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Several matters before the FCC could have substantial dollar and technology impacts for enterprise customers.  The FCC’s special access services and USF contribution reform proceedings could significantly affect pricing for enterprise services, beginning sometime in 2014.  A more open-ended proceeding focuses on whether the FCC will move aggressively in granting AT&T’s wish list included in its proposal to convert its local telephone networks to all-IP platforms.

One matter that should be addressed this year is the appeal of the FCC’s Open Internet Order currently pending before the D.C. Circuit.  Because this is such a prominent matter, we believe the non-prevailing parties likely will petition the Supreme Court for review.

FCC Taking a Fresh Look at Special Access Services.  In an earlier entry, we highlighted the FCC’s reassessment of the interstate special access services market.  Subsequently, the FCC released a Report and Order and Further Notice of Proposed Rulemaking, setting out a comprehensive data request to  price cap ILECs and other services providers to determine the extent of competition among providers of special access services, principally, DS-1, DS-3 and Ethernet special access services.  Ethernet service broadly is undergoing rapid growth.  The FCC is taking a direct approach to determine whether special access rates are competitively priced.

We propose to perform a one-time, multi-faceted market analysis of the special access market designed to determine where and when special access prices are just and reasonable, and whether our current special access regulations help or hinder this desired outcome. We do not propose to conduct a simple market share or market concentration analysis.  Rather, we will use the data we are collecting in this Report and Order to identify measures of actual and potential competition that are good predictors of competitive behavior, for example, by demonstrating that prices tend to decline with increases in the intensity of various competition measures, holding other things constant.  In undertaking that analysis we will consider evidence as to what leads firms, including competitive providers, to undertake infrastructure investments.

Clearly, a fresh look at the special access services market (data for years 2010 and 2012 are being requested) is warranted.

Two points merit further note.  First, the FCC is seeking comment on whether Internet access service is a competitive alternative to special access services.  Hopefully, the FCC will conclude the services are not substitutes.  Internet access service is not an “access service,” rather it is part and parcel of an end-to-end best efforts shared transport and information access and retrieval service.  Special access is basic transport between defined physical locations.  Second, the FCC is requesting comment on the “Petition to Reverse Forbearance Determinations,” filed late last year by an enterprise customer group, Sprint and several interexchange carriers that requests the FCC to reverse decisions issued prior to 2010 in which the FCC elected to forbear from (i) imposing certain Computer Inquiry requirements on the price cap ILECs, and (ii) regulating non-TDM based special access services offered by price cap ILECs, particularly Ethernet services.Continue Reading Telecom Policy Projections for 2013 and 2014–Wireline Services and Enterprise Customers

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Based on developments in 2012 and continuing this year, it is clear that the major carriers will have the necessary spectrum to offer more robust wireless broadband services for years to come.  In addition to spectrum acquisitions, the FCC adopted decisions facilitating mobile broadband operations on spectrum originally allocated to the Mobile Satellite Service (“MSS”) and, in other cases, initially authorized for narrowband voice communications or largely undeveloped because of adjacent channel interference concerns.

The willingness of the carriers to expend billions of dollars for spectrum and FCC decisions “repurposing spectrum” constitute a significant “doubling-down” on the future of wireless broadband.  The downside is that an essential resource for prospective competitors is increasingly concentrated in the hands of the major wireless carriers.

Major Wireless Carriers Move Aggressively to Enhance Broadband Spectrum Holdings.   As AT&T was acknowledging that DoJ and the FCC would not allow it to acquire T -Mobile at the end of 2011, spectrum deal-making began in earnest.

  • Verizon Wireless announced its agreement with SpectrumCo and Cox Communications to acquire the cable companies’ substantial AWS spectrum holdings.  Even though final approval was not granted until August, this transaction triggered a series of significant spectrum deals.
  • On the heels of Verizon Wireless/SpectrumCo/Cox, AT&T initiated a series of transactions to acquire 700 MHz A and B Block licenses and, later in the year, entered into transactions to acquire multiple Wireless Communications Service (WCS) licenses in the 2.3 GHz band.
  • T-Mobile and MetroPCS sought FCC approval to their proposed transaction that will consolidate operations, customers and spectrum holdings and enable deployment of “a network capable of supporting at least 20 x 20 MHz LTE deployments in many areas.”
  • Relying on an anticipated cash infusion resulting from Softbank’s proposal to acquire control of Sprint, the nation’s 3rd largest wireless carrier offered to acquire all of Clearwire’s equity interests that it did not already possess in order to control Clearwire’s spectrum at 2.5 GHz.  Dish Network Corporation (“DISH”) countered with its own offer for the Clearwire’s stock and asked the FCC to “stop the clock” on the FCC’s consideration of the Softbank/Sprint/Clearwire transactions.

