Current Telecom Developments

February 13, 2015

House, Senate Republicans Seek Details on Development of Title II Plan

As the FCC geared up for what is anticipated to be a partisan 3-2 vote on rules that would subject broadband Internet services to Title II regulation, Republican leaders in both the House and Senate launched investigations into the development of the draft FCC order and the influence of the Obama Administration over the FCC’s Title II plan. In preparation for the scheduled FCC ruling on February 26, FCC Chairman Tom Wheeler circulated a draft order among the agency’s commissioners last week that mandates Title II regulation of both fixed and wireless broadband Internet service providers (ISPs), in an effort to promote net neutrality and the openness of Internet networks. Wheeler’s plan to subject broadband to Title II common carrier regulation corresponds with a November speech in which President Obama urged the FCC to “reclassify consumer broadband service under Title II . . . while at the same time forbearing from rate regulation and other provisions less relevant to broadband services.” Prior to Obama’s speech, Wheeler had floated a proposed “hybrid” approach to net neutrality that derived regulatory authority from both Title II and Section 706 of the 1996 Telecommunications Act. In circulating the draft order, however, Wheeler acknowledged that his views on Title II had evolved out of increasing concern that application of standards of “commercial reasonableness” under Section 706 would benefit ISPs and not consumers. As such, the “light touch” Title II approach outlined by Wheeler in the draft order would measure ISP behavior against “just and reasonable” standards that are typically applied to common carriers. On the heels of Wheeler’s announcement, House Oversight and Government Reform Committee Chairman Jason Chaffetz (R-UT) delivered a letter to Wheeler requesting copies of all documents and communications between the FCC and the White House and copies of all internal FCC discussions on grounds “that views expressed by the White House potentially had an improper influence on the development of the draft Open Internet Order.” That letter was followed by a similar request by Senate Homeland Security and Governmental Affairs Chairman Ron Johnson (R-WI), who confirmed the launch of an investigative panel on Monday to review those allegations. Setting a reply deadline of February 23, Johnson wrote, “since the FCC is an independent agency that derives its authority from Congress . . . it is highly concerning that the White House would seek to take on this level of involvement in the regulatory process of the FCC.”

In This Issue:

House, Senate Republicans Seek Details on Development of Title II Plan more

Verizon to Sell Wireline and Tower Assets for $15.5 Billion more

Lawmakers Re-Introduce Bills to Facilitate Wi-Fi Operations in 5 GHz Band more

Senate Panel Discusses Government Role in Promoting IoT Security more

BT Forges $19.1 Billion Pact to Acquire Everything Everywhere more

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Neither Wheeler nor the White House responded to requests for comment. During a televised C-Span interview, however, FCC Special Counsel Gigi Sohn rejected allegations of undue influence, asserting: “I think what the president’s statement did was rather than force the chairman’s hand was give him cover to do something that he was already thinking of doing.”

Verizon to Sell Wireline and Tower Assets for $15.5 Billion

Verizon Communications struck a pair of high profile deals last Thursday that could help offset the $10.4 billion pledged by Verizon Wireless for its winnings in the recently-concluded AWS-3 auction. In the first of two transactions, Verizon agreed to sell its wireline telephone and Internet operations in the states of California, Florida and Texas to Frontier Communications Corp. for $10.54 billion. At the same time, Verizon confirmed plans to convey exclusive lease and operating rights to 11,300 communications towers to American Tower Corp. (ATC) in a $5 billion deal that also includes the sale of 165 towers to ATC. The agreement with Frontier encompasses 3.7 million wireline voice customers and 2.2 million data service customers that include 1.6 million subscribers to the Verizon FiOS broadband service and 1.2 million viewers of the Verizon FiOS video service. An official of Frontier, which paid $8.6 billion in 2010 to acquire Verizon wireline assets in 13 states, commented that the deal “marks a natural evolution for our company” and “will strengthen our presence in competitive suburban markets.” On behalf of Verizon, company CEO Lowell McAdam explained that the sale will permit his company “to focus on further penetrating the market for its FiOS business across a contiguous footprint in Eastern states.” Meanwhile, Verizon’s pact with ATC (which would bring ATC’s total tower count to more than 100,000) covers lease rights in which the average term is 28 years. ATC will acquire the option to buy the towers as the leases expire, and Verizon will sublease tower capacity from ATC for a minimum period of ten years. Observing, “demand for mobile broadband by U.S. consumers is expanding dramatically,” ATC CEO Jim Taiclet predicted that, “by aggressively marketing these relatively under-utilized towers to additional tenants, we will enable faster deployment of this spectrum, accelerating the expansion of broadband coverage throughout the U.S.” In remarks to reporters, McAdam proclaimed that both deals “will further strengthen Verizon’s focus on extending our industry leadership position in our core markets and return significant value to our shareholders.”

