Selected portions of the BloostonLaw Telecom Update, and/or the BloostonLaw Private Users Update — newsletters from the Law Offices of Blooston, Mordkofsky, Dickens, Duffy & Prendergast, LLP are reproduced in this section with the firm’s permission.
|BloostonLaw Telecom Update||Vol. 18, No. 20||May 13, 2015|
FCC Releases MAP OF CAF II Funding-Eligible Areas
The FCC’s Wireline Competition Bureau (WCB) has published the map showing the areas eligible for the FCC’s offer of model-based Phase II Connect America Fund support to price cap carriers on the FCC’s website, at www.fcc.gov/maps/fcc-connect-america-phase-ii-final-eligible-areas-map.
As we reported in the April 29 edition of the BloostonLaw Telecom Update, the WCB adopted the Connect America Cost Model (CAM v4.3) as its final model for purposes of making an offer of support to price cap carriers for the deployment of voice and broadband-capable networks in their service territories and it has offered $1.675 billion annually, for six calendar years (2015-2020) in Phase II support to price cap carriers. At that time, the map was not yet available.
FCC Refuses to Stay Open Internet Order
The Wireline Competition Bureau and Wireless Telecommunications Bureau denied the requests for a stay of the open Internet order filed by the U.S. Telecom Association, AT&T, Inc., the Wireless Internet Service Providers Association, CenturyLink, the American Cable Association and the National Cable Association. In a separate order, the bureaus also denied the petition filed by Daniel Berninger, founder of the Voice Communications Exchange Committee (VCXC).
The bureaus found that none of the petitioners met the standard for obtaining a stay by demonstrating a likelihood of prevailing on the merits and irreparable harm absent a stay. Among other things, the bureaus found that the Petitioners allegations that they will be harmed by expending resources on compliance costs and by being subject to litigation are insufficiently concrete to demonstrate irreparable harm.
NCTA, ACA, USTA, CTIA, AT&T, CenturyLink and WISPA all filed a petition for stay with the U.S. Court of Appeals for the District of Columbia Circuit earlier today.
Comments Sought on LNP Transition Plan
In connection with the FCC's conditional selection of Telcordia Technologies, Inc. d/b/a iconectiv as the next local number portability administrator (LNPA), the Wireline Competition Bureau (WCB) is requesting comment on the North American Portability Management LLC’s (NAPM LLC) Transition Oversight Plan (transition plan). (CC Docket No. 07-149, WC Docket No. 09-109, CC Docket No. 95-116). Comments on the plan are due on or before May 21, 2015 and reply comments on or before June 1, 2015.
In related news, Neustar, Inc., the outgoing LNPA, has asked the U.S. Court of Appeals for the District of Columbia Circuit for an expedited briefing schedule and oral argument in connection with its challenge of the FCC’s conditional selection of Telcordia to replace Neustar as the LNPA.
FCC Upholds Denial of High Cost Support Waivers—Provides Insight for USF Waivers
The FCC has denied the Petition for Reconsideration and the Application for Review (Petition) filed by Adak Eagle Enterprises, LLC (AAE) and Windy City Cellular, LLC (WCC), seeking review of the Wireline Competition Bureau’s and Wireless Telecommunications Bureau’s (the Bureau's) denial of WCC’s and AEE’s requests that the Commission waive its $250 per line per month cap on high cost universal service funding. In the process, the FCC has established parameters that any company seeking a waiver should consider.
In 2012, AEE and WCC each filed a request for waiver of the FCC's $250 cap on high cost support, pursuant to the waiver process established in the USF/ICC Transformation Order. The bureaus denied the petitions finding that the companies’ expenses were excessive and further denied WCC’s petition because of the presence of alternative wireless voice service. The bureaus, however, provided AEE and WCC an additional six months of support at the pre-existing interim support levels in the amounts of $33,276 per month and $40,104 per month, respectively, “to ensure that providers on Adak Island would have time to adjust so that their customers were not adversely affected.” AEE and WCC filed the Petition in August, 2013. While review was pending, the Bureaus granted two extensions of the interim support that AEE and WCC were receiving.
