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This year’s mergers-and-acquisitions boom is re-shaping industries and contributing handsomely to the bottom lines of leading investment banks.  One statutory provision triggered in many transactions—not just those involving major wireless or satellite broadcasting companies—is Section 310(d) of the Communications Act of 1934, as amended. This provision requires that the FCC grant its prior consent to the assignment of radio station licenses or the transfer of control of a radio station licensee.

Radio licenses issued by the FCC are essential assets of commercial wireless carriers such as Verizon or AT&T, TV and radio broadcast licensees, and satellite broadcasting companies.  These are among the prized assets in transactions involving these companies. Section 310(d) is the principal lever available to the FCC and interested parties for assessing whether major transactions involving communications and media companies are in the public interest.

Section 310(d) is sometimes overlooked in transactions involving entities that are not telecommunications companies, but have obtained FCC licenses to operate mobile, fixed or satellite radio systems to support the target company’s internal wireless voice and data communications requirements.

These are often referred to as “private wireless systems” and are widely deployed by operators of oil and gas pipelines, refineries, exploration and production fields; electric distribution and transmission networks and power generation facilities; chemical plants; and railroads. Large retailers, some logistics companies, and many manufacturing companies also operate private wireless systems.

Investments in private wireless systems by a critical infrastructure company are often measured in millions of dollars.  Apart from the technology, these licenses are valuable in and of themselves because in many areas of the country the spectrum allocated for private wireless systems is exhausted or the company paid several million dollars to obtain area-wide licenses at an FCC auction or acquired the spectrum from auction winners—consistent with the FCC’s secondary markets rule.

Assignment and transfer of control applications pertaining to private wireless systems do not raise major public policy or competitiveness issues and almost always are reviewed and acted upon by the FCC’s Wireless Telecommunications Bureau or the Satellite Division of the International Bureau.  Timeliness is essential to avoid the possibility of an enforcement action as the FCC’s consent must be obtained prior to closing.

Generally, these applications should be filed no later than 60 days prior to the anticipated closing date.  The principal due diligence task is developing the inventory of the target company’s FCC licenses and confirming the licenses are in good order, as discussed below.

In reviewing applications for transfers of control or the assignment of licenses, the FCC focuses on whether the licenses subject to the transaction are in effect (not expired) and are “constructed,” or, as applicable, the geographic coverage requirement has been met;  the assignee or transferee (or an affiliate of the assignee or transferee) meets the FCC’s “eligibility requirements” for each license; direct and indirect foreign ownership questions regarding the assignee/transferee are addressed;  the required certifications are made, including whether the transferee or the assignee, or any controlling entity, has been convicted of a felony in state or federal court; and whether  the applicants are delinquent in fees owed the FCC.  In certain instances, the FCC license-holding entities of the acquiring company must be disclosed.

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Updated on 6/12

The appeals of the Open Internet Order have been consolidated in United States Telecom Assoc. v. FCC, No. 15-1063 (and consolidated cases) (D.C. Cir. filed Mar. 23, 2015).  Thus, the court that decided Verizon v. FCC will rule on the FCC’s second attempt to extend its jurisdiction over the Internet.

As expected, the FCC denied several motions for stay on May 8, 2015.  In light of the alleged adverse impact on their industries and companies, petitioners filed a Motion for Stay or Expedition on May 14, 2015 with the D.C. Circuit (“Respondents’ Stay Motion”).  Absent a stay, the rules adopted in the Open Internet Order, with the exception of new reporting obligations which are subject to OMB approval, will become effective on June 12, 2015.

On June 11, 2015, the D.C. Circuit denied Petitioners’ motion for stay, but granted the request for expeditious consideration of their appeals.  A summary of reactions to the court’s order by interested parties and members of Congress is provided in an excellent piece by Lynn Stanton of TR Daily.

