FCC Wants Wireless Carriers to Warn Consumers of Jacked-Up Bills

eWeek

 

The Federal Communications Commission wants wireless carriers to notify their customers before they reach roaming or data usage limits under their wireless service plans, a move to staunch the "bill shock" syndrome that is plaguing the nation.

Bill shock is, quite simply, the unfortunate experience of getting a wireless phone bill that was higher than expected.

Joel Gurin, chief of the FCC's Consumer and Governmental Affairs Bureau set up by FCC Chairman Julius Genachowski in January, told media on a conference call May 11 that the FCC has fielded hundreds of complaints about bill shock.

While Gurin stressed that his group is not "cracking down" on bill shock, the FCC is raising questions about the issue.

"We are hearing from consumers about unpleasant surprises on their bills," Gurin said, citing unclear or misunderstood advertising, unanticipated roaming or data charges, and other problems as causes for bill shock. "But this is an avoidable problem. Avoiding bill shock is good for consumers and ultimately good business for wireless carriers as well."

One remedy for bill shock is to ask wireless carriers such as Verizon Wireless, AT&T, Sprint and T-Mobile to send their customers a short text message warning them that they are approaching their roaming and data usage limits.

This approach takes a page from the playbook of the European Union, which requires carriers such as Vodafone to text subscribers who are racking up roaming charges or getting close to a set limit for data roaming.

"Our sense is that this has not been a particularly difficult thing to implement in the EU ... and that the same principle seems to us like it could be applied very well in the U.S," Gurin said.

public notice to determine whether or not wireless carriers in the United States can follow Europe's lead.

Gurin said he and his team want to find out from carriers if U.S. providers are already offering such usage alerts, as well as how much they cost to the consumer or the provider.

They also want to know whether technological or other differences exist that would prevent U.S. wireless providers from employing usage alerts similar to those now required by the EU.

The FCC further wants to learn how consumers can now monitor their wireless usage and know when they are exceeding their predetermined allocations of voice minutes, text messages or data usage.

"We really think that consumers should have the same kind of transparency of information when it comes to all kinds of communications services, including broadcast, cable, broadband and other services they may buy, not just wireless and wireline," Gurin said on the call May 11.

The inquiry into bill shock is just the start.   

Julius Caesar of the Internet

The Wall Street Journal

The FCC puts another industry under political control.

A federal appeals court ruled last month that the Federal Communications Commission lacks the authority to regulate the Internet. No worries, mate. This week the Obama Administration chose to "reclassify" the Internet so it can regulate the Web anyway. This crowd is nothing if not legally creative.

For the past decade, broadband has been classified as an "information service" and thus more lightly regulated than traditional telephone services. This has led to an explosion of new investment and Web innovation, but it hasn't sat well with Democrats who want more control over the telecom business, as well as with some Web companies (Google) that want more leverage over Internet service providers like Time Warner or Verizon.

FCC Chairman Julius Genachowski did their dirty work this week by announcing that he plans to reclassify broadband lines so his agency can regulate them under rules that were written for Ma Bell in the 1930s. This means subjecting the Internet to new political supervision—from the federal government and 50 state public utility commissions. The goal is to put one more industry under Washington's political thumb.

Even Bill Clinton's FCC, under Chairman Bill Kennard, had refused to go this far. "Classifying Internet access as telecommunication services could have significant consequences for the global development of the Internet," said Mr. Kennard in a 1998 speech. "We recognized the unique qualities of the Internet, and do not presume that legacy regulatory frameworks are appropriately applied to it."

Mr. Genachowski says he's merely hewing to the political middle, pursuing a "third way" on regulation that will "allow the agency to move forward with broadband initiatives that empower consumers and enhance economic growth, while also avoiding regulatory overreach."

But Mr. Genachowski's promise to put in place safeguards so broadband companies are subjected to "only a handful" of phone regulations is hardly reassuring. Even if he keeps his word, what prevents future FCC Chairmen from reversing course? If Google or some other big political donor doesn't get its way, its lobbyists will descend on the White House or Congress, which will lobby the FCC, which may well do their bidding.

Our reporting suggests that something like that may have happened in this case. All indications early this week were that the FCC wouldn't take such a drastic step. But when a Washington Post story reported that news, the liberal "consumer" lobbies went to the barricades, and Mr. Genachowski's team sequestered itself from other FCC commissioners for most of Tuesday. Late Wednesday, he broke the "reclassify" news. Perhaps they all had overnight epiphanies.