The pending transactions are subject to the FCC’s current “case-by-case analysis” for assessing spectrum holdings in transactions and auctions.  While the FCC has initiated a proceeding reassessing current policies for determining criteria for limiting spectrum holdings, this proceeding will not be resolved until the 2nd Quarter of 2013, at the earliest.  In view of the closed and pending transactions noted above, the impact of new spectrum holding policies likely will be limited to future spectrum auctions.Continue Reading Impacts of Broadband Spectrum Concentration on Enterprise Customers In 2013 and Beyond

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In affirming the FCC’s Data Roaming Order, the D.C. Circuit rebuffed Verizon’s efforts to squash any obligation to enter into roaming agreements with competing wireless carriers. In Cellco Partnership v. FCC, No. 11-1135 (D.C. Cir. Dec. 4, 2012) (“Cellco”), the court found that the Commission had ample authority under Title III…

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Over the weekend, the boards of both Sprint and Softbank agreed to terms under which the Japanese wireless carrier would acquire a 70% equity interest in Sprint, providing substantial cash infusion into Sprint.  In light Deutsche Telekom’s controlling interest in T-Mobile and Vodafone’s longstanding ownership interest in Verizon Wireless and that Sprint is often regarded…

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In late August, the FCC adopted a Report and Order suspending new grants of interstate special access pricing flexibility for the “Price Caps ILECs”—principally Verizon, AT&T and CenturyLink (formerly Qwest)—adopted in the agency’s 1999 Pricing Flexibility Order.  The Report and Order is a breath of fresh air in terms of acknowledging that a predictive…

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Introduction.   In a recent entry, we noted that the FCC had released a Further Notice of Proposed Rulemaking (“Further Notice”), requesting comment on proposals to revise the manner in which it assesses telecommunications carriers (Wireline and Wireless) for Universal Service Fund (“USF”) contributions.  This entry provides a more in-depth look at these proposals; principally, how, if adopted, the proposals could impact enterprise customers.

The FCC has outlined extensive changes to the current, “end-user revenue” approach for determining USF contribution obligations, focusing on currently excluded services and revenue streams.  The Further Notice also proposes two alternative approaches as potential replacements.

What’s at Stake.  The annual revenue requirement for the FCC’s Universal Service Program lies between $8 Billion to $9 Billion.  During the first six months of 2012, the USF contribution factor exceeded 17% of Wireline carriers’ end-user revenues on carriers’ interexchange (interstate and international) services.  For the 3rd quarter, the contribution factor is just below 16%.  USF assessable revenues of Wireless carriers range between 20% to 37.1% of total services charges, excluding texting and data charges.  Reportedly, most Wireless carriers rely on traffic studies to establish what percentage of their traffic is jurisdictionally interstate, rather than rely on 37.1% “safe harbor” set by the FCC.

Carriers recover their USF contributions through surcharges added to customers’ monthly bills.  Depending on the proposals ultimately adopted, business customers could find themselves paying substantially more in USF surcharges.

Why Reform the USF Contribution Rules?  The base of USF assessable revenues is dwindling largely due to the migration to high speed Internet access services (Wireline and Wireless) and IP-based services such as MPLS.  These services are either information services or  do not fall clearly within the statutory definitions of “telecommunications services” or “telecommunications.”  Exclusions and exemptions apply to other revenue streams and/or services.  In addition, the FCC appears to be looking to resolve multiple issues raised in long pending appeals of Universal Service Administrative Company (“USAC”) contribution decisions.

Possible Modifications to the End-User Revenue Approach.  The most significant proposal is to classify the revenues on high speed dedicated Internet access services (residential and business; Wireless and Wireline) and text messaging as USF-assessable; either in their entirety or assessing a set percentage of these revenues.  The FCC also appears intent on clarifying whether MPLS offerings should be subject to USF assessments.Continue Reading A Closer Look at the FCC’s USF Contribution Reform Proposals

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The FCC’s Further Notice of Proposed Rulemaking proposes significant, substantive reforms to the manner in which Universal Service Fund (“USF”) contributions are assessed.

The FNPRM undoubtedly will elicit a blizzard of comments and counterproposals as interested parties assess and respond to the proposed changes. At this juncture, several comments are warranted:

  1. The FCC deserves credit

…

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The news has not been good for wireless start-up LightSquared as recent reports suggest it is running out of cash as key Federal agencies and departments maintain the company has not demonstrated that its proposed Wireless service will not interfere with critical GPS applications.

 Background

LightSquared started 2011 by celebrating the FCC’s decision to grant…

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In late November, AT&T and T-Mobile withdrew their application for FCC’s consent to their proposed merger because of an anticipated adverse decision signaled by FCC Chairman Genachowski, opting to focus their efforts on the Department of Justice’s antitrust case.  The carriers’ apparent assumption was that the FCC would surely grant a re-filed application consistent with…