In its order denying the Petition, the FCC found that the “companies failed to follow through on their commitment to reduce operating costs” and "they have also failed to meet their commitment to implement a 'drastic reduction of executive compensation.'” Among other things, the FCC states that AEE failed “to sell its boat and to move from the administrative building in Anchorage that is owned by the companies’ Chief Executive Officer (CEO) and Chief Operating Officer (COO)” and that the salary levels for the CEO and COO are “well above salary levels of similarly-situated companies in Alaska that the companies themselves submitted for comparison.” The FCC also found that AEE failed to control costs because it allowed the amounts owed by its cable affiliate, Adak Cablevision, LLC (ADV), to grow substantially year after year. The FCC found that these transactions also are inconsistent with the Commission’s affiliate transaction rules, which require “that services provided by a carrier to an affiliate be recorded at fair market value or fully distributed cost.” According to the FCC, “[c]ontinuing to allow unpaid balances owed by ADV to accumulate over a three-year period, particularly after the financial auditors issued a going concern notice, effectively means that those services were provided to ADV for free, regardless of how the transactions were shown on the corporate books.” The FCC also found that the “companies’ 2014 financial statements do not support the companies’ claims.” The FCC noted that the available cash shown on the companies’ cash flow statement is substantially higher than the estimates provided to the Commission; that the 2014 financial audit shows that the companies’ net additions of regulated property, plant, equipment (PPE) in 2014 was different than the estimates provided to the FCC; and that the companies invested in non-regulated PPE in 2014. According to the FCC, “[g]iven the companies’ claimed dire financial conditions, a reduction in cash flow ... for a company of that size due to these net additions to PPE is unreasonable, particularly given they had represented to the Commission in September 2014 they would be making much smaller regulated net additions to PPE. Had they not made net additions to PPE of that magnitude, they would have had an even greater amount of cash on hand at the end of the year.”
Thus, the FCC concluded that it “cannot determine that the companies’ expenses are justified” and, as a result, denied the request to reverse the Bureaus’ decision.
The FCC also denied AEE's and WCC's claim “that the Bureaus failed to observe the proper standard for granting a waiver of the universal service reforms adopted in the USF/ICC Transformation Order, and that the Bureaus’ denial of WCC’s request for waiver of section 54.307(e) of the Commission’s rules violated the principle of competitive neutrality and conflicted with the objectives of the universal service program.” Specifically, the companies argued that the reduction in existing high-cost support would put consumers at risk of losing voice services because the alternative terrestrial provider, GCI, does not provide the exact same wireless coverage on Adak that WCC provides. The FCC denied this claim, however, finding that “neither our universal service rules nor the waiver considerations articulated in the USF/ICC Transformation Order suggest that the Commission must conclude that the coverage provided by an alternative provider in the study area must be identical to the petitioner’s in order to deny a request for waiver.” Rather, the USF/ICC Transformation Order specified that “a mobile provider seeking a waiver of the capped support should provide evidence 'demonstrating that it is the only provider of mobile service in a significant portion of any study area for which it seeks a waiver.'”
The FCC ultimately agreed with the Bureaus that although WCC provided service from its White Alice cell site beyond what GCI currently provides, that “the cell site did not even become operational until after the USF/ICC Transformation Order was adopted;” “the cell site provides coverage largely to areas in the Aleutian wilderness and the sea lanes;” and “coverage to these mostly uninhabited areas cannot justify grant of WCC’s waiver request above the established cap.” The FCC was unmoved by AEE/WCC’s claim that, “without receiving high-cost support at a pre-USF/ICC Transformation Order level, WCC may choose to discontinue service at the White Alice cell site, and if that occurs, some consumers will lose that additional wireless coverage that WCC provides outside downtown Adak.”