The Petitioners’ Stay Motion is an excellent exposition of their legal arguments and the breadth of services providers’ opposition to the FCC’s imposition of Title II regulation on ISPs and the reclassification of Broadband Internet Access Service as a “telecommunications service.” Petitioners separately addressed the FCC’s decision to extend the Open Internet Order rules to mobile broadband service.  Petitioners also addressed the FCC’s assertion of jurisdiction over Internet peering and transit agreements.  As reported this week in Fierce Telecom, since adoption of the Open Internet Order, AT&T and Verizon have entered into interconnection agreements with Cogent and Level 3 for improved Internet connectivity.

The Respondents’(Department of Justice and FCC) Opposition emphasizes that the FCC has ample authority to classify broadband as a telecommunications service:  The Supreme Court’s decision in Brand X, relying on Chevron,  provides the FCC authority, to re-interpret on a continuing basis in light of changes in the industry and technology, ambiguous terms, including the statutory definitions of “telecommunications service” and “information service.”

Petitioners’ Reply zeroes in on the most compelling argument (from the author’s perspective) that broadband internet access service squarely fails within the statutory definition of “information services” that is distinct from and mutually exclusive with the definition of  “telecommunications service” and, therefore, the FCC is foreclosed from “interpreting” how broadband Internet access service should be classified.

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The entry summarizes the major elements of the Open Internet Order.  An analysis of the FCC’s policy determinations and reasoning for regulating broadband internet access service as a Title II telecommunications service will be provided in a later entry.   

Broadband Internet Access Service Defined.  The Open Internet rules apply to “broadband Internet access service” (BIAS) which is defined, in principal part, as a “mass-market retail service by wire or radio that provides the capability to transmit data to and receive data from all or substantially all Internet endpoints.”

Internet access services sold to enterprise customers are excluded, as are specialized services that may utilize BIAS providers’ last mile connectivity.  The latter (referred to as “non-BIAS data services”) include connectivity supporting heart monitors, e-readers, and telematics applications.  Non-BIAS services share several qualities:  they are application-specific, not intended to reach “all Internet endpoints,” and rely on network management to isolate capacity (for these services) from BIAS.

Bright Line Rules:

  1. BIAS providers cannot block lawful content, applications, services, or restrict the use of non-harmful devices to access broadband internet access service, subject to reasonable network management practices.  Unlawful content includes, but is not necessarily limited to, child pornography and copyright-infringing works.
  2. BIAS providers cannot throttle lawful content, applications, or services nor restrict the attachment and use of non-harmful devices except as required for reasonable network management.
  3. BIAS providers cannot engage in paid prioritization that includes direct or indirect favoring of some Internet traffic over other traffic for consideration.  A waiver of this rule may be granted in exceptional cases.

No Unreasonable Interference or Disadvantage to Consumers or Edge Providers. 
This is the FCC’s “free speech” rule for the Internet.  BIAS providers cannot interfere with end users’ access to lawful content, applications, services or devices of their choice and cannot impair the ability of edge providers to make lawful content, applications, services, or devices available to end users.

Enhanced Transparency.  The FCC expands the enhanced transparency rules adopted in 2010 and affirmed in Verizon v. FCC, requiring BIAS providers to disclose promotional rates, all fees and/or surcharges, and all data caps or data allowances; add packet loss as a measure of network performance that must be disclosed; and include specific notifications to consumers that a “network practice” is likely to significantly affect their use of the service.  The level of specificity is noteworthy as is the FCC’s decision to defer the effectiveness of enhanced transparency for BIAS providers having up to 100,000 customers until a rulemaking is concluded by mid-December.

BIAS Classified as a Telecommunications Service.  The FCC’s decision to classify BIAS as a telecommunications service subject to regulation under Title II of the Communications Act will remain a lightning rod of controversy.  While the FCC exercised its forbearance authority under Section 10 of the Communications Act to limit the applicability of many Title II statutory provisions and regulations and is declining to set or review BIAS service rates, the agency is retaining the authority to review and assess any practice, charge or rule of a BIAS provider under the “just and reasonable” and “nondiscriminatory” standards of Sections 201 and 202 of the Act.  End users, other providers, and edge users, among others, may file a complaint against a BIAS provider under Section 208 of the Act.

