I. Legislative Branch Activity

A. Senate Commerce Committee Meets to Discuss Universal Service.

On March 1, the Senate Commerce Committee invited Commissioners Tate and Copps, as well as other regulatory officials, to discuss the Universal Service Fund (USF). Senators from rural areas demanded that broadband needs to play a part in the USF program. Commissioner Copps endorsed adding broadband, but added that he could probably not gather the two additional votes necessary. Commissioner Tate said, while she believes the FCC has the authority to make the change, that adding broadband to the USF requires further study. Other panelists insisted that Congressional action would be necessary to ensure that USF issues are addressed quickly, as changes by the FCC could take several years.

B. House Increases Oversight Over Telecom.

Rep. Markey (D-MA), Chairman of the House Subcommittee on Telecommunications and the Internet, has increased oversight over the FCC and National Telecommunications and Information Administration (NTIA) with numerous hearings. Throughout March and April, the Committee held a total of seven hearings concerning media, broadband, spectrum management and wireless issues, and general oversight over the FCC and NTIA. 

C. Universal Service Fund Bills Introduced to House.

On April 26, Reps. Rick Boucher (D-VA) and Lee Terry (R-NE) introduced the Universal Service Fund Act of 2007. Their bill, using language from a bill Sen. Stevens’ (R-AK) submitted earlier in the 110^th Congress, aims to use USF monies for broadband while curbing the overall growth of the Fund. The bill would expand the base of contributors to include VoIP, Cable Internet, DSL, WiMAX, and broadband over power lines.  The FCC would still have to decide the correct contribution formula. 

D. Senate Judiciary Passes Data Mining Bill.

On April 12, the Senate Judiciary Committee passed the Federal Agency Data-Mining Reporting Act of 2007. The bill, which passed on a voice vote, requires the head of each federal department or agency to report to Congress any use of data mining. It also requires annual updates on any new uses. Except when dealing with classified programs, these reports must be released to the public. 

E. Legislative Calendar.

The House and Senate will not be in session from May 28 through June 1.

II. Federal Communications Commission (FCC) Activity

A. April FCC Meeting.

1. FCC Requires Retailers to Fully Inform Consumers About Analog TV Equipment Limitations as Transition to Digital Approaches.

The FCC adopted an Order that requires retailers to inform consumers when equipment is being sold as analog only. The FCC reasoned that because many consumers are not aware of the February 17, 2009 cut-off date, retailers must be explicit when selling analog televisions.

2. FCC Initiates Third Review of DTV Transition. (Docket 07-91)

The Commission initiated its third review of the transition from analog to digital television through a Notice of Proposed Rulemaking, which proposes deadlines to facilitate the digital transition of full-power stations. According to the FCC, the NPRM takes the following actions to assist in that transition:

• Restricts the grant of future extensions of time to construct digital facilities;
• Offers expedited processing to stations applying for a construction permit for their post-transition channel based on the new DTV Table of Allotments;
• Examines the circumstances in which stations may reduce or terminate analog service to facilitate construction of post-transition facilities;
• Permits stations that have different pre-transition and post-transition channels to devote their resources to building their post-transition channel;
• Requires stations by December 1, 2007 to file a form with the Commission detailing the current status of the station’s digital transition, the additional steps the station must take before the transition deadline, and a plan for how the station intends to meet the deadline; and
• Establishes February 17, 2009 as the construction deadline for stations with new channel allotments in the upcoming new DTV Table of Allotments.

3. FCC Seeks Comment on Dual Analog/Digital Broadcast Signal Delivery After the Digital Television Transition. (Docket 98-120)

Also at the April meeting, the FCC issued a Second Further Notice of Proposed Rulemaking seeking comment on proposals designed to ensure that cable subscribers with analog televisions will receive must-carry local channels after the February 17, 2009 transition. Noting that many cable subscribers still have analog cable, the FNPRM seeks comment on whether rules should be adopted to require cable operators to: "(1) carry the signals of all must-carry stations in an analog format to all analog cable subscribers, or (2) for all-digital systems, carry those signals only in digital format, provided that all subscribers have the necessary equipment to view the broadcast content."