Finally, the FCC also was unmoved by AEE's and WCC's contention that “upholding the denial of waiver may lead to the bankruptcy of WCC.” According to the FCC, “a party’s assertion that it might seek the protection of a bankruptcy court, with all the consequences that would entail, if the Commission does not otherwise waive the party’s obligations is no basis by itself for waiving the Commission’s rules.” The FCC, therefore, affirmed the Bureaus’ conclusion "that the universal service objectives are best served by denying WCC’s waiver request for additional support."
RUS and NTIA to Host Webinar on Broadband Opportunity Council Proposals, Registration Due Today
On May 7, the Rural Utilities Services and NTIA announced they will host a webinar on May 20, 2015, on the recent request for comments on “actions the federal government can take to promote broadband deployment adoption, and competition, including by identifying and removing regulatory barriers unduly impeding investments in broadband technology.” The webinar, which is intended to explain the purpose and objectives of the request and to allow an opportunity for the public to ask questions, will be open to the public and press on a first-come, first-served basis. To help assure that adequate space is provided, all attendees are required to register for the webinar at https://attendee.gotowebinar.com/register/4277364480826458625 by May 13, 2015 (today).
The request, as reported in the April 29 edition of the BloostonLaw Telecom Update, seeks comment on thirty questions relating to a variety of broadband deployment-related topics, such as addressing regulatory barriers to deployment and competition; promoting public and private investment; promoting adoption; issues relating to state, local, and tribal governments; issues related to “vulnerable communities” (such as veterans, seniors, minorities, people with disabilities, at-risk youth, or low-income individuals and families); and measuring broadband availability, adoption, and speeds.
The request specifically seeks comment on these questions regarding issues specific to rural areas:
- What federal regulatory barriers can Executive Branch agencies alter to improve broadband access and adoption in rural areas?
- Would spurring competition to offer broadband service in rural areas expand availability and, if so, what specific actions could Executive Branch agencies take in furtherance of this goal?
- Because the predominant areas with limited or no broadband service tend to be rural, what specific provisions should Executive Branch agencies consider to facilitate broadband deployment and adoption in such rural areas?
FCC Seeks to Refresh Record in Pole Attachment Proceeding
On May 6, the FCC’s Wireline Competition Bureau (WCB) issued a Public Notice seeking to refresh the record on the Petition for Reconsideration or Clarification of the National Cable & Telecommunications Association (NCTA), Comptel, and TW Telecom, Inc., in which the petitioners ask the FCC to clarify or amend the pole attachment rules by specifying the cost allocator to be applied based upon the actual number of attaching entities. Comments are due 21 days after publication in the Federal Register; replies due 31 days after publication.
According to the petitioners, the FCC’s newly-adopted § 1.1409(e)(2) “may result in unintended departures from the Commission’s stated goal of producing telecom rates that ‘generally will recover the same portion of pole costs as the current cable rate.’” Specifically, the petitioners state that while the rules do produce substantially similar rates when using the stated presumptions of five attaching entities (urban areas) or three attaching entities (rural areas), the telecom and cable rates are no longer comparable when fewer attaching entities are present. Therefore, the petitioners are asking the FCC to specify cost allocators based on 2, 3, 4, or 5 attaching entities, and to use a proposed formula in situations with partial-attachers.
In the alternative, the petitioners asked the FCC to adopt a proposal in its 2010 pole attachment further notice of proposed rulemaking “to establish the maximum just and reasonable rate as the higher of the cable rate pursuant to section 1.1409(e)(1) or the ‘lower bound’ telecom rate obtained by excluding capital costs from the definition of ‘cost of providing space’ in the existing telecom rate formula of section 1.1409(e)(2).”
FirstNet Announces Industry Day on May 14 – Will Accept Requests for Meetings Starting May 15
FirstNet, the government authority charged with developing a solution for ensuring interoperable public safety communications in the 700 MHz band, will be holding an “Industry Day” on May 14. According to TJ Kennedy, Acting Executive Director of FirstNet, this event, which is both open to the public and available via webcast, is designed to provide an “opportunity for members of the public safety community, the vendor community, and the public to engage in a dialog with FirstNet about [its] proposed acquisition approach to deploy the nationwide public safety broadband network (NPSBN).” Kennedy is encouraging stakeholders from all aspects of government, including local, state, federal and tribal agency, market participants and the public to participate in this event as well as other events that will be scheduled in the future so that FirstNet can receive direct feedback on issues that can affect the nationwide public safety broadband network.