Mobile Broadband is BIAS, as Well.  Unlike the 2010 Order, the Open Internet Order imposes the same rules on mobile broadband providers as wireline/fixed wireless providers, noting that it will take into account the network management practices associated with mobile broadband technology.  The FCC reassessed prior agency decisions, concluding that mobile broadband service is a commercial mobile service subject to Title II.

Transit and Peering Arrangements.  Leveraging its authority under Title II and to ensure end users and edge providers can reach “all or substantially all Internet endpoints,” the FCC asserts jurisdiction to review and assess Internet peering and transit agreements on a case-by-case basis under Sections 201 and 202 of the Act, but is not imposing the Open Internet rules on these arrangements.  It also emphasizes its jurisdiction is complementary to the antitrust enforcement authority by the Department of Justice.

Advisory Opinions.  Breaking from longstanding practice, the FCC established a process for persons to obtain advisory opinions on questions regarding the Order and rules.  The FCC’s Enforcement Bureau will act on requests for these opinions, but the FCC declined to set a response time.

Deferred Issues.  In addition to the network transparency rules for small BIAS providers, the FCC defers action on two matters triggered by classifying BIAS as a telecommunications service.  First, as a telecommunications service, BIAS revenues are subject to USF contribution requirements under Section 254(d) of the Act.  The FCC “partially forbears” from applying this requirement to BIAS at this time, noting the issue of USF contribution reform is being addressed in an ongoing proceeding.  Second, the FCC committed to initiating a proceeding to establish customer proprietary network information (CPNI) rules for BIAS.

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The FCC’s Monthly Meeting scheduled for 26 February 2015 is both widely-anticipated and one in series of continuing events.  The FCC will likely adopt its net neutrality order and order preempting certain state restrictions on municipal broadband by 3-2 votes.  Both decisions will be appealed.

The immediate questions are whether the net neutrality rules will be stayed pending appeal (unlikely) and whether the U.S. Court of Appeals for the D.C Circuit will rule on both decisions.  In handicapping judicial review of the two orders, the odds for affirming the net neutrality order are noticeably better than those for the order pre-empting state laws limiting municipal broadband deployments.

The oral arguments on the net neutrality order may be the most interesting as the judges question the FCC’s counsel on how high speed Internet access service should now be regulated as a regulated Title II telecommunications service even though the Commission has told the court on numerous occasions that it is an information service.   To prevail, the FCC may have to push the limits on judicial deference to agency decisions under Chevron.  Whatever the outcome, the Supreme Court likely will address the net neutrality order.  The wild card is whether the Republican-controlled Congress can pass net neutrality legislation that the President will sign.

The FCC Chairman’s perspective is that net neutrality rules are essential to the “virtuous cycle” of innovation and investment (by edge providers) associated with the Internet; Title II “lite” is the best regulatory approach (with Section 706 as a back-up); and the extent of Title II regulation will be less onerous than the impact of Title II regulation on commercial mobile service.  Parties opposing Title II-based net neutrality raise a number of objections, including one variously offered by Members of Congress, Commissioner Pai, NCTA, Verizon and AT&T that Title II-based net neutrality rules will discourage investment in the broadband facilities.

In the author’s view, the adverse impact on broadband investment is among the weakest arguments raised against the FCC Chairman’s net neutrality approach.  The Chairman’s opponents cannot establish the cause and effect relationship between the proposed regulations and broadband investment.  AT&T and Verizon are not going to slow investments in their wireless broadband networks, particularly after committing $$ Billions in the AWS -3 Auction and prior spectrum auctions.

As explained in a macro-economic perspective on net neutrality by Steven Pearlstein, a contributor to The Washington Post, factors other than net neutrality regulation drive broadband infrastructure investment decisions by the major ISPs.

Pearlstein views the net neutrality debate as a disagreement over cost allocation and recovery:  the major ISPs do not want to have an open-ended obligation to accommodate increasing bandwidth demands of video streaming and gaming providers, among others, without additional charges.