In any case, Mr. Genachowski has provided no evidence that the current regulatory approach is failing. The Supreme Court's 2005 Brand X decision reconfirmed cable broadband's current classification as an information service, and that regulatory certainty has led to a burst of capital investment and competition.

In the past five years, U.S. companies have invested $576 billion in communications equipment and structures, according to Bret Swanson of Entropy Economics. Add computers and software, and U.S. capital expenditures on information technology since 2005 have totaled $2.2 trillion. Telecom accounts for nearly half (47%) of all non-structure capital investment in the U.S.

The FCC decision adds a new element of political risk to these investments, which can only make companies more cautious. At a minimum, the FCC action will be challenged in court and introduce years of uncertainty at a time when the economy needs all the risk-taking and investment it can get.

At worst, it will lead to a new era of political meddling in Internet investment, bandwidth allocation, and no doubt much more. Google and others who are cheering now may not like where this ends up when, say, religious right groups start demanding FCC content regulations during the next GOP Administration.

Autos, health care, energy, Wall Street and now telecom. Is there any American industry this Administration doesn't want to run?

FCC's National Broadband Plan Raises Devisive Issues

USA Today

The Federal Communications Commission kicked off a series of potentially bitter debates about how to make high-speed Internet service faster and more popular with the official release Tuesday of its long-awaited National Broadband Plan.

The Senate Commerce Committee scheduled a hearing next Tuesday to explore the FCC's recommendations, which Congress requested last year. The House Energy and Commerce Committee will follow with its own hearing March 25.

The report also will result in "dozens of new proceedings at the FCC," says communications lawyer J.G. Harrington of law firm Dow Lohnes. "The plan is an outline on ways they'd like to go — not a decision."

The issues don't split neatly along partisan lines. Still, the plan could run into opposition from "some folks who don't want to see the president get a victory," says lawyer Jay Lefkowitz of law firm Kirkland & Ellis, who was deputy director of domestic policy for former president George W. Bush.

FCC commissioners identified some potential problems among the many proposals to connect 100 million people to broadband at home.

FCC Commissioner Mignon Clyburn criticized the recommendation to coax, and possibly force, television broadcasters to give up some airwave spectrum. The plan aims to increase broadband competition by boosting the amount of spectrum for wireless Internet services to 500 MHz from 50 MHz.

She said that "it is certainly possible, if not likely" that the few minority-owned stations likely would be among the first to sell their spectrum. She says she would find a policy that further diminished that number to be "untenable."

Others anticipate a wide-ranging debate about broadcasters' role in an Internet-centric society. The FCC would have to approve specific changes involving the use of the broadcast spectrum.

"It's not the most efficient thing to have everyone watch the Super Bowl on broadband," says media industry consultant Tom Wolzien.

Commissioner Robert McDowell also questioned another provision that would enable cable and satellite customers to ditch their company-supplied set-top box. The FCC has long wanted consumer electronics companies to sell DVRs, video game players and other devices that could tap all TV and Internet services.

"I caution the commission to tread gingerly," McDowell said. "Technological mandates by the government almost never result in robust innovation."

FCC Has Questions, Google Has Answers

Story from Information Week

The Federal Communications Commission has opened an inquiry into Google (NSDQ: GOOG)'s rationale for preventing its Google Voice users from making calls to certain phone numbers.

The rules the govern payments among telecommunications companies for the exchange traffic and connection of calls across different networks allow certain calls to be billed at very high rates. Some phone companies, particularly in rural markets, have found that by partnering with local services like pornographic chat lines, they can demand these high rates from long distance phone providers, a scheme known as "traffic pumping."

AT&T last month complained that Google, which isn't regulated as a phone company, should be forced to connect high-priced calls of this sort, just as AT&T must do under common carrier rules.

On Wednesday, 20 members of Congress, representing constituents who benefit from the current connection fee system, sent a letter to the FCC, asking the agency to investigate how Google operates Google Voice. The letter says that while Google may not consider itself a telephone company, its operation of telephone services could put competing telephone companies at a disadvantage.

"[I]t is our opinion that a company should not be able to evade compliance with important principles of access and competition set forth by the FCC by simply self-declaring it is not subject to them without further investigation," the Congressional letter states.

That investigation has begun. The FCC sent a letter to Google on Friday asking the company to explain how Google Voice routes and restricts calls, how it informs users about these restrictions, which of its services are free, whether it intends to charge in the future, and how Google pays for Google Voice.

More ominously for Google, the FCC asks, "How does Google believe its various Google Voice services fit within the statutory classifications of the Communications Act of 1934 [and the Commission's regulatory classification of interconnected VoIP]?"