In a related matter, FirstNet also announced that starting on May 15, it will start accepting requests for one-on-one meetings. Instructions on how to request a one-on-one meeting will be announced on FirstNet’s “Doing Business with FirstNet” webpage (http://firstnet.gov/about/doing-business-firstnet) or on the Federal Business Opportunities homepage (www.fbo.gov).
Law & Regulation
Sprint and Verizon to Pay $158 Million to Settle Mobile Cramming Investigations
Yesterday, the FCC’s Enforcement Bureau announced that Verizon Wireless will pay $90 million and Sprint Corporation will pay $68 million to settle investigations that revealed the companies billed customers millions of dollars in unauthorized third-party premium text messaging services, a practice called “cramming.”
According to the announcement, the monthly charge for these third-party premium text messaging services ranged from $0.99 to $14.00, but typically were $9.99 per month. Verizon retained 30% or more of each third-party charge that it billed, while Sprint received approximately 35% of collected revenues for each of its third-party charges. Customers who called to complain were often denied refunds, and yet, when the FCC requested proof during its investigation that customers had authorized charges, the carriers were unable to prove that these services were ever requested. Under the terms of the agreements, Verizon’s $90 million settlement will include a minimum of $70 million to fund a consumer redress program, $16 million for state governments participating in the settlement, and $4 million as a fine paid to the U.S. Treasury. Sprint’s $68 million settlement will include a minimum of $50 million to fund a consumer redress program, $12 million for state governments participating in the settlement, and $6 million as a fine paid to the U.S. Treasury. AT&T and T-Mobile had previously settled similar cramming complaints with the FCC.
Second Circuit Rules NSA Telephone Metadata Collection Program Illegal
On May 7, the United States Court of Appeals for the Second Circuit ruled that the National Security Agency’s (NSA’s) bulk telephone data collection program is not authorized by the Patriot Act and remanded the case back to the federal trial court in New York for further proceedings.
The case centered on an interpretation by the Foreign Intelligence Surveillance Court that Section 215 of the Patriot Act authorized bulk collection of cell phone records, a fact that was leaked by Edward Snowden. These courts, established by the Foreign Intelligence Surveillance Act of 1978 (“FISA”), operate largely on an ex parte basis and their decisions are not ordinarily disseminated to the public. The Second Circuit’s decision stated that Section 215 does not authorize the data collection program as a matter of law; as a result, it did not reach the question of whether the program also violated the First and Fourth Amendments to the Constitution.
In a recent article on the decision in the Washington Post, Orin Kerr, Fred C. Stevenson Research Professor of Law at George Washington University, notes that the actual impact of the decision will be surprisingly minimal – the Second Circuit did not enjoin the NSA from continuing with the program, and in any event Section 215 is set to sunset in just two weeks. In his own words, the decision “mostly interprets statutory language that goes off the books in a few weeks, with the understanding that the court’s ruling won’t be implemented by the district court in that time window. So from a practical perspective, it’s mostly symbolic.” However, the order may make it more difficult for Congress to reauthorize or revise the Patriot Act.
USAC Estimates $3.92 Billion for 2015 E-rate Demand
On May 6, the Universal Service Administrative Company (USAC) filed a letter with the FCC estimating that the demand for the Schools and Libraries Universal Service Support Mechanism discounts (more popularly known as the E-Rate Program) will be $3.92 billion for Funding Year 2015. According to the letter, the estimate is based on total funds requested in FCC Form 471 applications received on or before April 16, 2015.
At the end of 2014, the FCC issued the Second E-Rate Modernization Order, which extended the category two budget approach adopted in the E-rate Modernization Order for five years through funding year 2019; increased the annual E-rate funding cap to $3.9 billion; and directed USAC to establish a performance management system to assess the effectiveness of policy changes and program administration.
