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This is BeyondTelecomLawBlog’s first annual Telecom Legal/Policy Projections for the New Year. While multiple policy and legislative initiatives were launched in 2010 and 2011, we expect the courts, the FCC and Congress to define the scope of these initiatives in 2012.

Net Neutrality Order Heading for Reversal in Court of Appeals.  Assuming the D.C. Circuit Court of Appeals rejects the FCC’s motion to hold in abeyance review of the Net Neutrality Order, this Order likely will be overturned in 2012. Despite legitimate concerns regarding potential abuses by facilities-based ISPs, the FCC is challenged to argue that the Communications Act empowers it to regulate these ISPs as comprehensively as Title II of the Act authorizes regulation of telecommunications carriers and telecommunications services. The D.C. Circuit rejected a far less expansive assertion of Commission authority over Internet traffic management practices in the agency’s Comcast-BitTorrent decision.

USF Order Likely to Survive Despite Judicial Challenges.  Thirteen petitions for review of the FCC’s USF Order filed in eight circuit courts of appeals are now consolidated in the 10th Circuit. The migration to “bill and keep” is subject to Petitions for Review and Petitions for Reconsideration filed with the FCC. Wireline carriers (except AT&T and Verizon) are concerned with the adverse revenue impact of “bill and keep” for non-access Wireless-to-Wireline traffic. While petitioners may prevail on some issues, the FCC’s major restructuring of the USF program likely will survive.

Pressure Building for USF Contribution Reform.  The USF Contribution Factor for the 1st Quarter of 2012 is set at the unprecedented level of 17.9%, driving more data traffic to Internet-based VPNs, accelerating the demise of POTS and undermining growth in Wireless and Wireline services. This should prompt the FCC to revisit its rules governing USF contributions, perhaps migrating to a “numbers-based” approach or assessing a percentage of retail Internet access service revenues attributable to the telecommunications component embedded in this service. This latter makes sense as broadband Internet access service will now be supported by USF.

It May Be Lights Out for LightSquared.  The FCC will rule on LightSquared’s proposal to operate a mobile broadband service on MSS spectrum. While the FCC is unabashedly committed to rolling out Wireless broadband, the interference concerns of government and industry GPS users likely will prove insurmountable.

Congress Likely Will Allocate the D-Block to Public Safety and Authorize Incentive Auctions of TV Broadcast Spectrum.  Though ultimately stripped from the House payroll tax legislation, provisions allocating the 700 MHz D-Block to Public Safety and granting the FCC authority to conduct incentive auctions of licensed TV broadcast spectrum, elicited an extensive response from FCC Chairman Genachowski. Inasmuch as auction revenues offset Federal budget shortfalls and the House and Senate Commerce Committees largely agree on the D-Block, legislation incorporating these proposals likely will pass in 2012.

FCC to Address 700 MHz Handset Interoperability; No Indication on Handset Exclusivity Reform.  In authorizing the assignment of Qualcomm’s 700 MHz licenses to AT&T, the FCC committed to initiating a proceeding on the interoperability of Wireless (broadband) devices operating on frequencies in the 700 MHz band. Smaller wireless carriers have secured licenses to operate on the Lower 700 MHz band frequencies in some rural and urban areas, but not nationally. Without interoperability at least with AT&T (Verizon’s C-Block 700 License is in the Upper 700 MHz band), these carriers may be forced to sell or surrender their 700 MHz spectrum.

Another overarching issue is whether the FCC will review exclusivity arrangements between device manufacturers and the major Wireless carriers. Handset exclusivity was the single claim Judge Huvelle allowed Sprint to pursue in connection with its antitrust suit against the AT&T-T-Mobile merger. Longstanding agency indifference toward this issue contrasts sharply with the FCC’s interest in making Wireless broadband available throughout the country. As demonstrated by the iPhone, advanced devices drive Wireless broadband service adoption.