Google's answer has been that it's not a phone company and shouldn't be regulated like one. And the Computer & Communications Industry Association (CCIA), a tech industry group that counts Google as a member, suggested as much on Friday in a statement responding to the FCC's letter.

But simply saying so, as the letter from 20 members of Congress stated, isn't the final answer.

Google has until Wednesday, October 28, to respond to the FCC, but the company's telecom and media counsel Richard Whitt has already offered a preview of the company's response.

"The reason we restrict calls to certain local phone carriers' numbers is simple," he said in a blog post on Friday. "Not only do they charge exorbitant termination rates for calls, but they also partner with adult sex chat lines and 'free' conference calling centers to drive high volumes of traffic. ...Google Voice is a free application and we want to keep it that way for all our users -- which we could not afford to do if we paid these ludicrously high charges."

AT&T, Whitt charges, wants to slow down innovation by having the government saddle Web applications like Skype and Google Voice with the same regulations imposed on the telecom sector.

"And despite AT&T's lobbying efforts, this issue has nothing to do with network neutrality or rural America," he said. "This is about outdated carrier compensation rules that are fundamentally broken and in need of repair by the FCC."

FCC Begins Final Review Of Century Tel - Embarq Deal
Story from the Wall Street Journal

WASHINGTON – The Federal Communications Commission is in the final stage of reviewing CenturyTel Inc.'s $11 billion acquisition of Embarq Corp. and could sign off on the deal as soon as this week, clearing the last regulatory hurdle facing the merger of the two midsize phone companies.

The three-member FCC board is waiting to review a final draft of a deal to approve the merger, said people familiar with the review, although negotiations on merger conditions have been substantially completed. The deal received shareholder approval in January and a final nod from state regulators last month.

The companies have agreed to provide faster Internet speeds to their broadband customers at the request of the FCC. The companies committed to providing substantially higher speeds to customers in rural areas within a relatively short time frame to gain the FCC's approval of the deal, which was announced in October.

The FCC's insistence on improved broadband service for rural customers as part of the deal shows how its been focusing more intensely recently on ways of getting more Americans online at faster speeds. The agency is currently working on a national broadband plan designed to offer a roadmap for improving Internet access across the country.

In past years, the FCC has focused more on Internet retail pricing, not speeds, in other recent phone company mergers, including AT&T Inc.'s acquisition of BellSouth Corp. in 2006.

Within three years, the combined company has pledged to offer at least some broadband service to retail customers who are connected via lines that can transmit Internet data.

At least 90% of broadband customers would have download speeds of at least 768 kilobits per second within three years. Within two years, 87% of customers with broadband access would have download speeds of at least 1.5 megabits per second.

Additionally, the companies promised to offer speeds of three megabits per second to 75% of broadband customers within a year of the close of their merger and increase that access to 80% of customers within three years.

On Friday, the two companies signed off on a series of relatively minor conditions, many of which focus on requirements that the newly combined company adopts Embarq's business practices in dealing with wholesale customers.

The combined company, which will be called CenturyLink, will operate in 33 states, with 7.5 million phone lines, 2.1 million broadband subscribers and 440,000 video customers.

A spokeswoman for Embarq declined to comment, citing the FCC's ongoing review of the deal. A spokeswoman for CenturyTel couldn't immediately be reached for comment.

The FCC is on a relatively tight deadline to sign off on the deal, since it will lose one member when the Senate confirms incoming Chairman Julius Genachowski. A Senate vote on Mr. Genachowski's confirmation could come as soon as this week.

Another Democratic FCC commissioner, Jonathan Adelstein, will leave the board when Mr. Genachowski arrives. FCC officials want to complete the deal before the new chairman arrives so that it won't be delayed any further.

Report Faults FCC Chairman Martin

Story by: Wall Street Journal

WASHINGTON -- Democrats on the House Energy and Commerce Committee escalated a running battle with Federal Communications Commission Chairman Kevin Martin, issuing a report that faults how he has run the agency and preparing the ground for changes in how it will be run under the Obama administration.

The report, issued Tuesday by Energy and Commerce Oversight subcommittee Chairman Bart Stupak (D., Mich.) and departing committee Chairman John Dingell (D., Mich.), accused Mr. Martin and his staff of manipulating and withholding information from the other four FCC commissioners and lawmakers. It also said he created "a climate of fear" among staff at the FCC, which regulates telecommunications.

Although Mr. Martin will step down as chairman when President-elect Barack Obama takes office next month, his term as an FCC commissioner expires in 2011. He has declined to discuss his plans.

