both coasts, CEO Douglas Kahn said Mon. at C.E. Unterberg, Towbin satellite conference in N.Y.C. Agreements with BellSouth and Hughes Network Systems’ DirecPC in addition to Qwest and Excite@Home give Net36 access to 3.5 million homes in U.S., although goal is to pass 16 million worldwide as service expands to 24 transponders by 2004, he said. PanAmSat will spend $250 million in developing service and draw heavily on fleet of 21 satellites to deliver it worldwide, Kahn said. Of 16 million homes, half will be in U.S., others in Europe and Asia, he said. Plan is to have Net/36 act as middleman in delivering programming content to edge of DSL and cable modem networks. PanAmSat has agreements with dozen programmers including ABC-TV, Walt Disney Co., Bloomberg TV and Hollywood.com, Kahn said. Despite start of beta test, PanAmSat still has several hurdles to clear, including digital rights management issues raised by content providers. “This concern has taken on a tremendous amount of significance for them and we'll have to address that,” Kahn said. Adoption of Net/36 platform among broadband service providers also has been slower than expected, he conceded. Number of homes that had access to Net/36 stood at “several hundred thousand” in late Nov. before additions were made in following month, he said. “We're going to invest a little bit less [in Net/36] this year because we expect the revenues are going to be a little bit slower,” Kahn said. Executive conceded that PanAmSat had been “frustrated” at pace of DSL deals, noting that even after reaching agreements, RBOCs “are not fast movers” in deploying technology. PanAmSat also is aggressively pursuing Ka-band spot beam satellite business and is likely to enter market with 2 birds, Kahn said. PanAmSat has received authorization for 7 Ka-band slots, with 5 others pending, he said. While PanAmSat had aimed to have some Ka-band agreements secured by late last year, Kahn said it was likely no deals would be signed by midyear. “Our objective is to be comfortable with what the spot beams are going to be used for,” he said. “It’s better to take a little bit more time to get it right.”

U.S. Supreme Court agreed Mon. to hear appeal of decision by 8th U.S. Appeals Court, St. Louis, that vacated FCC’s Total Element Long-Run Incremental Cost (TELRIC) pricing standard for competitive interconnection (CD July 19 p1). Court said it would hear case (Verizon Communications v. FCC) in 2001-2002 session that begins in Oct., meaning decision probably won’t be handed down until about year from now. Appeals were filed by Verizon, WorldCom, FCC, AT&T, General Communications. FCC Gen. Counsel Christopher Wright said agency was pleased court had granted its petition in this case as well as another involving rates that utilities can charge for pole attachments (see below). In both cases, “Congress decided that utilities owning bottleneck facilities must lease them to competitors at reasonable rates,” Wright said.

FCC didn’t meet regulatory flexibility requirements with rulemaking on DTV children’s TV obligations (MM 00-167), Small Business Administration (SBA) said in letter to FCC Chmn. Kennard. SBA said it didn’t question regulatory goal of improving children’s TV, but said Commission “did not describe a vast majority of the compliance requirements… and their impact on small firms. Nor did it discuss significant alternatives.” FCC should submit supplemental Regulatory Flexibility Analysis required by Regulatory Flexibility Act, SBA said. Although FCC listed rulemaking proposals, SBA said it didn’t provide adequate information about costs and alternatives of such proposals as requiring broadcasters to devote 3% of their air time to children’s programming. It said that proposal would require broadcasters to add programming whenever they added channels, and FCC didn’t provide information about cost of additional programming. SBA raised same questions about other proposals, including technical format rules, menu approach, daily core programming obligation, datacasting, providing content information to publishers and others, preemption rescheduling, commercial tie- in limits. FCC should consider alternatives such as delaying enforcement of rules because of cost to small broadcasters of DTV transition itself, SBA said, as well as setting reduced requirements for small broadcasters that have access to fewer resources. Meanwhile, in comments on rulemaking, state broadcast associations said it was too early to impose “burdensome” children’s TV rules on DTV because they “would hamper innovative uses of the digital spectrum.” State groups also said FCC didn’t have legal right to impose quantitative requirements for programming, and rules would raise First Amendment concerns. Center for Media Education immediately rejected constitutionality argument. “The public owns the airwaves, not the broadcasters,” CME Pres. Kathryn Montgomery said.