The important point lost in the net neutrality debate is, according to Pearlstein, that ISP (fixed) last-mile service is neither competitive nor, when compared to other investments available to the major ISPs, sufficiently lucrative.  He notes that the major ISPs can secure better returns by buying content companies, buying competing cable companies, or investing in faster growing wireless businesses.  He singled out the per-subscriber build-out costs and modest take-rates for Verizon FiOS fiber as explaining the FiOS build-out freeze that we highlighted in a recent entry on this blog.  He also notes that even if paid prioritization were allowed, there is no guarantee that the major ISPs would use revenues to expand their wireline broadband networks.

He concludes net neutrality is an academic/regulatory debate among stakeholders that does not advance the objective of a more robust, widely-accessible Internet, and notes that the debate can be waged indefinitely by the major ISPs.  He recommends that the net neutrality debates be abandoned and policy makers/legislators  look at the issue from an antitrust law perspective and treat (regulate)  last mile Internet access service as a true public utility service, the same as retail electricity, subject to net neutrality obligations.

While it is doubtful the FCC would ever adopt and execute a true “public utility” model for regulating broadband access, Pearlstein’s article provides a compelling argument that business objectives, not neutrality rules, drive broadband infrastructure investments by the major ISPs.

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Following up on my posts on the subject, I had the opportunity to discuss FCC Commissioner Tom Wheeler’s announcement of a new Net Neutrality proposal with Colin O’Keefe of LXBN. In it I explain why the FCC wouldn’t really regulate the Internet like a utility and answer a few other key questions. 

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At the CES Conference earlier this month, Chairman Wheeler signaled the FCC would adopt net neutrality rules, including a ban on paid prioritization, consistent with President Obama’s blog post from November.  These remarks were noteworthy because the Chairman stated he would circulate a draft net neutrality order for adoption at the February Commission Meeting that would rely on Title II of the Communications Act as authority for the anti-blocking and anti-discrimination rules that the D.C. Court of Appeals struck down last January in Verizon v. FCC.

The Chairman’s Title II statements must have triggered alarms among the major ISPs. The Republican–controlled Congress has moved quickly.  On January 16, Senator Thune and Representative Upton, Chairmen of the Senate and House Commerce Committees, released a Discussion Draft of a bill that tracks the FCC’s 2010 Open Internet Order.  The synopsis of the Discussion Draft summarizes the major elements:

“To amend the Communications Act of 1934 to ensure Internet openness,to prohibit blocking lawful content and non-harmful devices, to prohibit throttling data, to prohibit paid prioritization, to require transparency of network management practices, to provide that broadband shall be considered to be an information service, and to prohibit the Commission or a State commission from relying on Section 706 of the Telecommunications Act of 1996 as a grant of authority.”

Importantly, the Discussion Draft limits the authority of the FCC to expand the bill’s net neutrality principles.

The Discussion Draft reflects significant concessions by the major ISPs, but it tracks the major concerns of the cable industry, AT&T and Verizon over Title II-based net neutrality rules. The bill would foreclose potential rate and related regulation of broadband Internet access service under Sections 201 and 202 of the Communications Act.

The restriction on Commission authority under Section 706 also precludes the FCC from relying on Section 706 to preempt state laws restricting municipal broadband.  More broadly, the draft bill is an effort by the Republican-controlled Congress to limit regulatory agency discretion.

It is unlikely release of the Discussion Draft or hearings on the bill will cause the FCC to defer action on a Title II-based net neutrality order or an order that preempts restrictive state laws limiting municipal broadband networks under Section 706 of the Act.  Were Congress to enact a bill modeled on the Discussion Draft—which is a possibility—the Administration would be presented with an interesting choice.  A veto is one possibility, but codification of basic net neutrality principles could insulate the principles from being gutted by the agency in the future and from the risk of another adverse appellate court decision.  The related consideration is whether the Administration could strike a deal with Congress to limit state laws restricting municipal broadband.