A House subcommittee report issued Tuesday accused FCC Chairman Kevin Martin of creating "a climate of fear" among the agency's staff.

FCC spokesman Robert Kenny said Mr. Martin is reviewing the report. "It appears that the committee did not find or conclude that there were any violations of rules, laws or procedures," Mr. Kenny said. Mr. Martin called the report a personal attack on him for aggressively monitoring cable-industry pricing. "I don't think the process is different than it has been," he said.

The list of allegations in the 26-page report focuses on the way Mr. Martin expanded his control of the agency's operations, faulting him for a "heavy-handed, opaque and non-collegial management style."

The report is likely to fuel efforts by Democrats to overhaul the agency, which has generated bipartisan grumbling from industry, consumer groups and lawmakers.

The yearlong investigation began as a bipartisan effort, but Republicans withdrew their support and the report represents the findings of the committee Democrats.

The report cites an exchange between Catherine Bohigian, one of Mr. Martin's staffers, and Daniel Shiman, an FCC economist on the career staff, about how cable-television prices would be changed if channels were offered "à la carte."

"The conclusion of this report is supposed to be that à la carte could be cheaper for consumers," Ms. Bohigian wrote. When Mr. Shiman resisted that conclusion, Ms. Bohigian wrote that "the report cannot conclude that à la carte would likely raise most cable bills with fewer channels delivered. If that is going to be the conclusion, we need to stop now."

FCC Moves to Open Up Idle Airwaves For Gadgets

Regulators moved closer to clearing the way for next-generation wireless devices and Internet services, dismissing claims they would create signal interference with TV stations, and setting up a vote on their use as soon as next month.

The next-generation products, which have yet to be developed, would use "white space," or vacant TV airwaves. Federal Communications Commission engineers conducted several tests this summer of prototype white-space devices. According to an FCC report issued Wednesday, the tests showed that such devices could theoretically operate in these spaces with minimal interference to TV broadcasters and others. (See the full text of the report.)

FCC Chairman Kevin Martin said companies would be able to "take advantage of...the spaces between the broadcast channels" and develop innovative, new wireless gadgets. The airwaves could be used "as a low-cost means of having a broadband connection," he told reporters Wednesday.

Mr. Martin circulated proposed rules Tuesday night to the agency's other commissioners for how those vacant TV airwaves could be used.

The FCC's decision to set rules for white-space devices is a victory for high-tech companies including Intel Corp., Microsoft Corp. and Google Inc. These companies have lobbied the FCC to allow them to use the unlicensed, vacant TV airwaves. They say access to these airwaves could spark a revolution in wireless services, similar to what happened when the FCC set aside different airwaves that are now used for Wi-Fi networking.

Station owners and wireless-microphone users have opposed the plan, saying the new gadgets could cause interference. The wireless industry and broadcasters have argued that the airwaves should be auctioned off, instead of being given away. The FCC's current plan, however, is to allow free use of the vacant airwaves.

"Now is the time for the FCC to put the power of better and faster broadband in the hands of innovators and entrepreneurs," Google lawyer Richard Whitt said in a blog post Wednesday. He urged consumers to petition the agency to pass the proposed rules.

It is too soon to say exactly how the airwaves would be used, but high-tech companies and consumer electronics makers say there are plenty of options. TV airwaves are more powerful than what consumers use now for Wi-Fi; the waves can go through walls and around corners.

Companies could use the airwaves to offer cheap, powerful wireless Internet access. Google co-founder Larry Page has described the potential services as "Wi-Fi on steroids."

The FCC's action comes just a few days after it dismissed interference concerns involving another chunk of airwaves. The agency wants to auction off those airwaves to a company that would promise to build a free, national wireless Internet network.

Both actions have been pushed by Mr. Martin, who wants to open up airwaves and encourage more wireless Internet competition before a new administration takes over. As a result, the commission could be in a position to act as soon as November on new rules that would open up some TV airwaves for unlicensed use. Those airwaves would become available in February, when the U.S. switches to digital-only TV broadcasts.

Since digital signals take up far less space than current analog signals, there will soon be plenty of unused airwaves around the country. Many channels are left empty to prevent broadcast TV station signals from bleeding into each other.

High-tech companies say they can make devices that will be able to sniff out channels that are in use locally and avoid them. They have also proposed a backup plan that would require new gadgets to come equipped with a GPS chip and software that would tell the device on which channels local stations are broadcasting.

