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FCC and Capitol Hill Driving the Telecom's Future
Monday, November 17, 2008

Almost immediately following his inauguration, President Bush designated Michael Powell, a Republican commissioner of the Federal Communications Commission (FCC) named by President Clinton (and son of Secretary of State Colin Powell), to be the FCC’s chairman, replacing resigning Chairman William Kennard. Due to an unusual set of circumstances, three other commissionerships are now to be filled. A fourth vacancy is expected by year-end. Two new commissioners have already been nominated, with more soon to come.

In contrast to recent Chairmen Hundt and Kennard, who believed the FCC should foster conditions that would give new entrants a chance to compete, Chairman Powell believes that government should be less interventionist and should allow market forces to determine the outcome, a position some economists believe favors incumbents.

A major issue the FCC will wrestle with in the coming months is the allocation of spectrum to support the introduction of 3G wireless services. The Commission initiated a rulemaking in December 2000 to allocate spectrum for 3G use. At the end of March, the FCC issued a final report on the use of the 2500-2690 MHz band, and the National Telecommunications and Information Administration (NTIA) of the Department of Commerce issued a final report on use of the 1710-1850 MHz band. The schedule requires the FCC to issue an allocation order specifying the bands selected for 3G by July 30, 2001 and to auction and assign licenses for 3G spectrum by September 30, 2002.

The FCC and NTIA reports each concluded that using the spectrum it examined would seriously disrupt operations of existing users, that it would be impracticable for the existing users and 3G providers to share the examined spectrum, and that relocation of existing users would be problematic, costly and take many years.

The proceeding could have a significant impact on Silicon Valley and other tech hubs that rely on the telecom equipment market. Comments filed by most mobile wireless providers, indicate that for technical reasons most would prefer to use spectrum in the 1710-1850 MHz band. Nevertheless, the position of federal government users has forced an examination of the 2500-2690 MHz band.

Although the original principal use of the 2500-2690 MHz band was a symbiotic relationship between Instructional Television Fixed Service (ITFS) and multichannel “wireless cable” for one-way analog video transmission, a series of FCC decisions, beginning in 1996, have allowed Multipoint Distribution Service (MDS) providers to expand the use of the spectrum to include very high speed, two-way fixed wireless broadband services, while retaining and expanding ITFS use.

At year-end 2000, approximately 25 companies, including Sprint, WorldCom and Nucentrix Broadband Networks, were using MDS spectrum to offer high-speed Internet access in over 90 markets, with equipment supplied by Cisco, Nortel and others. According to comments filed by Sprint, WorldCom and Nucentrix, reallocation of even a portion of the 2500-2690 MHz spectrum to 3G providers would lead them to exit the market. Clearly, the FCC’s allocation order, which is likely to be decided by the newly nominated Commissioners, will be a watershed event in service provision and equipment technology and manufacture.

Capitol Hill is also debating policy critical to telecom business. The Subcommittee on Telecommunications and the Internet of the House Energy and Commerce Committee passed the Internet Freedom and Broadband Deployment Act of 2001 at the end of April by a 19 to 14 vote.

The bill, generally known as the “Broadband Bill,” is strongly supported by the regional Bell companies as it would permit them and other incumbent local exchange carriers to provide long-distance high-speed data services without first meeting the requirements of the 1996 Telecommunications Act for opening their networks to new entrants.

CLECs, as well as AT&T strongly oppose the bill, fearing it will permit the Bell companies to provide digital voice services without first opening their local markets to competition. If this happens it would make it almost impossible for already beleaguered CLECs to establish their businesses, with consequences not only to them but also to their equipment suppliers and other supporters.

The bill is expected to be passed handily by the full Committee; however, its chances for success in the Senate are dim.

Meredith Jones is a Special Counsel at Silicon Valley-based law firm Gray Cary. She is former Bureau Chief of the Federal Communications Commission’s Cable Services Bureau.

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