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As 2015 begins, the FCC has reportedly chosen Title II with forbearance as the basis for targeted Net Neutrality rules.  Other headline issues are the incentive auction, re-assessing whether the Communications Act empowers the FCC to pre-empt state laws limiting municipal broadband networks, and redefining broadband as 25 MBPS downstream/3 MBPS downstream.    

However far reaching, the FCC’s focus has blind spots.  Multiple industry sectors and user communities face significant challenges in terms of basic connectivity and market entry opportunities.  This post highlights three areas that deserve far more attention and creative energy from the FCC. 

  1. Lack of Wireless Service Diversity
  2. Nationwide In-Building Wireless Coverage Gaps
  3. USF Contribution Reform

1.         Lack of Wireless Service Diversity.  The statutory and policy biases in favor of spectrum auctions trigger a series of unfortunate dynamics.  Auctions have become a politically unassailable source of government funding.  As the major wireless carriers expend billions for spectrum (almost $45B in the AWS-3 auction), barriers to entry rise; the dominant carriers are in an even stronger position to dictate technology and service offerings.  As a result, the wireless requirements of critical infrastructure industries are ignored at two fundamental levels. 

First, each of the wireless carriers’ data service offerings are limited to wireless high speed Internet access, a “best efforts” service.  Baseline service level agreements for latency, availability, or reliability, even on a regional or local basis, are not offered.  The carriers do not offer wireless equivalents of private line service or virtual IP services, such as MPLS.  The same is true for fixed M2M (“Internet of Things”) offerings:  no SLAs.   

The carriers’ best efforts, “one-size-fits-all” data service conveniently ignores the reality that wireless high speed Internet access service poses significant cyber risks.   That their data must traverse the Internet is a difficult pill to swallow for critical infrastructure CTOs and CIOs constantly challenged to secure their networks from cyber threats.

Second, requests for additional spectrum for wireless voice and data requirements of critical infrastructure industries are given short shrift by the agency.  To meet these requirements, CII firms look to the FCC’s secondary market rules to secure area-wide licenses, principally spectrum that the major wireless carriers have abandoned.  These spectrum resources provide a limited, short term “relief valve” for CCI firms.

2.         Nationwide In-Building Wireless Coverage Gaps.  Almost two years ago, the FCC adopted rules for consumer signal boosters.  Fixed consumer boosters are designed for single-family residences and small business environments.  While the FCC recently proposed helpful rule amendments, fixed consumer signal boosters have limited coverage, require exterior antennas, and are not designed to provide building-wide coverage.    

In its 2013 decision, the FCC deferred to the wireless carriers’ interest in network management, failing to acknowledge the persistence of substantial in-building signal coverage gaps.  This blind spot extends into the FCC’s efforts to improve in-building wireless 9 1 1 capabilities.  Advanced location-based technology is useless if the 9 1 1 call from the dorm room or apartment cannot reach the wireless carrier’s network.

From the author’s vantage point, the demand for in-building coverage far exceeds the ability or willingness of the wireless carriers to serve.   Major venues, airports and rail terminals, and large commercial structures appear to have the carriers’ attention.  But this is not the case for many multi-dwelling residential properties (apartment buildings, condos, college dormitories and retirement communities), commercial buildings, and industrial structures.  This is a particular challenge when upwards of 44% of America’s households rely exclusively on wireless service for voice communications. 

Property owners are beginning to accept that they must bear the cost to install distributed antenna system (“DAS”) technology and some related equipment with the wireless carrier installing, maintaining and operating the RF signal source at the property.  In many ways, DAS is becoming the “inside wiring” for wireless service. 

But when the property owner makes or is willing to make the investment in a DAS, the carriers are often indifferent to reasonable requests for service.  At a given property, participation by the wireless carriers varies:  some or one of the carriers may agree to participate.  It is not unusual for all of the wireless carriers to decline to participate.  And, even when a carrier commits to participate in an in-building solution, the carrier may reserve the right to terminate the relationship without cause on 30 days’ notice.

