Reciprocal compensation payments by Bell companies are growing despite lower rates in some areas, creating “distortions” that will continue until FCC reforms system, BellSouth Vp Robert Blau said in Feb. 1 ex parte letter to Commission. Writing on behalf of BellSouth, Qwest, SBC and Verizon, Blau told Commission that declining rates had been offset by “continuing rapid growth of dial-up Internet minutes.” At same time, cost of network facilities used by CLECs to route Internet calls to ISP modem banks has declined, creating “ever greater economic inefficiencies and distortions,” he said. Only solution is for FCC to require carriers to recover those costs “from their own customers.” Blau said Bells have had difficulty providing figures to prove CLEC costs are going down, as requested by FCC, because “the costs at issue belong to the CLECs who, of course, have no interest in making these data publicly available.” However, Blau attached report by Morgan Stanley Dean Witter analysts that he said “corroborates our view that market forces will not reduce rates fast enough to resolve the reciprocal compensation problem at least in the foreseeable future.” Blau said report also showed CLECs were billing both ISP and ILECs for terminating dial-up traffic at rates well above costs and, therefore, many were reaping extraordinary profits on services rendered to the ISP. Financial information in report also revealed that “reciprocal compensation payments… could be eliminated in their entirety without forcing the CLECs to raise per line charges to their ISP customers.” Blau said Dean Witter analysis supported Bell company view that reciprocal compensation payments “represent a totally unreasonable transfer of revenue from the ILECs to CLECs for reasons that have no basis in economics or the law.”
Designed in part to stem loss of potential revenue from franchise fee on cable modem service, Portland, Ore., released draft telecom ordinance that seeks, among other things, to plug franchise loopholes engendered by 9th U.S. Appeals Court, San Francisco, decision classifying cable-delivered Internet service as telecom service. City’s incumbent cable provider AT&T has insisted that it doesn’t require telecom franchise for its cable modem service while asking cities in 9th Circuit jurisdiction to waive franchise fees on high-speed Internet service, citing court ruling. Portland has been relying on separate provisions in City Charter and City Code for procedural requirements governing its various telecom franchising, licensing and permitting policies, said Comr. Erik Sten. Proposed alternative would enable city to respond flexibly to “new demands or situations arising from, among other things, rapid growth in technology, digital convergence, cross-platform competition and new or other newly competitive lines of business” such as telephony over cable facilities, Sten told City Council. To be covered under ordinance’s classification of telecom providers would be franchised cable operators using cable facilities for provision of telecom or any other noncable service not otherwise authorized by underlying cable franchise agreement. Anyone who owned or controlled telecom system or facility located in rights-of-way would have to obtain from city current, valid franchise or license. Saying there had been very little industry input into draft ordinance, AT&T spokeswoman said: “The company is very clear that Excite @Home service is cable modem service and it doesn’t intend to get a telecom franchise.” In response to AT&T request for waiver of cable modem franchise fees, David Olson, dir. of Mt Hood (Ore.) Cable Regulatory Commission (MHCRC), which handles cable franchising and regulatory matters for 6 local govts.,including Portland, wrote company that while AT&T was relying on 9th Circuit ruling to maintain @Home service wasn’t cable service and therefore not subject to franchise fee, none of MHCRC franchises under which company operates authorizes it to provide any services other than cable services. As result, Olson said, AT&T is required to obtain additional local authority from each MHCRC jurisdiction to provide telecom or other noncable services. If AT&T believes otherwise, he said, it should provide legal rationale by March 1.
Research team, including 2 members from U. of Cal., Berkeley, identified what they said were flaws in algorithm used to protect wireless communications on 802.11 standards from eavesdroppers. Group, which also included researcher from Zero Knowledge Systems, published paper on wired equivalent privacy (WEP) algorithm used in 802.11-based wireless local area networks (LANs). Research cited areas in which it said such LANS were susceptible to security breaches, including attacks to “inject new traffic from unauthorized mobile stations” and to decrypt traffic. WEP is used to bar unauthorized access from using “secret” key shared between mobile station such as laptop and access point such as base station, paper said. Key encrypts packetized data before it’s transmitted. “More sophisticated key management techniques can be used to help defend from the attacks we describe; however, no commercial system we are aware of has mechanisms to support such techniques,” paper said. It said that while decoding 2.4 GHz digital signal is difficult, hardware to listen to those transmissions could be obtained from 802.11 consumer products. “The products possess all the necessary monitoring capabilities and all that remains for attackers is to convince it to work for them,” paper said. Phil Belanger, chmn. of Wireless Ethernet Compatibility Alliance (WEPA) , said “this is not new news.” IEEE 802.11 group has been working on issues such as enhancing medium access protocol for 802.11 systems, including security and quality of service, he said. Vendors also have been working on firmware upgrades and retrofits for existing products, which would be similar to how software users can obtain “patch,” Belanger said. Point that paper missed, he said, is that WEPA has goal of making wireless LAN security mechanism as secure as wired networks. Typical scenario for business user, however, would be end-to-end security solution such as virtual private network that adds another layer of security on top of those systems, he said.
