Cable companies shouldn’t be allowed to pass through to basic tier subscribers expenses for sales of ads, National Assn. of Telecom Officers & Advisers (NATOA) and Montgomery County, Md., said in ex parte presentation to FCC officials. Original petition filed by Pasadena, Cal., seeks FCC ruling that federal law and Commission rules don’t allow passthrough to subscribers of cable operators’ franchise fee on revenue from nonsubscriber sources. Permitting passthrough of expenses for competitive cable services would “unfairly disadvantage competitors” to cable operators, NATOA and county said. Charter Communications is Cal. MSO in question. Comcast and Coxcom support Charter’s claim that passthrough is acceptable. NATOA and county said it was unfair for subscribers to have their cable bills increase whenever cable operator “makes money from advertising sales.” Among FCC officials in meeting were Chmn. Powell’s cable adviser, Susan Eid, and representatives of Comrs. Tristani, Copp, Martin.

Federal court in Ark. Thurs. rejected appeal by Advanced Communications in case in which defunct DBS startup attempted to sue MCI for “tortious interference” with FCC in 1995 decision that led to auction of spectrum it lost because of failure to meet milestones. MCI mailed letter to then FCC Chmn. Reed Hundt that urged Commission to auction Advanced orbital locations and channels and said it would be willing to pay $175 million. Hundt subsequently sent copies of letter to other commissioners while Advanced was appealing decision to deny extension of milestone requirements.

Even among former Bell companies, FCC didn’t gain across-the- board support for its proposal to replace intercarrier compensation schemes with bill & keep, according to comments filed with agency Aug. 21 (CD Aug 22 p1). While BellSouth seemed to offer strongest support for FCC’s proposal, Verizon gave more measured response and used part of its filing to rail against somewhat unrelated issue of misuse of phone numbers. SBC said it’s been “firm proponent of bill and keep” for Internet traffic and supports extending it to wireless and other local calling. However, SBC said that while replacing access charges with bill & keep also “has much to recommend it,” some groundwork would have to be done first. Bells have tended to be proponents of unifying intercarrier compensation although filings by all 3 indicated caution about moving too quickly, particularly on access charges.

U.S. Cellular Corp. (USCC) and Rural Cellular Assn. (RCA) petitioned U.S. Appeals Court, D.C., for en banc hearing to reconsider its ruling that upheld FCC decision to remove carrier cost-recovery requirement as precondition to provision of Enhanced 911 service. Corr Wireless, part of rural carrier group challenging original FCC order, also is seeking D.C. Circuit review. In order, Commission had deleted carrier cost recovery precondition, which was seen as slowing down rollout of E911 services. Agency concluded carriers didn’t have to meet E911 Phase 1 and Phase 2 requirements until guaranteed state or local govt. funding was in place. Rural carriers, including USCC, had challenged FCC decision, and D.C. Circuit sided with Commission (CD July 2 p1). “Despite a directly analogous wireline model where the incumbent local telephone monopoly charges the state and local governments to provide comparable wireline E911 service, the panel decision affirmed the FCC’s orders that created this unfunded mandate on wireless carriers,” petition said. RCA and USCC argued that ruling ignored Sec. 201 of Communications Act, which limits FCC authority to regulate wireless carriers through Administrative Procedure Act and other legislative provisions. Calling decision to roll back carrier cost recovery conditions “irrational,” RCA and USCC asked court to rehear case and vacate FCC’s order. Rural carriers cited D.C. Circuit decision in 1996 in CompTel case in which court said Communications Act barred departures from principles of cost causation without compelling justification. Rural carriers contend that FCC order at issue departs from that principle because public safety answering point that orders E911 service from wireless carrier “has been excused from paying” for service. Petition said: “No reasonable court would sustain a federal order requiring ambulance makers to provide ambulances for free to state and local governments because the emergency rescue service was otherwise in the ‘public interest.’ Because the FCC orders at issue effectively require the very same thing, this court should rehear this case and vacate the FCC orders under review.” Rural carriers said issues were of “exceptional importance.” They said FCC mandate would require operators to spend billions of dollars to upgrade their networks to meet E911 Phase 2 deadline of Oct. 1.

SAN ANTONIO -- National Conference of State Legislators (NCSL) task force on state and local taxation of telecom and e- commerce adopted resolution at convention here encouraging states to adopt uniform sourcing rules for transaction taxes on telecom services, clarifying tax sourcing rules for mobile telecom, bundled services, postpaid and prepaid calling and private communications. Telecom industry and Streamlined Sales Tax Project (SSTP) subgroup on sourcing must agree to rules and Telecom Tax Reform Initiative should provide input, officials said.