Lawmakers Re-Introduce Bills to Facilitate Wi-Fi Operations in 5 GHz Band

Republicans and Democrats joined in a bipartisan effort to re-introduce companion bills in both chambers of Congress on Tuesday that would promote deployment of unlicensed Wi-Fi operations in the 5 GHz band with protections to avoid harmful interference to incumbent connected vehicle applications that include intelligent transportation systems (ITS). In the House, sponsors of the Wi-Fi Innovation Act include Representatives Bob Latta (R-OH), Darrell Issa (R-CA), Anna Eshoo (D-CA) and Doris Matsui (D-CA). A nearly identical version of the legislation bearing the same title was introduced simultaneously in the Senate with the backing of Senators Marco Rubio (R-FL) and Cory Booker (D-NJ). Resurrecting legislation that was introduced last summer but failed to advance before the end of the 113th Congress, both bills would require the FCC to conduct tests to determine if unlicensed Wi-Fi devices could use the 5850-5925 MHz band without interference to ITS, dedicated short-range communications, and other incumbent operations. Specifically, both bills would give the FCC three months to solicit comment on interference mitigation techniques and deployment timelines, six months to publish a test plan, and 15 months to conduct tests and publish test results. If the FCC determines that

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unlicensed Wi-Fi operations in the 5 GHz band would not interfere with incumbent licensees, the agency would have 18 months under the Senate bill and 24 months under the House bill to modify its rules to enable “widespread commercial deployment of unlicensed operations.” Both bills would also require the FCC to prepare a report within one year on “the availability of broadband Internet access using unlicensed spectrum and wireless networks in low income neighborhoods.” Applauding the bill, Jot Carpenter, the vice president of government affairs for wireless association CTIA, predicted that “freeing additional spectrum in the 5 GHz band will help meet Americans’ increasing demand for mobile Internet access and support the growth of the Internet of Things.” Along a similar vein, a spokesman for the National Cable & Telecommunications Association declared that the legislation “provides a clear path forward for properly allocating a finite and increasingly necessary public resource.” Stressing that “experts from the automotive, Wi-Fi and [ITS] industries are working together to explore whether a spectrum sharing technology can be developed to allow Wi-Fi devices to operate in the same 5.9 GHz band set aside by the FCC for ITS safety systems,” an official of ITS America cautioned, “this collaborative process should continue without Congressionally-imposed deadlines.”

Senate Panel Discusses Government Role in Promoting IoT Security

Security issues associated with the Internet of Things (IoT) and the government’s role in protecting the security of personal data transmitted across IoT networks were spotlighted as main topics of discussion at a hearing conducted by the Senate Commerce Committee on Wednesday. Lawmakers and witnesses from academia and the electronics industry agreed that, while significant security and privacy risks exist with respect to the IoT, the government should refrain from imposing heavy-handed regulations that could jeopardize investment in the rapidly-developing IoT ecosystem. Committee chairman John Thune (R-SD) echoed that theme in opening remarks in which he acknowledged that privacy and security issues “are real, but I urge policy-makers to resist from jumping in headfirst” to enact rules “that could halt innovation.” Pointing to a recent CBS 60 Minutes broadcast that explored the potential danger of computer hackers taking over the driving functions of IoT-connected cars, ranking committee member Bill Nelson (D-FL) argued that “the benefit of [IoT] needs to be balanced against real concerns about privacy and the security of our networks.” “No one is talking about over-regulating,” he added. Douglas Davis, the vice president and general manager of Intel’s IoT group, admitted that a lack of consumer trust could emerge as a barrier to IoT adoption as he called for the development of a national IoT strategy with a “focus on security and interoperability as critical foundational elements.” As he emphasized that “top down or one-size-fits-all regulation will limit innovative opportunities,” Adam Thierer, a senior research fellow at the Mercatus Center at George Mason University, recommended that “policy makers should encourage, but not mandate, privacy and security by design.” Meanwhile, in reply to questions posed by Nelson about the voice command feature on certain Samsung smart TVs and the right of consumers to opt in or out of the potential sharing of their conversations through IoT-connected sets, Thierer quipped: “they don’t have to buy the TV.”

BT Forges $19.1 Billion Pact to Acquire Everything Everywhere

Heralding its return to the UK wireless sector after a fourteen year absence, British Telecom (BT) agreed last Thursday to acquire Everything Everywhere (EE), the nation’s top provider of mobile network services, in a transaction valued at £12.5 billion (U.S. $19.1 billion).

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EE, a joint venture owned equally by Deutsche Telekom (DT) and French carrier Orange, boasts the largest subscriber count of any British wireless carrier at 24 million customers, as well as the most advanced fourth-generation (4G) mobile broadband network in the UK. BT, which hasn’t offered mobile service since it spun off its BT Cellnet mobile division in 2001, commenced exclusive negotiations in December toward a potential acquisition of EE. When combined with 4G 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. The terms of the agreement provide DT with a 12% stake in BT that will make the German carrier BT’s largest shareholder. Orange will acquire a 4% stake in BT, and DT CEO Timotheus Hottges will hold a seat on the BT board. Sources indicate that BT intends to raise £1 billion toward the purchase price through the sale of stock and by issuing debt. Advising reporters that “the UK’s leading 4G network will now dovetail with the UK’s biggest fiber network, helping to create the leading converged communications provider in the UK,” BT CEO Gavin Patterson termed the agreement as “a major milestone.”

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