Two Wireless Mergers Top the FCC's To-Do List

The Federal Communications Commission has drawn up an ambitious to-do list, topped by review of two pending wireless mergers, for the last few months of the Bush administration.

FCC Chairman Kevin Martin on Thursday said the agency will try to finish its review of Verizon Communications Inc.'s pending acquisition of Alltel Corp. and Sprint Nextel Corp.'s purchase of Clearwire Corp. before year end.

The agency is also hoping to tackle issues related to the rates phone companies pay each other to connect calls, to tee up two airwave auctions and to decide on whether to allow high-tech companies to use vacant, unlicensed television airwaves for a next-generation wireless gadgets.

Mr. Martin didn't mention new cable regulations on his list, but that hasn't stopped the cable industry -- which has come under more scrutiny than any other industry under his watch -- from taking pre-emptive measures. Leaders of the influential Senate Commerce Committee, prodded by cable lobbyists, recently sent a thinly veiled letter warning Mr. Martin and other FCC commissioners against imposing more regulations on cable.

"Pursuing contentious policy initiatives, such as the unbundling of wholesale subscription television channels, would divert the attention [of FCC staff] at a critical time," they wrote.

Less than two months until Election Day, Bush administration officials at agencies all over Washington are making a final push to change or enact rules before the White House changes hands. Earlier this year, budget officials gave agencies a deadline to propose new rules, but regulators at various agencies are trying to shove issues out the door.

Mr. Martin has repeatedly said publicly that the FCC staff isn't currently working on anything related to the issues cable is most worried about.

But it is a measure of just how bad relations are between the cable industry and Mr. Martin that few seem to believe him. Cable companies fret he is planning to propose regulations that would make it easier for independent programmers to demand arbitration when local cable operators refuse to carry their channels.

Meanwhile, large independent cable programmers including Walt Disney Co., News Corp. and Viacom Inc., are especially worried that the FCC could approve a proposal that would require them to offer individual channels to cable systems at "reasonable" rates.

News Corp. owns Dow Jones & Co., publisher of The Wall Street Journal.

Programmers offer channels individually now, but cable systems get a better deal by purchasing discounted bundles of channels. Programmers argue the FCC would essentially be setting new price controls and any cost savings to cable systems wouldn't necessarily filter down to consumers.

In the uncertain economy, "it would be a jarring oddity for the FCC to indulge controversial pet proposals in a last minute and hasty effort to restructure an entire business model that has served consumers well for over two decades," said Kyle McSlarrow, head of the National Cable & Telecommunications Association, a trade group.

Mr. Martin declined to comment for this article. He told reporters earlier that "I can't give you a timeframe for what the commission will do, if anything," on the cable-unbundling issue. "What I can say is that I'm concerned about the increasing cable rates that consumers are having to pay. Cable rates have doubled over the past decade."

Mr. Martin has argued so-called wholesale unbundling would lead to lower cable prices because cable systems wouldn't be required to carry unwanted channels just so they can get popular channels like ESPN.

By: Amy Schatz
Wall Street Journal; September 26, 2008

FCC Advances Airwave Auction

Powerless FCC continues to accept under the table bribes; all public airwaves are for sale to the highest bidder....

...Kenneth J. Martin loves the coin!

Credit Crisis May Curb Financing for Bidders But Agency Wants the Rules in Place

Federal regulators are pushing ahead with plans to put two valuable chunks of airwaves up for sale, despite market turmoil that could make it difficult for potential bidders to raise necessary financing.

Today, the Federal Communications Commission is expected to release draft rules for the re-auction of airwaves that would be used to create networks that allow fire, police and other emergency services to communicate more effectively. The idea, pushed in the wake of the Sept. 11, 2001 terrorist attacks, faltered earlier this year when the first effort to sell airwaves attracted no winning bids. Potential bidders were concerned about onerous conditions required of the winner. This time, the FCC is considering relaxing some of those conditions, including cutting the minimum bid to $750 million from $1.3 billion.

Separately, the FCC is considering an auction of airwaves that would require the winner to offer free wireless Internet service to consumers.

The turmoil in the credit markets raises a potential dilemma for regulators, who want to hold the two auctions as early as next spring. Smaller companies and start-ups could have problems raising financing and bids would likely be lower. In the case of the public safety airwaves, that could provide an opportunity for larger carriers such as AT&T Inc. and Verizon Communications Inc. to expand their already robust airwaves holdings relatively cheaply.

"If you're looking at start-ups and new entrants to come in this space, boy, that seems like a tall order to me under current finance conditions," says Michael Powell, a former FCC Chairman and current adviser to private-equity firm Providence Equity Partners.