4. FCC Addresses Rules Governing Commercial Wireless and Public Safety Licenses in the 700 MHz Spectrum Band.

A closely watched item on the agenda was the adoption of rules for the 700 MHz auction. Disagreements within the Commissioners delayed the meeting for over 8 hours, and even with this added time they were not able to agree upon a specific band plan. Instead, the FCC adopted a FNPRM that seeks comment on several different ideas. Chairman Martin had pressed to divide the upper 700 MHz band into large blocks, which would enable a bidder to win a nationwide license. It would also contain no cellular market areas (CMAs) in the upper band and only one CMA block in the lower 700 MHz band. Democratic Commissioners, joined by Commissioner McDowell, strongly opposed the plan. Text of the rulemaking has not been released yet. The Commission has limited time to act, as Congress has set January 28, 2008 as the final day the auction can begin.

B. Other April FCC Activity.

1. FCC Attempts to Prevent Pretexting.

In an effort to protect personal phone records, the FCC adopted additional safeguards to prevent unauthorized access to customer proprietary network information (CPNI). Some of those safeguards include: carrier authentication requirements, notice to customers of account changes, notice of unauthorized disclosure of CPNI, joint venture and independent contractor use of CPNI, and annual CPNI certification.

2. FCC Terminates Proceeding on the Use of Cellular Phones Onboard Aircraft. (Docket 04-435)

The FCC released a Memorandum Opinion and Order that ends its proceeding on cell phone use aboard airplanes. They cited insufficient technical information concerning possible interference, as well as incomplete research from the airlines, manufacturers, and wireless carriers. 

3. Broadcasters Pay $12.5 Million to Resolve Possible "Payola" Violations.

On April 13, the FCC agreed to consent decrees with CBS Radio, Citadel Broadcasting, Clear Channel, and Entercom Communications worth $12.5 million. The payments closed investigations into allegations that each violated the FCC’s sponsorship identification rules, which is commonly called payola. In other words, each entity accepted payments from record labels in exchange for airplay, and did not disclose those transactions.

4. FCC Begins Inquiries on Broadband Data and Broadband Deployment. (Docket 07-45 for NOI and Docket 07-38 for NPRM)

On April 16, the FCC released two documents concerning broadband deployment. First, a Notice of Inquiry (NOI) attempts to determine whether broadband services are getting to all Americans in a reasonable and timely manner. Among other questions, the NOI asks: whether the definition of broadband should change based on technological advances; whether consumers are adopting new services; and whether rural and hard-to-serve areas are on a level playing field. 

At the same time, the Commission issued a Notice of Proposed Rulemaking to improve upon the data collection which would set broadband policy in the future. Topics include: possibly modifying speed tier information, improving collection of data concerning wireless broadband service, the best way to measure subscribers of VoIP, and gathering more accurate data on current broadband deployment in general.

C. March FCC Meeting.

The Commission held an open meeting on March 22, 2007 to discuss numerous topics.

1. FCC Initiates Rulemaking to Evaluate Access to Multiple Dwelling Units for Video Providers. (Docket 07-51)

The FCC adopted a Notice of Proposed Rulemaking that seeks comment on exclusive contracts for video services in multiple dwelling units (MDUs), such as apartment buildings. The NPRM will determine the current environment for service providers attempting to gain access to MDUs and the impact of exclusive contracts on consumer choice and video competition. The Commission tentatively concluded in the NPRM that it has the authority to regulate exclusive contracts in MDUs when it deems that competition and deployment are being impeded.

2. FCC Adopts Rules for Digital Audio Broadcasting. (Docket 99-325)

The Commission adopted a Second Report and Order, First Order on Reconsideration, and Second Further Notice of Proposed Rulemaking, which includes several rules to allow terrestrial radio broadcasters to increase local service in their communities. 