Netflix Opposes AT&T Merger, Cites Interconnection Disputes
Technology policy news outlet, The Hill, is reporting that Netflix recently opposed the $48 billion merger of AT&T and DIRECTV in a recent ex parte filing at the FCC, citing a number of anticompetitive concerns.
According to its ex parte filing, Netflix is concerned that, in the wake of the recent withdrawal of Comcast’s merger application, AT&T now stands poised to become the world’s largest multichannel video programming distributor (MVPD), as well as potentially the largest ISP as well. This, according to Netflix, puts the company in a position to harm online video distributors (OVDs) such as itself by leveraging control over interconnection to degrade access to OVD content. Netflix cited studies indicating that switching ISPs is “notoriously difficult, costly, and time consuming,” thus preventing churn as a result of degradation.
Verizon to Buy AOL for $4.4 Billion
The Wall Street Journal reported yesterday that Verizon Communications announced it would acquire AOL for $4.4 billion in an all-cash deal at $50 a share – a 23% premium over the average price in recent months.
“Certainly the subscription business and the content businesses are very noteworthy. For us, the principal interest was around the ad tech platform,” said Verizon’s president of operations, John Stratton.
According to the Journal report, Verizon has plans to launch a video service “focused on mobile devices” this summer, likely offering a mix of paid, free and ad-supported content rather than trying to replicate traditional TV.
“This will have nothing to do with what you do in your house,” said Verizon’s Chief Financial Officer about the program in an interview last month. “Millennials consume news in ways you can’t even see on the TV.”
JUNE 1: FCC FORM 395, EMPLOYMENT REPORT. Common carriers, including wireless carriers, with 16 or more full-time employees must file their annual Common Carrier Employment Reports (FCC Form 395) by May 31. However, because May 31 falls on a Sunday this year, the filing will be due on June 1. This report tracks carrier compliance with rules requiring recruitment of minority employees. Further, the FCC requires all common carriers to report any employment discrimination complaints they received during the past year. That information is also due on June 1. The FCC encourages carriers to complete the discrimination report requirement by filling out Section V of Form 395, rather than submitting a separate report.
JULY 1: FCC FORM 481 (CARRIER ANNUAL REPORTING DATA COLLECTION FORM). All eligible telecommunications carriers (ETCs) must report the information required by Section 54.313, which includes outage, unfulfilled service request, and complaint data, broken out separately for voice and broadband services, information on the ETC’s holding company, operating companies, ETC affiliates and any branding in response to section 54.313(a)(8); its CAF-ICC certification, if applicable; its financial information, if a privately held rate-of-return carrier; and its satellite backhaul certification, if applicable. Form 481 must not only be filed with USAC, but also with the FCC and the relevant state commission and tribal authority, as appropriate.
Although USAC treats the filing as confidential, filers must seek confidential treatment separately with the FCC and the relevant state commission and tribal authority if confidential treatment is desired.
JULY 1: MOBILITY FUND PHASE I ANNUAL REPORT. Winning bidders in Auction 901 that are authorized to receive Mobility Fund Phase I support are required to submit to the Commission an annual report each year on July 1 for the five years following authorization. Each annual report must be submitted to the Office of the Secretary of the Commission, clearly referencing WT Docket No. 10-208; the Universal Service Administrator; and the relevant state commissions, relevant authority in a U.S. Territory, or Tribal governments, as appropriate. The information and certifications required to be included in the annual report are described in Section 54.1009 of the Commission’s rules.