There are different ways to measure an auction's success. In the two coming sales, the goal seems less about raising money than meeting various public needs. FCC Chairman Kevin Martin is trying to engineer both auctions to fulfill the desire by public-safety groups and consumers for more wireless broadband services.

Earlier this year, the FCC raised almost $20 billion in an airwaves auction, but public-interest groups complained that Verizon and AT&T won most of the airwaves. Smaller telecom companies groused that the rules were written to benefit larger carriers instead of potential competitors.

That could happen again, analysts say, if only because larger carriers may be the only ones who can raise enough financing to bid.

This week, influential House Democrats complained that the FCC is rushing to set rules for the public airwaves auction. Mr. Martin proposed a three-week deadline for public comment, an aggressive timetable but one that would ensure final rules would be set while he is still chairman.

It's not clear when the other airwaves, which would require the winner to offer free wireless Internet to consumers, might go on the block. Mr. Martin has championed the idea. The most likely bidder, M2Z Networks Inc., a start-up backed by Kleiner Perkins Caufield & Byers partner John Doerr, is lobbying for the FCC to set rules before the end of the year.

FCC officials say they can set rules for the auctions and delay them until lending conditions improve.

Some wireless-industry analysts question whether six or eight months would have much of an impact, however, given the amount of time it can take a smaller company or start-up to arrange financing.

"We've just seen the most radical transformation of the credit market in the last 80 years. That doesn't smooth itself out and we go back to the glory days in six months," says Roger Entner, Nielsen IAG's senior vice president of communications research.

Even Mr. Martin's critics give him credit for trying to tackle the issue of creating an interoperable wireless network for local police and fire departments. Congress set aside a large chunk of airwaves for first responders during a post 9-11 effort to improve communications, but never provided the billions needed to build a new network.

The FCC is essentially trying to tempt a commercial provider into building a network for public safety in exchange for the use of those valuable airwaves to sell high-speed wireless Internet services to consumers.

Agreement on how to do that has been elusive, however, and the effort has only become more complicated. "It's more obvious by the hour that there's less consensus about what we should do," said Robert McDowell, a Republican FCC commissioner.

By: Amy Schatz
Wall Street Journal; September 25, 2008

Yet Another FCC Blunder

Early Digital-TV Switch Has Flaw

Viewers Could Lose Certain Channels on Permanent Basis

One of the most surprising lessons from the early digital-television transition that took place last week in Wilmington, N.C., is that some viewers may permanently lose access to certain broadcast channels.

Federal Communications Commission Chairman Kevin Martin said Tuesday that TV stations whose analog signals stretch far beyond their digital broadcast areas may be on the hook to build more antennas to reach those viewers.

FCC Chairman Kevin Martin, left, accompanied by National Association of Broadcasters Television Board Chairman Jim Yager at a news conference in Washington last month.

On Sept. 8, TV stations in Wilmington made the digital switch five months early to give regulators a chance to identify potential problems with the nationwide transition.

The analog signal for Wilmington's NBC affiliate, WECT-TV Channel 6, one of the stations in the experiment, broadcasts several counties away from its actual digital market. When WECT stopped broadcasting in an analog format, as all TV stations must do Feb. 17, several customers outside the official market suddenly lost the channel.

Most of those viewers can access other NBC affiliates closer to their homes, but Mr. Martin is concerned that in February, some people will lose access to channels they have been accustomed to watching without a local replacement.

Mr. Martin told the House Energy and Commerce Committee Tuesday that about 15% of television markets across the country will shrink their markets "in a significant way" when broadcasters shut off their analog signals next year.

The Government Accountability Office estimates that stations with decreased coverage areas after the digital transition could affect 23,000 viewers.

The FCC is currently working on identifying the problematic markets and considering ways to solve the problem, Mr. Martin said. The FCC will ask TV broadcasters to build new antennas to extend their digital signals into dark areas.

"It's important and we will work with the broadcasters to make sure we're filling in those holes," Mr. Martin said.

The FCC wants to distinguish between viewers who will lose access to channels after the digital switch and those on the edge of an analog-TV station's market who can receive a similar affiliate closer to home.

In Wilmington, WECT General Manager Gary McNair said his station's large analog broadcasting domain dates back to when it was the only NBC affiliate across several markets. Other NBC affiliate stations have since sprouted in regions outside Wilmington. Until last week, some viewers on the outer edge of WECT's broadcast area had access to two NBC channels.

When WECT shut off its analog signal, several viewers outside of WECT's market called to complain that they couldn't receive that channel.