3.         USF Contribution Reform.  The principal issue with the USF rules is that the contribution rules have not changed since the late 1990s and, despite substantial growth in telecommunications (both information services and telecommunications services) revenues, aggregate assessable revenues have not kept pace.  The contribution factor is well above 16% and will remain elevated due to major USF program reforms such as E-Rate Modernization.  In addition, requests for important rule clarifications remain pending for years.   

The FCC does not grasp the competitive challenges posed by a surcharge of 15-18%, particularly when the applicable rules are unclear and subject to multiple interpretations.  Unlike the wireless carriers, cable companies and the major wireline carriers, all of which systematically pass their USF assessments onto their customers, new telecommunications carriers and ISPs (that don’t have historic rights-of-way grants or franchises) must compete aggressively on price and service quality.  USF contribution levels set at typical state sales tax rates of 4-6% based on clearer, more rational rules would mitigate this competitive hurdle.

The expansion of USF funding to broadband strongly suggests that revenues attributable to the telecommunications (service?) component of high speed Internet access service (probably on a capacity basis) should be assessable.  Assuming the FCC bases Net Neutrality rules on its Title II authority, the pool of assessable USF revenues should expand significantly.  Alternatively, a more sustainable and less convoluted approach (as compared to today’s rules) based on assigned telephone numbers could also work. 

While the FCC punted contribution reform to the Federal State Joint Board last year, the Commission should advance the ball when it receives the Joint Board’s recommendations. 

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Few FCC issues have elicited the sustained attention of the general public, public interest groups of all persuasions, the media, and the cable, telco and wireless industries as Net Neutrality.  It is one of those rare issues that can drive a united front among the major Internet services providers.

In parallel, the Commission, guided by the Chairman and with the Office of Strategic Planning & Policy Analysis doing the heavy lifting, is in the midst of significant, though less widely reported, efforts to address a far more pressing issue for many of the country’s rural communities:  For all intents and purposes, these communities do not have broadband services and find themselves on the wrong side of the “Digital Divide.”

Net Neutrality – The Political Stakes Keep Rising

The FCC’s proposal that sought to “thread the needle,” between the perceived risks of no regulation of the Internet and the D.C. Circuit’s opinion in Verizon v. FCC, has proved a lightning rod for criticism, stemming principally from the FCC’s tentative conclusion to “permit broadband providers to engage in individualized practices [to accommodate some form of “fast lane” agreements], while prohibiting those broadband provider practices that threaten to harm Internet openness.”  In an early defense of his proposal and looking to placate its critics, FCC Chairman Wheeler expressed a willingness to impose Title II regulation, if the agency’s proposal proves ineffective.

The political winds are now blowing in the direction of some form of Title II regulation.  House Minority Leader Nancy Pelosi (D-Calif.) has called for Title II regulation as have other members of the House.  In response, the cable industry recently “took the gloves off” noting that Title II regulation will inevitably lead to a “real Internet Slowdown” in contrast to the Internet Slowdown Day staged by several technology companies supporting Title II regulation.  The cable industry’s warning has not slowed the momentum toward Title II regulation.

President Obama recently issued a surprisingly strong statement on the importance of net neutrality that may drive the FCC toward a decision decidedly adverse to the positions of the major ISPs. This drama will play itself out in the coming months as the Chairman takes one cue or another and the FCC staff wades through the 3.7 million (and counting) filings.

Rural Broadband—A More Pressing Problem

In the author’s view, the shortfall in rural broadband availability is largely the result of leaving broadband deployment “to the market.” The major cable operators and the telecom conglomerates that control the price cap ILECs operate high capacity broadband networks in metropolitan areas, often in competition with each other and, sometimes, with those of aggressive start-ups, but the Nation’s rural and ex-urban broadband markets are largely ignored by these major services providers.

