October 28, 2011

Judge Denies Sprint Access To AT&T Documents In Merger Case

Sprint suffered a blow in its legal quest to stop the AT&T/T-Mobile merger, as U.S. District Court Judge Ellen Huvelle denied the companys motion to access confidential documents that were provided by AT&T to the Justice Department (DOJ) in connection with the DOJs antitrust lawsuit against the transaction. The ruling, handed down at a status hearing on Monday, could complicate efforts by Sprint and C-Spire (formerly Cellular South) to prove that the proposed $39 billion union of AT&T and T-Mobile USA will negatively impact their ability to compete. (Last month, Sprint and C-Spire filed separate legal challenges against the transaction on the heels of the DOJ complaint, which was filed with the U.S. District Court for the District of Columbia in August.) Huvelles decision also comes as a setback for the DOJ, which had told Huvelle that a grant of Sprints request would enable the DOJ to coordinate the development of its case with both Sprint and C-Spire and thus gain insight from the carriers expertise that the DOJ otherwise lacks on competitive and other issues affecting the wireless industry. While denying Sprints motion to the extent that they want reciprocal access to everything AT&T produces for the [DOJ], Huvelle specified that the DOJ could make a special request, on a case-by-case basis, to the court-appointed master who oversees discovery and protective orders in the antitrust case in the event the DOJ wants to share particular information with Sprint and/or C-Spire. At Mondays hearing, Huvelle also listened to arguments relating to AT&Ts petition to dismiss the Sprint and C-Spire lawsuits for lack of standing, as she questioned Sprint repeatedly on how the company would be harmed by the transaction as opposed to how consumers or competition in general would be harmed. Predicting that if the merger proceeds it will tip the market toward duopoly, Sprint argued that the transaction will make it difficult . . . to get key inputs like handsets, as well as raise costs for roaming and backhaul. Answering Huvelles inquiry as to whether Sprint will survive in a post-merger market led by a unified AT&T/T-Mobile, counsel for Sprint also replied: the question is whether our ability to increase output and discipline prices, whether that survives. As she scheduled the next status hearing for November 30, Huvelle said she would take under advisement AT&Ts claim that Sprint and C-Spire lack standing.

Judge Denies Sprint Access To AT&T Documents In Merger Case read more FCC Enacts Rules To Reform Universal Service, Intercarrier Compensation Regimes For Broadband Age read more Representatives Of Broadcast, Wireless Industries Debate Spectrum Needs read more EU Parliament Body Approves Resolution On Net Neutrality read more UN Panel Sets Global Broadband Access Goals read more CEA Predicts 99% Of Electronic Devices Will Be Web Connected By 2021 read more

FCC Enacts Rules To Reform Universal Service, Intercarrier Compensation Regimes For Broadband Age
As anticipated, the FCC unanimously adopted rules yesterday to transition the legacy universal service fund (USF) from landline telephony to broadband support and retool the intercarrier compensation (ICC) regime to facilitate the free and fair exchange of telecommunications traffic across a variety of platforms. Describing the order as a once-in-a-generation overhaul of universal service, FCC Chairman Julius Genachowski

