Current TelecomDevelopments

January 22, 2016

DISH-Backed DEs Present Case to Court Against Denial of Bid Credits

In a brief filed late last week with the D.C. Circuit Court, Northstar Wireless and SNR Wireless accused the FCC of acting in an arbitrary and capricious manner in rejecting the companies’ status as small business designated entities (DEs) and their eligibility for the $3.3 billion in DE bid credits that they accrued collectively during the Advanced Wireless Service (AWS)-3 auction. Together, Northstar and SNR were surpassed only by AT&T as the top bidders during the AWS-3 auction, which took place between November 2014 and January 2015 and garnered gross winning bids of nearly $44.5 billion on 1,611 licenses. Northstar and SNR are backed by DISH Network, which has been described by both companies in FCC documents as a non-controlling, 85% economic stakeholder. Spurred by complaints about Northstar and SNR’s relationship with DISH—an AWS-3 auction competitor that did not win any licenses—and the bidding activities of all three entities during the auction, the FCC decided last August to deny the companies’ status as DEs and require them to pay the full amount of their collective gross winning bids of $13.3 billion. Concluding that Northstar and SNR Wireless “have a financial dependency” on DISH of unprecedented size and scope,” the FCC rejected the companies’ claim that the economic interest held by DISH constitutes a non-controlling stake. Emphasizing, however, that most of the provisions in their agreements with DISH were “derived from (and were nearly identical to) provisions in earlier [DE] agreements where very small businesses had been approved to obtain bidding credits,” Northstar and SNR told the court there was nothing unusual or illegal about their arrangement with DISH that warranted FCC denial of their eligibility as DEs. Despite the fact that they had structured their relationship with DISH “by doing exactly what the Commission instructed: closely examining past relevant precedents,” Northstar and SNR complained that the FCC later “disavowed that guidance” in the August order so that the FCC could conclude that DISH had impermissibly controlled the bidding activities of both companies during the AWS-3 auction. Northstar and SNR further charged that the FCC had intentions of applying later-adopted DE control standards retroactively to Northstar and SNR as evidenced by FCC Chairman Tom Wheeler’s July 23 testimony to Congress that the FCC would use a standard “that had never been applied before . . . in reviewing Petitioners’ applications for bidding credits.” Asserting that, “parties must be given fair notice of the rules,” Northstar and SNR wrote that, even if the FCC adopts a new standard, “it may not penalize Petitioners for failing to anticipate that change.” FCC

In This Issue:

DISH-Backed DEs Present Case to Court Against Denial of Bid Credits more

FCC Removes Cuba From International Service Exclusion List more

Carriers Caution FCC on Proposed Improvements to Wireless Emergency Alert System more

Verizon Wireless to Launch Sponsored Data Service more

UK Competition Authority Approves BT Acquisition of Everything Everywhere more

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officials offered no comment, and the agency is expected to reply in a brief that is due on February 26.

FCC Removes Cuba From International Service Exclusion List

Telecommunications carriers in the U.S. will be able to offer international service to Cuba without having to apply for separate FCC authority, pursuant to the FCC’s decision last Friday to remove Cuba from the agency’s exclusion list for international Section 214 authority. Prior to last Friday’s order, Cuba had been the only remaining nation on the FCC’s Section 214 exclusion list. Carriers seeking blanket authority to provide international telecommunications services between the U.S. and foreign markets may not offer service to exclusion list countries without first obtaining separate FCC consent to serve those countries. Applications to provide international service to exclusion list countries are also processed by the FCC on a non-streamlined basis and in consultation with the State Department and other federal agencies with respect to national security, competitive and other concerns. Friday’s order, which went into effect immediately, allows carriers that already possess global Section 214 authority to provide service to Cuba as part of that blanket authority. Carriers that file new requests with the FCC, pursuant to Section 214 of the 1934 Communications Act, to offer global telecommunications services will be able to add Cuba automatically to their list of foreign destination markets. Building on the restoration of diplomatic relations between the U.S. and Cuba last year, the FCC order corresponds with the Obama Administration’s goal of promoting “new efforts to increase Cubans’ access to communications and their ability to communicate.” Statistics issued recently by advocacy group Freedom House show that only 5% to 26% of Cubans have access to Internet services and that “high prices, exceptionally slow connectivity, and extensive government regulation have resulted in a pronounced lack of access to applications and services other than e-mail.” Recognizing the opportunities for U.S. firms that seek to serve the Cuban market and the potential benefits for the Cuban populace, the FCC predicted that its decision “will promote competition.”