The cable operators have always defined their service territories, and apparently will continue to do so.  Comcast’s proposed acquisition of Time Warner contemplates an even larger, urban-based cable operator.  Neither entity has proposed extending their service territories into rural areas or acquiring smaller cable operators to enhance the downstream and upstream speeds of rural operators.

Verizon has essentially frozen its FiOS buildout and has exited the local landline business in four states: Maine, Vermont, New Hampshire and West Virginia.   AT&T has announced broadband upgrades in selected cities—often in response to Google’s fiber initiatives, which in and of themselves, has given us “fiberhoods” in light of the tech giant’s narrowly defined fiber buildouts.  Yet, AT&T is reserving the option not to proceed in any market if the municipal right-of-way policies or the economics of a planned buildout don’t meet expectations.  The “flip-side” of AT&T’s announcements is that the mega-carrier is unwilling to extend these measured commitments to the thousands of communities in which it operates the local ILEC.

To its credit, the FCC is aggressively building upon its USF and Intercarrier Compensation Transformation Order affirmed by the 10th Circuit’s recent opinion, implementing major changes in the distribution of USF monies to extend meaningful broadband connectivity to rural communities. This ongoing policy shift is grounded in the widely-held belief in the importance of the Internet, elegantly set out in the bestseller, The Second Machine Age, in which the authors emphasize not only the benefits that the Internet provides to individuals, but also value the Internet confers on society as it brings more “people into the community of potential knowledge creators, problem solvers and innovators.”

Next: Highlights of the FCC’s Rural Broadband Policies 

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The manner in which many enterprises procure wireless services needs to be reassessed.  For those interested in deploying M2M networks or experiencing in-building wireless reception challenges (or concerned such challenges may arise), the standard procurement approach is no longer viable.

Wireless procurements typically focus on service and device pricing (with two-year refresh cycles) for generally-available service plans (and some custom pricing options) and smartphones and tablets.  Transition periods and renewal term options are atypical and often not demanded. Substantive SLAs are not offered.  The carriers determine network upgrades.  Reliable coverage varies. International service support is a decisional factor in some instances.  Service pricing, device discounts or accelerated refresh options, and customer experience (or concerns) regarding service coverage and reliability drive wireless procurement decisions.  

M2M.  Companies and government agencies considering a major commitment to M2M are challenged by the two-year procurement cycle.  A meaningful ramp-up period is needed to install the hundreds or thousands of devices associated with an M2M deployment. (Many M2M configurations utilize a combination of licensed or unlicensed frequencies to transmit data from devices being monitored to the aggregation points at which a cellular modem is located.)   M2M devices are not subsidized.  M2M networking remains a challenge.  Because M2M deployments provide essential inputs to company-specific data processing/data analytics resources, a stable, highly reliable wireless service is essential. 

Specialized MVNOs have been successful in offering end-to-end M2M solutions.  For companies looking to manage M2M networks and data flows internally, wireless service procurements should be geared to secure agreements that more closely resemble wireline WAN agreements. 

The term of agreements should be three years with two one-year renewal options; service metrics based on reliability and coverage with partial discontinuance and termination rights are warranted; pricing should be scaled downward to reflect the substantially lower data rates/usage per line for M2M services and that devices are not subsidized; and unified discounts for utilizing the carriers’ wireline services (MPLS or private line) for backhaul should be sought.    

In-Building Wireless Reception Challenges.  Enterprise customers face substantial uncertainty if and when their wireless carrier or carriers will address the enterprise’s in-building wireless reception challenges. These challenges will remain constant, at best, and likely increase over the next several years.  

Carriers continue to experience network capacity shortfalls as the demand for wireless broadband in high traffic areas continues to accelerate, including major urban areas.  Coverage is also impacted by materials and design practices used to achieve LEEDs status for new buildings. (Much like inside wiring, enterprise investment in one-premise distributed antenna systems (DAS) and, possibly, carrier-provided and managed small cells should be anticipated.)  