Mr. McNair described the problem for WECT viewers outside Wilmington as "inch-wide, mile deep." Even if those people had access to a local NBC affiliate, some preferred the Wilmington channel because they are from the area and feel connected to it, he said.

And when Mr. McNair told those callers there was nothing he could do about it, he said they blamed the government.

By: Fawn Johnson
Wall Street Journal; September 17, 2008

The Sirius-XM Merger: Now What?

Liars Figure & Figures Lie! Why did the FCC Approve the XM Sirius Merger?

As the former XM Satellite Radio and Sirius Satellite Radio finally have been allowed to merge and now confront the fact that deal was the least of their problems. Very little is known about how they will handle the integration; the only thing the companies have said is that they expect $400 million in cost cuts. Several bigger business issues await the companies, who once argued that if they couldn’t merge together, they would collapse separately. Here are some of the challenges confronting the combining companies.
A weak auto industry: Sirius has 18.5 million subscribers and expects to add 3 million more next year from auto makers including General Motors, according to Sirius XM CEO Mel Karmazin. That would generate $350 million in revenue, Karmazin predicted. But auto sales have been slowing, hit by rising fuel prices, constrained credit and a slower-growing economy. Sirius’s second-quarter financial results provided insight into how that already has affected the satellite radio business: it added 246,221 subscribers from auto makers, well below the 325,000 expected by some analysts. Detroit’s Big Three are in dire enough financial straits that they will appeal to Congress to increase to $50 billion a $25 billion loan facility signed into law last year. A Citigroup report this week spoke of a silver lining in that news, arguing that the better-capitalized the auto makers are, the better off Sirius XM is. Still, that may be something of a stretch.

Subscriptions are slowing: In the second quarter, Sirius added a net 279,820 subscribers–less than half the 561,500 subscribers of the year-earlier period. Morgan Joseph analyst David Kestenbaum warns of slowdowns in subscriber growth both from sales to auto makers and through retail outlets, and glumly predicted of both distribution channels, “We believe the [auto maker] troubles are short-term while retail’s demise is permanent.” Many new cars also have iPod jacks, another threat to Sirius-XM’s business.
Debt refinancing: XM refinanced more than $1 billion of debt before the deal closed, but Sirius has another $1 billion to take care of within the next 16 months. Not only is the credit crunch going to make that more difficult than it would be in normal times, but the capital markets haven’t been very welcoming to the satellite radio operators. Sirius sold $550 million in convertible securities to investors in late July for what Stifel Nicolaus analysts called “a desperately low price.”

New talent is expensive: Karmazin lured Chris “Mad Dog” Russo for a new show with a contract reportedly valued at $3 million a year for five years. Shock jock Howard Stern, the crown jewel of the Sirius broadcasting empire, signed a contract in 2004 reportedly valued at as much as $500 million over five years and received as much as $306 million in 2006 if you count bonuses and other perks, according to Forbes. Programming costs for both XM and Sirius total $475.4 million, or 23% of revenue. At the same time, Sirius shares are trading at record lows, and much of Stern’s compensation is in stock. Unless Sirius wants to pay cash or boosts its stock price, it may have trouble luring more talent.

By: Heidi N. Moore
Wall Street Journal; August 28, 2008

FCC Blunders Continue

Among the conditions extracted by regulators before approving the Sirius XM satellite radio merger earlier this month was the company's promise to set aside a share of channels for minority programmers. Now we're finding out what these racial preferences mean in practice.

In a commitment letter last month, Sirius XM informed the Federal Communications Commission that while it agreed to reserve the channels, the company doesn't want to choose the actual programmers. No doubt Sirius XM realizes that this is one giant political headache, and that it's unlikely to be the final arbiter in any case. There will almost certainly be more applicants than available channels, and programmers who aren't chosen will inevitably turn to the courts and the FCC to complain. The government may as well pick the minority programmers directly.

FCC Chairman Kevin Martin is prepared to do just that. According to a report in Communications Daily, an electronic newsletter that covers the telecom industry, the FCC is developing procedures to determine what constitutes a "minority" programmer and which minorities are worthy of special treatment. These racial preferences and quotas are blatantly unconstitutional, and may not themselves survive judicial review. But Mr. Martin gets around that legal nicety by claiming the concessions are "voluntary."

We look forward to seeing who the FCC deems to be "minority" enough to qualify. Meanwhile, this spectacle of a Bush appointee playing racial landlord is one to keep in mind when Mr. Martin begins his oft-mentioned run for elected political office.

