BloostonLaw Telecom Update Published by the Law Offices of Blooston, Mordkofsky, Dickens, Duffy & Prendergast, LLP [Portions reproduced here with the firm's permission.] www.bloostonlaw.com |
| Vol. 12, No. 32 | x September 16, 2009 |
 Reminder: Ownership Change May Need FCC OK We want to remind clients that many types of reorganizations and other transactions involving entities regulated by the FCC require prior FCC approval; and given the frequent need to implement such transactions by the end of the year, companies engaging in such transactions should immediately evaluate whether they must file an application for FCC approval, and obtain a grant, before closing on a year-end deal. Transactions requiring prior FCC approval include (but are not limited to): - Any sale of a company that holds FCC licenses;
- Any transfer of stock that results in a shareholder attaining a 50% or greater ownership level, or a shareholder relinquishing a 50% or greater ownership level, regardless of the amount of stock to be transferred;
- Any transfer of stock, partnership or LLC interests that would have a cumulative affect on 50% or more of the ownership.
- The creation of a holding company or trust to hold the stock of an FCC license holder;
- The distribution of stock to family members, if there are changes the control levels discussed above;
- The creation of new classes of stockholders that affect the control structure of an FCC license holder.
- Certain minority ownership changes can require FCC approval (e.g., transfer of a minority stock interest, giving the recipient extraordinary voting rights or powers through officer or board position).
Fortunately, transactions involving many types of licenses can often be approved on an expedited basis. But this is not always the case, especially if microwave licenses are involved. Also, in some instances Section 214 authority is required, especially in the case of wireline and other telephony services. Clients planning year-end transactions should contact us as soon as possible to determine if FCC approval is needed. |
INSIDE THIS ISSUE - Incumbent broadband providers should watch for overlapping stimulus applications.
- Boucher has concerns about broadband program.
- Strickling says broadband program may have only one more funding round.
- Adelstein says agencies are evaluating round 1 apps.
- FCC extends comment dates for Wireless Innovation & Investment NOI.
- FCC extends comment dates for Mobile Competition NOI.
Incumbent Broadband Providers Should Prepare To Comment on Stimulus Proposals Overlapping Their Service Area Rural Utilities Service (RUS) officials indicated on Monday that maps of proposed stimulus project areas will likely be released this week or next, to be filed shortly by a public notice establishing a comment period for incumbent broadband providers. It is expected that the comment period will only last 30 days at most, so broadband providers should watch carefully for stimulus proposals that may overlap their service area, and comment appropriately. If an applicant is claiming that a portion of the incumbent’s service area is “unserved” or “underserved” and therefore eligible for stimulus funding, the incumbent will want to be ready to counter that claim if in fact it is already providing broadband service. Incumbents providing broadband will want to: (1) Search for information about applications that have been filed in their area. A limited amount of information is available about Round 1 applications, although not in an easily searchable format at present. (2) Monitor for maps showing applicant proposals overlapping their existing service areas. Such maps may be available later this week, and will hopefully be in a searchable format. (3) Proceed to prepare information about their broadband service coverage, speeds and capabilities (including appropriate maps). (4) Be prepared to furnish an analysis of overlapping stimulus proposals within the expected 30-day comment window.
NOTE: NTIA and RUS have posted on the Web site www.broadbandusa.gov summaries of the applications filed in the first round of the broadband stimulus program. Clients desiring our assistance with this process should contact us as soon as possible. BloostonLaw contacts: Gerry Duffy, Mary Sisak, Ben Dickens, and John Prendergast. Boucher Has Concerns About Broadband Program Rep. Rick Boucher (D-Va.), chairman of the House Energy and Commerce Subcommittee on Communications, Technology and the Internet, expressed concern at a September 10 hearing that much of the eastern part of the United States could be disqualified from broadband grants because of the way remote communities are considered. He directed his remarks at the hearing witnesses: Larry Strickling, head of the National Telecommunications and Information Administration (NTIA) and Jonathan Adelstein, Administrator of the Rural Utilities Service (RUS). Our clients that encountered similar but distinct problems with the current rules in Round 1 should consider submitting comments to NTIA/RUS and their congressional delegation about how the rules can be reformed for Round 2 (which as discussed below, may be the only additional round of funding). Please contact us ASAP if you would like our assistance with such effort. Boucher said that some rules governing the $7.2 billion program of loans and grants are too restrictive and urged administrators to be flexible. He was specifically concerned about how a community might be considered "remote" under the RUS program. For example, some grants are not available to remote communities that are within 50 miles of a city of at least 20,000. “In the RUS program,” Boucher said, “a grant of between 80 and 100 percent of project costs is only available to communities that are remote, and any