Carriers Caution FCC on Proposed Improvements to Wireless Emergency Alert System

Responding to a November rulemaking notice (NPRM) in which the FCC laid out various suggested improvements to the wireless emergency alert (WEA) system, players in the wireless industry endorsed proposals to increase the length of WEA messages, but advised the FCC against other enhancements, such as embedded phone numbers and URLs in WEA alerts, that could lead to network congestion and impact the distribution of emergency information to the public. Mobile carriers throughout the U.S. participate voluntarily in the WEA system. Specifically, the NPRM proposes to improve the accuracy and relevancy of WEA alerts, and public access to the system, by (1) increasing the length of WEA messages from 90 characters to 360, (2) including embedded phone numbers and URLs in the text of WEA messages, (3) enabling WEA public safety advisories that include “boil water” recommendations and the locations of emergency shelters, and (4) requiring carriers to deliver targeted WEA messages to smaller geographic areas that are more directly impacted by the emergency situation at hand. Comment was also requested on “the technical feasibility of implementing multilingual and multimedia alerting” and on other proposed improvements. Local government and public safety groups such as the City of Los Angeles, the National Public Safety Telecommunications Council and the Association of Public-Safety Communications Officials-International (APSCO)

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voiced strong support for multimedia messaging, embedded phone numbers and URLs, and geo-targeting, which APSCO said would reduce “false alarms” and “inquiries from members of the public who are located outside of the impacted area yet receive the alert.” As it endorsed geo-targeting and an increase in WEA message length to 360 characters, however, wireless association CTIA warned against multiple language messaging (other than Spanish) and embedded phone numbers and URLs, which risk “straying from the highly effective system in place today” and would also “jeopardize wireless providers’ significant participation in this voluntary system.” Echoing CTIA, AT&T affirmed its support for increased WEA message length but drew the line on embedded phone numbers and URLs and on multimedia messaging, which it said “is not feasible because multimedia is not supported by existing cell technology.” With the exception of alerts in Spanish, AT&T told the FCC that it viewed multiple language alerts as “impracticable because of the increased burden it would place on the cell broadcast network.” Verizon agreed that proposals to add more languages “would require substantially higher message volumes, thus risking delays, congestion and consumer dissatisfaction.” T-Mobile also advised the FCC that proposals to incorporate URLs and multimedia applications into WEA alerts “should not be adopted because such requirements would adversely impact network capacity and performance during emergencies.”

Verizon Wireless to Launch Sponsored Data Service

Verizon Wireless picked up a cue from rival T-Mobile US in announcing plans this week to launch a new sponsored data offering, known as “FreeBee,” which will enable subscribers to download or stream content from specified content providers without charge to their monthly data allotments. FreeBee answers to the recent introduction of T-Mobile’s “Binge On” mobile video streaming service, which provides subscribers with access to the programming of Netflix, Hulu and other content partners without charge to monthly data caps but at reduced transmission speeds. The service will be marketed under two models: (1) FreeBee Data 360, which provides a platform for content partners to offer some or all of their mobile content to subscribers on a data-exempt basis, and (2) FreeBee Data, a separate offering which enables providers to sponsor mobile video clips, audio streaming, app downloads, and other specified content on a pay-per-click basis. On Tuesday, FreeBee 360 was launched commercially on a beta basis to post-paid mobile data customers with 3G or 4G connections, and FreeBee 360 usage will be billed to participating content providers on a per-gigabyte basis. Verizon will begin beta tests of the pay-per-click FreeBee Data service on January 25 and expects to launch that service commercially later this year. Subscribers, meanwhile, will be able to identify FreeBee content through a unique icon attached to such content. Proclaiming that “with one in three Americans now watching videos on their smart phone . . . the business case for mobile is clear,” Verizon Consumer Products Vice President Colson Hiller told reporters: “we look forward to providing our Verizon Wireless subscribers with more options to access amazing content without data charges, just by being one of our valued customers.”

UK Competition Authority Approves BT Acquisition of Everything Everywhere

BT Group’s proposed acquisition of Everything Everywhere (EE) was cleared last Friday by the United Kingdom (UK) Competition and Markets Authority (CMA), which concluded that the transaction is unlikely to lessen competition in the UK fixed and wireless communications sectors.

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Completion of the £12.5 billion (US$18 billion) merger, which was announced in February 2015, would herald BT’s return to the UK wireless sector after a 15-year absence. (BT, the former UK state telecommunications monopoly, hasn’t offered facilities-based wireless service since it spun off its BT Cellnet mobile division in 2001.) EE, a joint venture owned equally by Deutsche Telekom (DT) and French carrier Orange, ranks as the top provider of mobile voice and broadband services to British customers. When combined with 4G wireless license rights acquired by BT in a 2013 spectrum auction, the EE deal will enable BT to offer a bundled package of fixed and mobile voice, broadband and video services to British customers in competition with converged service offerings launched previously by rivals Virgin Media and TalkTalk. Noting that EE and BT, the UK’s leading provider of fixed voice and broadband services, operate in separate market segments with little or no overlap, the CMA declared, “evidence does not show that this merger is likely to cause significant harm to competition or the interests of consumers.” Upon completion of the transaction, which is now scheduled for January 29, DT and Orange, the joint owners of EE, will become shareholders of BT with respective ownership stakes of 12% and 4%. As he welcomed the CMA ruling, BT CEO Gavin Patterson predicted that “the combined BT and EE will be a digital champion for the UK, providing high levels of investment and driving innovation in a highly competitive market.”

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