The Order:

• Refrains from imposing a mandatory conversion schedule for radio stations to commence digital broadcast operations;
• Allows FM radio stations to operate in the extended hybrid digital mode, which allows for a higher bit-rate;
• Requires that each local radio station broadcasting in digital mode to simulcast a digital signal of at least comparable audio quality to its analog signal;
• Permits a radio station to transmit high quality audio, multiple program streams, and data casting services at its discretion; 
• Allows radio stations to time broker unused digital bandwidth to third parties, subject to certain regulatory requirements;
• Applies existing programming and operational statutory and regulatory requirements to all free DAB programming streams;
• Authorizes AM nighttime operations; 
• Dismisses several pending Petitions for Reconsideration and Petitions for Rulemaking that asked, inter alia, the Commission to reconsider the adoption of iBiquity’s in-band, on-channel (IBOC) system as the technology chosen for DAB transmission
• Seeks further comment on appropriate limits to the amount of subscription services that may be offered by radio stations; and
• Seeks comment on whether the Commission should adopt any new public interest requirements for digital audio broadcasters.

3. FCC Evaluates 76 Noncommercial Educational FM Application Groups.

The Commission resolved several long pending mutually exclusive applications for new or modified noncommercial educational (NCE) FM broadcast service to 76 different communities. The Commission plans to open a filing window for new NCE FM stations in the fall of 2007. This Order provides a chart summarizing the outcome of these potential new applicants.

4. FCC Approves Citadel/Disney Radio Transaction.

The FCC approved a transaction in which Citadel Broadcasting Corporation will acquire 24 radio stations from subsidiaries of The Walt Disney Company. 

5. FCC Grants 182 E-Rate Appeals. (Docket 02-06)

The FCC granted 182 separate appeals from schools or libraries which had either been denied or received reduced funding under the E-rate program. In every case, the FCC held that the entity had been denied funding due to a technicality or minor error. Under the E-rate program, eligible schools and libraries may apply for discounts for telecommunications services, Internet access and internal connections. The FCC remanded the applications back to the Universal Service Administrative Company and directed them to complete review in 90 to 120 days.

6. FCC Launches Inquiry into Broadband Market Practices. (Docket 07-52)

The Commission issued a Notice of Inquiry that seeks information on the behavior of broadband market participants, including: how providers are managing increased traffic, price differences for different Internet speeds, possible policy differences for those providers that charge end users for access versus those that do not, and how consumers are affected by these policies. Comments are due on June 15 and replies a month later on July 16.

7. FCC Grants Application for Transfer of Control of Telecomunicaciones de Puerto Rico, Inc. (TELPRI) from Verizon Communications, Inc. to America Movil, S.A. de C.V.

The FCC adopted a Memorandum Opinion and Order and Declaratory Ruling that grants the application for transfer of control of Telecomunicaciones de Puerto Rico, Inc. (TELPRI) and petition for declaratory ruling filed by Verizon Communications, Inc. and América Móvil, S.A. de C.V. (América Móvil). 

8. FCC Adopts Annual Report on State of Competition in Satellite Industry. (Docket 06-67)

As directed by Congress, the FCC issued its first annual report describing the state of competition in the communications satellite service industry. The report covers data from 2000 to 2006 in both the wholesale and retail markets. The Commission finds sufficient competition at present, and reports that the satellite industry provides many benefits to consumers, the government, and American industry.

9. FCC Classifies Wireless Broadband Internet Access Service as an Information Service.

As expected, the FCC declared that wireless broadband Internet service should be classified as an information service under the Communications Act. This places wireless access under the same regulatory rules that other broadband providers face. By definition, the Commission understood wireless service to be that which uses spectrum, wireless facilities, and technologies to provide high-speed access. Specifically, the Commission found that the “transmission component” behind wireless access is "telecommunications" and that the “provision of this telecommunications transmission” as a part of a wireless network is an information service.

10. FCC Seeks Comment on Permitting the Use of Smaller Antennas by Fixed Service Operators in the 11 GHz Band.

The FCC adopted a Notice of Proposed Rulemaking that seeks comment on the installation of smaller antennas by Fixed Service operators in the 10.7-11.7 GHz band, and whether this service would be in the public interest or would cause too much interference.