community that is within 50 miles of a city of at least 20,000 is considered non-remote, disqualifying that community from receiving grants of more than 50 percent under the RUS program. Almost the entire eastern U.S. is disqualified from 80 to 100 percent grants by this inappropriate standard, which in mountainous terrain is not a reasonable yardstick for determining need.” Boucher noted that in Virginia, West Virginia and other states in the Appalachian region, hundreds of communities in isolated mountain valleys may be within only a few miles of a city but because of the high cost of building the fiber optics or wireless links in such challenging topography, and given the small size of the population to be served, only through grants of 80 percent or more of the project cost can these communities receive broadband. He said that “The previously existing RUS Community Connect program is well suited to the need I have described, but that program is very small with only $13 million available for grants nationwide in one recent year. I would urge that in round two, the definition of remote be changed to qualify more truly isolated communities that may be close to a city. In the circumstances I have described, that proximity is functionally irrelevant.” Boucher’s second concern is that for rural applicants to be considered for the NTIA program which has more flexible rules for making grants of 80 to 100 percent, the application must first go to RUS and be rejected before NTIA can make an award to the applicant. “As a practical matter,” Boucher said, “I wonder if by the time RUS has reviewed and rejected an application as not qualified under RUS rules, there is time remaining in the funding cycle for NTIA to review it and consider it on equal footing with applications made initially to NTIA. In the next round, I hope you will consider allowing applicants to designate which agency will be primary for considering the application.” Boucher’s third concern relates to the standards that are used to determine areas that are underserved. He said they appear to be highly restrictive. One of three standards would have to be met: 1. “No more than 50 percent of homes could have a broadband connection greater than 768 kilobits per second (kbps). That is a very slow data rate that many would not consider true broadband. A speed of at least 1.5 megabits per second (Mbps) might be more appropriate. Or 2. “No provider advertises download speeds of at least 3 Mbps in the area. Advertising is not a reliable measure of genuine broadband availability since advertised speeds often exceed actual speeds. Or 3. “The rate of broadband subscribership is 40 percent or less. The national take rate is over 55 percent, and we are told that few places where broadband is found have take rates of 40 percent or less.
“And so I am concerned that these standards will result in many communities finding that the program is less helpful to them than we intended for it to be. My final concern is that apparently the states have been handed NTIA’s applications for initial review. We intended for NTIA to have final decision making authority over its applications, and I am looking for assurance today that it will,” Boucher said. BloostonLaw contacts: Ben Dickens, Gerry Duffy, John Prendergast, Mary Sisak, and Cary Mitchell. Strickling Says Broadband Program May Have Only One More Funding Round Lawrence Strickling, Administrator of the National Telecommunications and Information Administration (NTIA) said that although NTIA and the Rural Utilities Service (RUS) previously indicated that they planned to hold three rounds of funding for the broadband stimulus program, a review of the first round has led them to explore the option of holding just one more round of funding. This more consolidated approach may have the potential of yielding benefits for all stakeholders, but will require interested applicants to work quickly to be ready for Round 2, which would constitute their last shot at stimulus funding. Strickling’s remarks came in testimony before the September 10 House Subcommittee on Communications, Technology, and the Internet. First, the consolidated approach would enable the agencies to complete the entire grant-making process in the summer of 2010, as opposed to next September, thus expediting the stimulative benefits for the economy and job creation that the Recovery Act promises. Combining the second and third rounds into a single funding round, and adjusting the application deadline, could afford additional time – both to stakeholders, to provide NTIA/RUS with well-informed views on how the first round worked for applicants, and to NTIA and RUS, to learn from their experience and adjust those aspects of the process that need to be improved. Also, parties who wish to collaborate on an application, such as through consortia or public-private partnerships, could have additional time to work out the details of those arrangements. Finally, combining the final two rounds may also economize on administrative expenses, Strickling said. “As we evaluate this option, however,” Strickling said, “we want to ensure that our framework promotes the development of high quality applications and the funding of projects that meet the most compelling priorities. This was the reason that we initially designed the program with multiple funding rounds. Our goal remains producing the best possible results for the American public, in terms of both the quality of the broadband projects we support and the speed with which the program will contribute to our economic recovery.” Strickling said that the “review of the first round applications also demonstrates the wisdom of NTIA’s and RUS’s decision to implement our respective Recovery Act broadband initiatives in a