JULY 31: FCC FORM 507, UNIVERSAL SERVICE QUARTERLY LINE COUNT UPDATE. Line count updates are required to recalculate a carrier's per line universal service support, and is filed with the Universal Service Administrative Company (USAC). This information must be submitted on July 31 each year by all rate-of-return incumbent carriers, and on a quarterly basis if a competitive eligible telecommunications carrier (CETC) has initiated service in the rate-of-return incumbent carrier’s service area and reported line count data to USAC in the rate-of-return incumbent carrier’s service area, in order for the incumbent carrier to be eligible to receive Interstate Common Line Support (ICLS). This quarterly filing is due July 31 and covers lines served as of December 31, 2014. Incumbent carriers filing on a quarterly basis must also file on September 30 (for lines served as of March 31, 2015); December 30 (for lines served as of June 30, 2015), and March 31, 2016, for lines served as of September 30, 2015).
JULY 31: CARRIER IDENTIFICATION CODE (CIC) REPORTS. Carrier Identification Code (CIC) Reports must be filed by the last business day of July (this year, July 31). These reports are required of all carriers who have been assigned a CIC code by NANPA. Failure to file could result in an effort by NANPA to reclaim it, although according to the Guidelines this process is initiated with a letter from NANPA regarding the apparent non-use of the CIC code. The assignee can then respond with an explanation. (Guidelines Section 6.2). The CIC Reporting Requirement is included in the CIC Assignment Guidelines, produced by ATIS. According to section 1.4 of that document: At the direction of the NANPA, the access providers and the entities who are assigned CICs will be requested to provide access and usage information to the NANPA, on a semi-annual basis to ensure effective management of the CIC resource. (Holders of codes may respond to the request at their own election). Access provider and entity reports shall be submitted to NANPA no later than January 31 for the period ending December 31, and no later than July 31 for the period ending June 30. It is also referenced in the NANPA Technical Requirements Document, which states at 7.18.6: CIC holders shall provide a usage report to the NANPA per the industry CIC guidelines. . . The NAS shall be capable of accepting CIC usage reports per guideline requirements on January 31 for the period ending December 31 and no later than July 31 for the period ending June 30. These reports may also be mailed and accepted by the NANPA in paper form. Finally, according to the NANPA website, if no local exchange carrier reports access or usage for a given CIC, NANPA is obliged to reclaim it. The semi-annual utilization and access reporting mechanism is described at length in the guidelines.
Calendar At A Glance
May 14 – Deadline for Comments on Further Issues on Competitive Bidding Proceeding.
May 15 – Deadline to submit corrections to Revised Alternative Connect America Cost Model map.
May 21 – Deadline for reply comments on Further Issues on Competitive Bidding Proceeding.
May 18 – Short Form Tariff Review Plan is due.
May 27 – Questions on terms in the FirstNet RFP are due.
May 29 – Comments on Short Form Tariff Review Plans are due.
Jun. 1 – FCC Form 395 (Annual Employment Report) is due.
Jun. 5 – Reply comments on Short Form Tariff Review Plans are due.
Jun. 5 – Comments are due on the 9-1-1 Non-Service Initialized Device NPRM
Jun. 10 – Comments are due by 5 p.m. Eastern on the Broadband Opportunity Council Notice and Request.
Jun. 16 – Tariffs filed on 15 days’ notice are due.
Jun. 23 – Petitions to Suspend or Reject Tariffs filed on 15 days’ notice are due.
Jun. 24 – Tariffs filed on 7 days’ notice are due.
Jun. 26 – Replies to Petitions to Suspend or Reject Tariffs filed on 15 days’ notice are due.
Jun. 26 – Petitions to Suspend or Reject Tariffs filed on 7 days’ notice are due by noon Eastern Time.
Jun. 29 – Replies to Petitions to Suspend or Reject Tariffs filed on 7 days’ notice due by noon Eastern Time.
Jul. 1 – FCC Form 481 (Carrier Annual Reporting Data Collection Form) is due.
Jul. 1 – FCC Form 690 (Mobility Fund Phase I Auction Winner Annual Report) is due.
Jul. 6 – Reply comments are due on the 9-1-1 Non-Service Initialized Device NPRM
Jul. 27 – Comments are due on FirstNet Draft RFP.
Jul. 31 – FCC Form 507 (Universal Service Quarterly Line Count Update) is due.
Jul. 31 – Carrier Identification Code (CIC) Report is due.