Previous applicants for wireless licenses are suing FCC for $148 million, contending that’s current value of licenses on which they charged Commission reneged on promise to award spectrum via lottery. Class action litigation is led by lottery applicants that include Gene Folden, Boca Raton; Judith Longshore, Canton, N.Y., Coastal Communications Assoc., Charleston, S.C. Lawsuit, filed in U.S. Court of Federal Claims, argued that agency had breached “implied contracts” to award 7 cellular licenses by lottery, saying govt. owed them and other lottery applicants pro rata share of current market value of spectrum. Applicants said they paid U.S. $855,200 to participate in lotteries that Commission held in 1989. FCC later found lottery winners to be unqualified and scheduled replacement lotteries for 6 of 7 licenses in July 1996, cancelling re-lotteries few months later. In 1997, Congress cancelled FCC’s authority to use lotteries, replacing them with auctions. After that, FCC awarded spectrum to 3 of originally disqualified lottery winners at direction of Congress. Plaintiffs said FCC “apparently intends” to auction 4 remaining cellular licenses that had been at issue. FCC Wireless Bureau released order March 2 that denied reconsideration of lottery participants’ application for 7 licenses. Licenses at issue are in Ark., Fla., Minn., N.D., Pa., P.R. and Tex. and range in estimated value from $4 million to $53.5 million. Suit said FCC, by not awarding 7 licenses by lottery, deprived applicants “of their contract rights to have chances of winning licenses.” Robert Kerrigan, attorney for lottery applicants, said govt. took money from applicants, kept $200 per applications that had been paid and then used another system to award licenses. “Although the government can do that from a regulatory perspective, the folks who paid to enter the lottery are entitled to the benefit of their bargain, which in this case is their pro rata share of the fair market value of those licenses,” he said. Kerrigan has represented state of Fla. against tobacco industry. He said there were 926 members of class of lottery applicants for 7 licenses who would share value of $148 million on pro rata basis, depending on which lotteries they entered, “minus expenses and attorney fees.”

DBS industry will leave behind most of U.S. TV stations when new spot beam satellites are launched, according to study by Equal Airwaves Right Now (EARN), organization supported by 20 broadcast companies and consumer groups. At least 2/3 of U.S. market (1,100 TV stations) won’t receive local TV signals, said EARN study, The Left Behind Project. In news conference at National Press Club Tues., group cited new study as demonstrating why FCC should license competing services such as Northpoint. EARN Exec. Dir. Peter Pitts said “satellite giants” made decisions on must-carry “based on pure profit and politics” with no consideration of “public interest.” He said policy on local TV carriage was “wrong.”

Commerce Secy. Donald Evans told FCC Chmn. Powell that with “additional time” NTIA should work with Commission to develop “a new plan for the selection of 3G spectrum.” Evans wrote: “The aim will be to build upon the good work already done and to develop and execute the new plan as quickly as possible.” Evans said he was asking that the work be done in coordination with other Executive Branch agencies, including National Security Council, National Economic Council (NEC), Office of Management & Budget, Defense Dept. Evans said in letter that he was urging participants to consider ways to “achieve flexibility” on statutory auction dates if flexibility was needed to implement plan. Letter appeared to be response to Powell letter last month outlining Commission’s plans to delay spectrum allocation decision for 3G that had been due this month under timeline set in White House executive memorandum last fall (CD June 28 p4).

Cal. PUC became first state commission in nation to adopt rules for allowing consumers to charge small purchases to their wireless or wireline phone bills. New PUC rules implement state law passed last year that took effect July 1. Law amends anticramming statute to permit use of phone bills for non- communications-related charges under rules set by PUC. Permitted charges would be for items such as beverages, snacks, magazines. Some phone carriers in Europe and Japan already offer that type of billing through arrangements with merchants. Under Cal. rules, telephone customers must subscribe in advance to authorize noncommunications charges and can cancel their subscription at any time by giving notice to their phone carrier. Each nontelecom purchase must be verified by PIN number or other security device. Because phone companies in effect are offering credit, billing service must adhere to federal regulations on consumer credit disclosures of interest, fees, penalties, handling of disputed charges, other terms. Phone companies must screen vendors and billing agents for history of consumer fraud and must itemize nonphone charges on bills, indicating what each charge was for, who put it on bill and whom to contact with questions. PUC said basic phone services couldn’t be disconnected for failure to pay non-telecom-related charges. It said new technologies that allowed charging purchases to phone bills would be emerging soon in Cal., and agency sought to design rules that would provide effective protection against fraud and abuse without creating barriers to offering new service. PUC said it would review effects of new rules in 18 months.

Newest FCC Comr. Martin is focused on statutory-based authority of Commission and need for “more stable regulatory environment,” he said. In interview with Communications Daily Fri. in his still sparsely-furnished office, with boxes of files not yet arrived from Austin, he said: “That’s kind of an overarching philosophy, that the government has limited but important roles. The Commission specifically is an implementer of congressional policy, first and foremost.” Martin repeatedly emphasized role that competition played in protecting consumer interests and said “the government has a vital role in making sure that playing fields are level and fair.” He also stressed importance of strong enforcement arm in maintaining level playing field.