coordinated fashion, and the success of those coordinated efforts in both educating the public about BTOP and BIP and establishing rules and intake mechanisms that encourage diverse and broad-based participation.” He said, “One result of our collaboration was the decision to allow applicants in rural areas to seek funding under both RUS’s BIP and under NTIA’s BTOP, although of course no project would be funded twice. Parties submitted more than 830 applications jointly, requesting nearly $12.8 billion in infrastructure funding. Thus, a rural applicant who is not awarded funding by BIP remains eligible for BTOP funding without needing to refile. “NTIA received an additional 260 applications that were filed solely with the BTOP program, requesting over $5.4 billion in grants to fund broadband infrastructure projects in unserved and underserved areas. In addition, parties filed more than 320 applications with NTIA requesting nearly $2.5 billion in grants from BTOP for projects that promote sustainable demand for broadband services, including projects to provide broadband education, awareness, training, access, equipment or support, including among vulnerable population groups where broadband technology has traditionally been underutilized. Parties submitted more than 360 applications with NTIA requesting more than $1.9 billion in grants from BTOP for public computer center projects, which will expand access to broadband service and enhance broadband capacity at public libraries, community colleges, and other institutions that provide the benefits of broadband to the general public or specific vulnerable populations. NTIA and RUS [will be] posting online – at www.broadbandusa.gov – a searchable database containing descriptions of all applications received, as well as maps of the geographic areas of coverage proposed by applicants in the first funding round. [At present, only high-level data is available.] “Our proactive outreach regarding the Mapping Grant Program also paid dividends, as we have received application packages from every State, territory, and the District of Columbia. These 56 applicants to the Mapping Grant Program have requested a total of $187 million in grant awards to fund broadband mapping projects and $26 million to fund broadband planning projects. Unlike BTOP’s multiple round approach, the Broadband Mapping Grant Program will issue awards in a single round, and, pursuant to BDIA, only a single state-designated entity per State or territory is eligible to receive a grant. This will help ensure that the projects will benefit from significant state involvement and oversight. We are asking awardees to submit initial data as early as November and hope to leverage the information gained in this program to make data-driven decisions on BTOP grants. We will have a first set of substantially complete broadband mapping data by February 2010, and we will complete a comprehensive, interactive national broadband map by February 17, 2011, as directed by the statute.” BloostonLaw contacts: Ben Dickens, Gerry Duffy, John Prendergast, Mary Sisak, and Cary Mitchell. Adelstein Says Agencies Are Evaluating Round 1 Apps In his testimony at the September 10 House Communications Subcommittee hearing, Rural Utilities Service (RUS) Administrator Jonathan Adelstein said: “We are now evaluating applications and expect to issue awards in early November. The first Notice of Funds Availability (NOFA) made available up to $2.4 billion in program level funding out of the anticipated $7-9 billion in total anticipated Broadband Investment Program (BIP) investment. Well over half of the total investment projected under the BIP program has been reserved for subsequent funding rounds.” He said that subsequent funding may include enhancements to eligibility and scoring criteria used in Round One. And he added that RUS is cognizant of the concerns and suggestions that have been raised regarding a wide range of issues including the definition of rural and remote areas, eligibility standards for unserved and underserved areas, scoring weights for various factors and concerns regarding overlapping service territories for satellite providers. But he said it would be premature to speculate about specific changes until RUS has completed the evaluation of first round projects, but it is important to note that this is not a static process. BloostonLaw contacts: Ben Dickens, Gerry Duffy, John Prendergast, Mary Sisak, and Cary Mitchell. FCC EXTENDS COMMENT DATES FOR WIRELESS INNOVATION & INVESTMENT NOI: The FCC has extended the comment deadline two days until September 30 for its Wireless Innovation and Investment Notice of Inquiry (NOI) (BloostonLaw Telecom Update, September 9). Replies are now due October 15. The NOI seeks comment broadly on all ideas that will foster wireless innovation and investment. In particular, the NOI focuses on spectrum availability and use, wireless networks, devices, applications, and business practices. The NOI also seeks comment on how the public has used wireless services and technology to solve real-world problems in areas such as health care, energy, education, and public safety. In addition to extending the comment deadlines, the FCC modified the NOI to subject all presentations to its “permit-but-disclose” requirements. BloostonLaw contacts: Hal Mordkofsky, John Prendergast, Cary Mitchell, and Bob Jackson. FCC EXTENDS COMMENT DATES FOR MOBILE COMPETITION NOI: The FCC has extended the comment dates on its Notice of Inquiry (NOI) that seeks to enhance its analysis of competitive conditions in the mobile wireless market (BloostonLaw Telecom Update, September 9). As a companion and extension to its Commercial Mobile Radio Service (CMRS) Reports, this new Mobile Wireless Competition Report seeks to