Wall Street Journal; August 19, 2008

FCC Continues Press for Clarity In Web Providers' Delivery Practices

SAN JOSE, Calif. -- Federal Communications Commission Chairman Kevin Martin is bringing his campaign for unfettered Internet access to Silicon Valley Thursday, putting Comcast Corp. on the spot, despite the cable giant's efforts to back away from a policy of limiting the way customers download some Internet files.
The News: FCC Chairman Kevin Martin will hold a hearing on limits placed on Internet traffic.
The Background: A move by Comcast to restrict downloads through file-sharing software has drawn criticism, and is likely to make the company a focus of the hearing.
Outlook: Comcast recently backed away from the restrictions. Broadband providers have argued new FCC rules on traffic aren't necessary.

Mr. Martin will preside over a seven-hour hearing at Stanford University that will explore what responsibilities Internet providers have to deliver traffic fairly, and what phone and cable companies should be telling consumers about the services they can expect for their $40 or $60 a month.

"We'll focus on the disclosure issues and the broader impact these practices are having from the consumer perspective," Mr. Martin said in an interview Wednesday.

If an Internet provider decides to limit traffic in some way to manage its network, that should be "clearly and reasonably disclosed to the consumer," Mr. Martin says. "If people are going to upgrade [their Internet service] they need to understand what they're getting."

Comcast declined an FCC invitation to attend Thursday's hearing, though it appeared at a hearing earlier this year. A Comcast spokeswoman said the company "felt the issues specific to us were well covered at the first hearing, and the focus of this event should be broader than any individual company's issues."

A few years ago, Mr. Martin expressed the view that he didn't think the FCC needed new rules to make sure all online traffic was treated equally -- an issue that has come to be known as net neutrality -- because there were no examples of Internet providers degrading traffic.

But his stance changed last year when Comcast was accused of deliberating dropping some traffic by users of file-sharing service BitTorrent, Inc. Consumer advocates and file-sharing company Vuze Inc. filed complaints at the FCC, accusing Comcast of violating the FCC's net-neutrality principles and asking the agency to wade into the area of deciding what constitutes "reasonable" network-management practices.


Now, the FCC is pressing an investigation into whether phone and cable companies can deliberately slow or block some Internet traffic, and Mr. Martin has strongly suggested companies provide more consumer disclosure before the FCC makes them do so.

Mr. Martin's interest in enforcing the FCC's net-neutrality stand hasn't flagged in recent days, despite efforts by Comcast to cut deals with some file-sharing companies whose users consume an outsized share of the capacity of high-speed networks.

Last month, Comcast and BitTorrent Inc. announced they'd begun collaborating on ways to allow BitTorrent's applications to work more smoothly on the cable company's network. Comcast had a policy of deliberately slowing some traffic flowing over BitTorrent's file-sharing network during peak Internet usage times.

Instead of slowing file-sharing traffic used by specific applications during peak times, Comcast said it would target consumers instead, slowing traffic for those who use too much bandwidth.

Earlier this week, Comcast announced it had teamed up with peer-to-peer software company Pando Networks Inc. to create a "Bill of Rights and Responsibilities" for network owners and consumers who use peer-sharing software. The effort was mocked by consumer advocates and bloggers.

Despite Comcast's efforts, it is not clear Mr. Martin or other FCC officials are willing to let them off the hook.

"I'd be interested in hearing what they're talking about in the 'Bill of Rights,' " said Mr. Martin, who indicated he has not ruled out a third public net-neutrality hearing. "I think we obviously need to continue to focus on the complaint that's in front of us and how that's impacting consumers."

Some FCC officials and telecom lobbyists have privately questioned whether Mr. Martin's interest in investigating Comcast's network-management practices have more to do with his ongoing battle with the cable industry.

Mr. Martin dismisses the speculation, noting that he backed a condition in two mergers -- involving AT&T Inc. and Verizon Communications Inc., respectively -- that required the companies to abide by the FCC's net-neutrality principles.

Mr. Martin's investigation into Comcast's efforts to limit traffic for file-sharing programs set off alarms in Hollywood and the recording industry. Entertainment-industry executives would welcome help from Internet providers to block the illegal online sharing of movies, television shows and music. Several entertainment-industry officials will testify at the FCC's hearing Thursday.

"How should network operators deal with certain kinds of content that's illegal?" Mr. Martin asked. "The commission's net-neutrality principles don't only apply to legal content, but it's important to hear from those people concerned about how the principles might apply."

By: Amy Schatz
Wall Street Journal; April 17, 2008