Despite growing competition from Baby Bells, cable operators continue to dominate market for high-speed data as demand keeps growing for broadband service. Although several leading MSOs haven’t reported their official numbers yet, industry analysts said they expect cable to wind up 2000 with 3.9-4.2 million high- speed data subscribers, almost twice as many as phone companies. But DSL growth rate continues to be faster than that for cable modems, thanks to big push by SBC Communications, Verizon Communications, BellSouth. Analysts said DSL players ended last year with up to 2.3 million subscribers, with 4 Bells accounting for more than 1.7 million.
There’s strong link between development of local phone competition and growth of U.S. economy, according to study written by ALTS Public Policy Research Dir. David Wolcott. Telecom Act and resulting local competition has “been quite successful in promoting the deployment of advanced technologies and the expansion of the Internet,” said study titled Local Competition Policy and the New Economy. By contributing to growth of Internet, local competition has fueled nation’s economy, report said. However, it concluded that remaining barriers to local competition stymie that development and should be addressed by policymakers. Problems cited: (1) ILEC “failure to open their networks to competition.” (2) Restrictions to entry erected by building owners. (3) Actions by municipalities that “perpetuate the ILEC monopoly.” (4) Financial constraints on CLECs. Study suggested that Congress could take action in all 4 areas, for example imposing greater enforcement penalties on ILECs for failure to open their networks to competitors. To overcome “enormous financial constraints” faced by competitors, ALTS suggested Congress establish programs that would extend credit to help carriers deploy broadband services in rural areas -- www.alts.org or 202-969-2587.
Everest Connections announced deal with Liberate Technologies to introduce interactive TV service to Everest customers in Kansas City and Minneapolis. Everest, cable overbuilder in Midwest, said it would deliver service to subscribers via Liberate’s interactive TV software on Motorola’s low-end digital cable set-tops. Everest said it would start service in Kansas City first and then expand to Minneapolis in 2nd half of year.
Broadcasters must file electronically to apply for commercial station construction permits, to assign commercial licenses or permits to others and to transfer control of corporate holdings, FCC Mass Media Bureau said. Mandatory electronic filing begins Feb. 15.
Williams Communications reported deeper loss in 4th quarter due in part to sale of business unit, but said its $287 million 4th-quarter revenue beat analysts’ expectations. Including special and one-time items, Williams reported net loss widened to $546.6 million from $74 million net loss year ago. Company’s Network segment contributed $250.9 million in revenue while its Broadband Media segment reported $46 million.
Added to House Commerce Committee Chmn. Tauzin’s (R-La.) office: Patrick Morrisey as deputy staff dir.-policy coordinator; Ramsen Betfarhad, ex-Rep. Bliley’s (R-Va.) office, as counsel on commerce, trade and consumer protection; William Nordwind, ex- Rep. Upton’s (R-Mich.) office, as counsel to telecom subcommittee… Verizon Federal Affairs Dir. Richard Ellis named to FCC’s Consumer/Disability Telecom Advisory Committee… Named to Alliance for Telecom Industry Solutions’ Network & Services Integration Forum: Kenneth Stephens, BellSouth, chmn.; Ron Roman, Telcordia, vice chmn.; Connie Hunt, SBC, security team leader; Andy Walsh, Telcordia, protection/architecture team leader… Shaya Phillips, ex-St. John’s U., named networking dir., Global Broadband… Peter Mondics, WorldGate, named senior vp-gen. mgr., TVGateway, joint venture of Adelphia, Charter, Comcast, Cox, WorldGate… Matthew Yarborough, ex-asst. U.S. attorney, named to Fish & Richardson Dallas office… John Podesta, chief of staff for President Clinton, appointed to teaching position, Georgetown U. Law Center… Yuval Bloch, Motorola, named pres.- gen. mgr., Invisix, Motorola-Cisco Systems joint venture… Joining LeBoeuf, Lamb, Greene & McRae: Douglas Bonner as partner, Elizabeth Dickerson and Brett Snyder, ex-Arent, Fox, Kintner, Plotkin & Kahn, as associates… Correction: Suzanne Hutchings was promoted to senior regulatory counsel, Teledesic (CD Feb 5 p5).
Radio ad revenue climbed to nearly $20 billion in 2000, Radio Ad Bureau said. It said local and national ad revenue each grew 12% in year. RAB Pres. Gary Fries predicted radio ads would “withstand any slowdown in the economy” and forecast continued growth in 2001.