do the following: First, the FCC inquires about which analytic framework and data sources will most clearly describe competition in the mobile wireless market. Second, it adjusts the inquiry to include new market segments not covered thoroughly in previous reports, such as device and infrastructure segments. Third, it inquires about vertical relationships between “upstream” and “downstream” market segments, and how these relationships affect competition. Comments in this WT Docket 09-66 proceeding are now due September 30, and replies are due October 15. BloostonLaw contacts: Hal Mordkofsky, John Prendergast, Cary Mitchell, and Bob Jackson. FCC PROPOSES 12.3% USF CONTRIBUTION FACTOR FOR FOURTH QUARTER 2009: The FCC has proposed setting the Universal Service Fund (USF) contribution factor at 0.123 or 12.3% for the fourth quarter of 2009. This is down from the record 12.9% in the third quarter, but up from the 11.3% from the second quarter figure and the 9.5% first quarter figure. It is also above the 11.4% figure for the third and fourth quarters of 2008, as well as the 11.3% figure for the second quarter of 2008. And it is up from 10.2% figure for the first quarter of 2008. The proposed 12.3% contribution factor for the fourth quarter of 2009 will be used to calculate the line item charge on the customer’s bill (i.e., to calculate the charges on revenues that a carrier receives). The FCC’s USF Interim Contribution Methodology order prohibits carriers from marking up the USF line item higher than the contribution factor. If the FCC takes no action by September 28, the contribution factor will become effective. BloostonLaw contacts: Ben Dickens, Gerry Duffy, and Mary Sisak. FCC MODIFIES BRS/EBS RULES, SEEKS COMMENT ON CHANGING BRS CONSTRUCTION DEADLINE: The FCC has recently adopted its Fifth Memorandum Opinion and Order and Third Further Notice of Rulemaking modifying, on reconsideration, certain rules in the Broadband Radio Service (BRS)/Educational Broadband Service (EBS). The first issue addressed on reconsideration concerned how the Commission should implement the 15-year term limit for grandfathered EBS leases (i.e. leases entered into before January 10, 2005) that it established in the BRS/EBS Fourth MO&O. The item adopted an unopposed compromise proposal negotiated between two leading EBS and BRS industry groups, and modified the FCC’s 15-year term limit for grandfathered EBS spectrum leases (i.e., those entered into before January 10, 2005). Also on reconsideration, the FCC clarified that BRS 1 and 2/2A licensees could conduct simultaneous operations, post-transition, in the 2.1 GHz band and in the 2.5 GHz band until all of their customers have migrated to the 2.5 GHz band. In the Third Further Notice of Proposed Rulemaking, the FCC has proposed to amend Section 27.14(o) of the Commission’s Rules to change the substantial service deadline for BRS licenses granted after the effective date of the rule adopted in this proceeding from May 1, 2011, to four years from the date of initial grant in light of the Wireless Telecommunications Bureau’s decision to auction BRS licenses in October 2009. Our firm’s clients who recently filed applications to bid for available BRS spectrum in Auction No. 86 should contact us if they wish to file comments in support of this proposal, which would give them additional time to construct their networks and to provide substantial service in their new license areas. Comments in this WT Docket No. 03-66, RM-10586 proceeding will be due 15 days after publication of the item in the Federal Register, and replies will be due 10 days thereafter. BloostonLaw contacts: Hal Mordkofsky, John Prendergast, Cary Mitchell and Richard Rubino. FCC MIGRATES TO NEW MEDIA: New FCC Chairman Julius Genachowski apparently implemented a “new media” revolution at the Commission. The FCC has launched on the crowd-sourcing platform, Ideascale, at http://broadband.ideascale.com/ Crowd-sourcing allows the online community to discuss, evaluate and rank ideas. The FCC says the platform will be especially useful as the Commission develops a National Broadband Plan, which will provide a strategy for reaching all Americans with robust broadband. - The FCC will also be launching on social media sites Facebook and YouTube, which will be linked through www.fcc.gov/connect. These tools, the FCC said, will both allow increased communication with the public.
- Further, the FCC is also launching www.fcc.gov/rss as a central repository of data feeds from the agency. Though the FCC launched a general RSS feed in August, the addition of 48 feeds provides more robust access. As part of its commitment to opening government
- data and furthering transparency, the FCC will continue to grow the catalog of data feeds available at www.fcc.gov/rss.
- Additionally, Chairman Genachowski posted his first video blog on the FCC’s Blogband page, http://blog.broadband.gov/?page_id=185. The FCC created Blogband, along with a Twitter site, in August. The blog is expected to help explain the process of developing the National Broadband Plan and provided an accessible forum for public discussion.
FCC OPEN MEETING TO FOCUS ON NATIONAL BROADBAND PLAN: The FCC has announced that its September 29 open meeting will have a single “Omnibus Broadband Initiative (OBI) Presentation.” The Commission staff will report on the status of the National Broadband Plan, which the FCC must deliver to Congress on Feb. 17, 2010. The presentation will include a review of the testimony from participants at the August and September staff workshops, comments received from the public, and staff research and analysis. BloostonLaw contacts: Hal Mordkofsky, Ben Dickens, Gerry Duffy, and John Prendergast. |
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