At least one wireless carrier publicly states it wants one-year’s advance notice from property owners for the carrier to install facilities to connect to a planned DAS and typically demands design approval with regard to the DAS.  It is no small irony that in a recent blog post AT&T calls upon the FCC to streamline the environmental review process to quicken the deployment of small cells and DAS installations, but is part of the wireless industry that struggles to support in-building wireless solutions.

Rather than hope for a favorable and timely resolution, customers should address these concerns by beginning their next wireless procurement much sooner to address wireless reception challenges.  

In the next wireless RFP, the enterprise should reserve the right to disqualify a respondent that declines to commit to support in-building reception solutions in a timely manner, and, among requested contract provisions, include the right to terminate the agreement if the carrier does not meet the commitment.  This approach is warranted until wireless carriers allocate the resources to deal with in-building wireless reception challenges in a more responsive manner. 

The widely-anticipated commercial deployment of drones piques the interest of critical infrastructure industries, the agricultural sector, and technology companies such as Amazon.  Consistent with this commercial interest and its Congressional mandate, the FAA is developing proposed regulations for commercial drone operations by the September 2015 statutory due date, which likely will not be met.  Recently, a manager within the UAS Integration Office announced the FAA is considering granting several exemptions under Section 333 of the FAA Reauthorization and Reform Act from the general prohibition against the commercial operation drones for (1) precision agriculture; (2) film making; (3) power line and pipeline inspections; and (4) oil and gas flare stack inspections.

On the other hand, constant media coverage and casual conversation on drones evoke thoughts of unrestrained government surveillance, widespread Fourth Amendment violations, and other privacy concerns for many interest groups and individuals.  As noted by Catholic University law professor, Clifford S. Fishman, people almost reflexively equate drones with government surveillance; the mere mention of drones “bypasses the brain and goes straight to emotion.”

These concerns are not without foundation. Equipped with real time cameras and biometric identification systems, drones have the capability of being a surveillance super-tool, sending detailed images and tracking what the naked cannot. Privacy advocates argue that drones have the potential to erode Fourth Amendment protections and “reasonable expectations of privacy.”

Because of their relatively low cost (as compared to helicopters), the rapidly developing technology, and current use of drones by law enforcement agencies, the courts likely will be called upon to assess a range of Fourth Amendment challenges to the use of drones by law enforcement.  A recent Supreme Court decision regarding global positioning system (GPS) devices suggests the jurisprudence on drone-based surveillance will evolve over time. In United States v. Jones, a unanimous Supreme Court held that attaching a GPS device to a person’s car to monitor his movements constitutes a search under the Fourth Amendment (requiring a warrant).  Importantly, the length of the monitoring was dispositive; not the actual attachment of the device to the car. In his concurring opinion, Justice Alito stated, “It is clear that the attachment of the GPS device is not itself a search . . . [and] short-term monitoring of a person’s movements on public streets accords [with reasonable privacy expectations].”

More than ten states have enacted drone laws aimed at protecting their citizens’ privacy, and the ACLU reports that drone legislation has been introduced in 36 states.  A central theme in state drone laws is that law enforcement officials must obtain a warrant before engaging in drone surveillance, and Virginia banned drone use by law enforcement until 2015, Congress’ deadline for the FAA to develop commercial drone regulations.

Texas prohibits warrantless drone searches, and allows drone use for multiple purposes including the use by owners and operators of pipelines for inspection and maintenance purposes.  It is doubtful that state laws regarding permissible commercial uses of drones will be sustainable over the long term, in light of the FAA’s broad authority over the domestic airspace.

Privacy concerns associated with drones must be balanced against and should not impede the beneficial use of drones.  This technology holds the promise of delivering real-time or near real time information regarding hurricane paths, the status and operation of pipelines, railroad infrastructure; enhancing productivity in agriculture; and saving lives during natural disasters.  The purposes behind these drone operations do not implicate privacy expectations.

Nonetheless, proponents of commercial drone operations should acknowledge and be prepared to address privacy concerns through engagement with concerned citizens and establish best practices that effectively preclude the commercial deployment of drones as surveillance super-tools.