11. FCC Addresses Rules for Private Land Mobile Radio Systems to Transition to 6.25 kHz Narrowband Technology. (Docket 99-87)

Finally, the Commission issued a Third Report and Order that declined to establish a fixed date for private land mobile radio systems to transfer from the 150-174 MHz and 421-512 MHz to 6.25 kHz narrowband technology. It does strongly urge licensees to make that transition directly, however, rather than first adopting the 12.5 kHz technology as a stopgap. The Order also moves the implementation date of the 6.25 kHz technology to January 1, 2011.

D. Other March FCC Activity.

1. FCC Releases Text of AT&T Inc.-BellSouth Corp. Merger Order.

On March 26, the Commission released a Memorandum Opinion and Order approving the merger of AT&T and BellSouth. The FCC concludes that five benefits to consumers will result from the merger: deployment of broadband through more areas, increased competition for advanced pay television, improved wireless products, enhanced national security, and better disaster response and preparation. In its analysis of competitive effects of the merger, the Commission focused on six key groups of services: special access competition, retail enterprise competition, mass market voice competition, mass market Internet competition, Internet backbone competition, and international competition. The Order also details the conditions of merger approval.

2. FCC Approves Transfer of Univision Communications Inc., and Enters Into $24 Million Consent Decree With Univision Concerning Children’s Programming Requirements.

On March 27, the FCC approved transfer of control of Univision Communications, from current shareholders to Broadcasting Media Partners.  In a related action, the FCC and Univision agreed upon a $24 million consent decree to resolve disputes concerning violations of the FCC’s children’s programming rules.

E. Next Commission Meeting.

The next open Commission meeting is scheduled for May 31, 2007. The agenda is not yet available.

III.  NTIA

NTIA Issues Final Rule on Converter Box Coupon Program.

On March 12, the NTIA released its final order concerning digital-to-analog converter boxes. In the order, the NTIA states that each household will be eligible to apply for up to two $40 coupons in order to purchase such converter boxes. An initial allotment of $990 million is available, and the coupons may begin to be acquired on January 1, 2008. If initial funds are used up, another $510 million is available, but this time coupons will only be available to those households without pay-TV subscriptions.

IV. Litigation

A. Vonage, Verizon Battle in Courts over Patent Dispute.

Throughout March and April, Vonage and Verizon waged legal battles over certain patents, which Verizon claims Vonage infringed upon. Back on March 8, a federal jury decided that Vonage must pay $58 million in damages to Verizon for infringing upon three of the five patents under review. It did, however, decide that Vonage’s actions were not willful, which kept the damages lower. Matters became worse for Vonage when, on March 26, U.S. District Court Judge Claude Hilton issued, but did not sign, a permanent injunction barring use of Verizon patents. Since it is speculated that Vonage does not have a technological work-around, an injunction could cripple Vonage service. 

On April 4, Judge Hilton issued a stay on the injunction, which would allow existing Vonage customers to continue using the Verizon patents. Some legal confusion then arose as Vonage filed an appeal the same day with the U.S. Appeals Court, Federal Circuit. An emergency full stay was granted. This stay would override Judge Hilton’s partial stay, and would allow Vonage to apply these patents to new and existing customers while legal battles continue. Verizon is appealing the emergency full stay on the ground that Judge Hilton’s partial stay was never formally issued, and therefore, it cannot be appealed. Both Verizon and Vonage filed comments on the emergency stay late in April and a decision is still pending.

B. Powers Under Tunney Act More Limited.

On March 30, U.S. District Judge Emmet Sullivan gave approval to the SBC-AT&T and Verizon-MCI mergers, saying portions under his jurisdiction to review were deemed in the public interest. Judge Sullivan added that his role, under the Tunney Act, is limited to determining if consent decrees are in the public interest. He is not to examine whether mergers violate antitrust laws or whether they, in their entirety, meet the public interest. Judge Sullivan wrote that arguments against the consent decrees went beyond the narrow scope of the Tunney Act and DOJ responses were reasonable.