told reporters that we are taking a system built for Alexander Graham Bell telephones and modernizing it for a Steve Jobs vision of the nations future in broadband and wireless communications. The agencys four commissioners also predicted that the new rules will expand broadband services to at least 18 million unserved Americans by the end of the decade, create 500,000 new jobs, and boost economic growth by $50 billion over the next six years. Specifically, the order takes a two-step approach toward the establishment of a new Connect America Fund (CAF) that will support broadband services and eventually replace the existing, $4.5 billion high-cost USF. The first phase of CAF deployment, to begin early next year, would freeze all existing high-cost USF support to price cap telcos and provide an additional $300 million in CAF funding to spur construction of broadband networks in unserved areas with minimum speeds of 4 Mbps upstream/1 Mbps downstream. Under the second phase, which would span five years, the CAF would use a forwardlooking broadband cost model to be developed by the FCCs Wireline Competition Bureau, as well as competitive bidding to support deployment of networks that carry both voice and broadband. The CAF will also include a separate Mobility Fund that would provide up to $300 million in one-time support during the first phase to boost wireless broadband services in rural and unserved areas and $500 million in annual ongoing support for such networks during the second phase. Meanwhile, with respect to ICC, the FCC ruled that carriers with revenue sharing arrangements will be required to refile their interstate switched access tariffs at lower rates if they report significantly more terminating traffic than originating traffic. The FCC also specified that voice-over-Internet protocol (VoIP) operators are obligated to pay for traffic exchanged with local exchange carriers. As one of the many telecom executives who welcomed the order, Verizon senior vice president Kathleen Grillo applauded the FCCs ruling as one that puts the USF and ICC systems on a sustainable path and will enable millions of American households to connect to . . . high speed broadband networks. Lamenting, however, that the decision set the long-term funding level for mobile services at only 11 percent of the high-cost fund, Steve Largent, the CEO of wireless association CTIA, said the agencys action falls short of what could have been done to fully capture the revolutionary migration to mobile services.

Representatives Of Broadcast, Wireless Industries Debate Spectrum Needs

At a Chicago spectrum summit hosted by the Wireless Communications Association (WCA) on Monday, representatives of the mobile telephony and broadcast industries clashed on wireless industry claims that incentive auctions of broadcast television channels are needed to avert a looming shortage of spectrum resources that are required by carriers to satisfy burgeoning demand for wireless broadband services. While acknowledging that the use of spectrally efficient technologies and the offloading of data traffic onto Wi-Fi networks could help alleviate the spectrum crunch, representatives of Sprint Nextel, AT&T and Verizon voiced support for the FCCs proposal to conduct voluntary incentive auctions of broadcast spectrum as well as for the repurposing of mobile satellite service (MSS) that could be used for wireless broadband applications. Arguing that the broadcast industrys model for delivering video programming is not a winning proposition, Recon Analytics co-founder Roger Entner endorsed the call for incentive auctions as he proclaimed the wireless industry to be the most efficient user of spectrum. Casting doubt on wireless industry claims of a looming spectrum shortage, however, National Association of Broadcasters vice president Bruce Franca cited statistics recently compiled by Citigroup Global Markets, Inc. demonstrating that U.S. wireless carriers currently utilize only 192 MHz of the 538 MHz allocated by the FCC to their industry. Franca, a former chief of the FCCs Office of Engineering and Technology, also told conference participants that theres a lot . . . the FCC hasnt thought about in developing its incentive auction plan, as he recounted NAB estimates that incentive auctions could force at least 391 full power and Class A television stations in 86 markets off the air. Franca also disputed assertions by Sprint Nextel that only ten million Americans rely on over-the-air television channels that could be auctioned to the wireless industry, citing estimates provided by Knowledge Networks that upwards of 47 million Americans and 25% of Hispanics nationwide rely on over-the-air service.

EU Parliament Body Approves Resolution On Net Neutrality

The European Parliament Committee on Industry, Research and Energy (CIRE) has adopted a resolution on net neutrality that digital rights advocates applauded as being stronger than a European Commission (EC) statement on the subject issued last April. Supporters of net neutrality, however, voiced dismay that the CIRE resolution largely endorses the wait and see approach recommended by the PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP 2

EC, through which regulations would be prescribed only if the market shows evidence of abuse. Welcoming the April 19 EC statement on net neutrality, the CIRE resolution touts net neutrality as a significant prerequisite for enabling an innovative Internet ecosystem that must be conditioned upon quality of service, transparency, and ease of switching services to assure end-user freedom of choice. While urging additional EC guidance on net neutrality to promote competition and consumer choice, the resolution also calls on EU governments to adopt a consistent approach towards achieving net neutrality goals. Noting that the resolution rejects the industrys stance that transparency alone will head off abuses, a spokesman for European Digital Rights (EDR) confirmed that the resolution ranks transparency as among the minimum necessary conditions for achieving net neutrality. The EDR spokesman also added that, unlike the ECs April statement, the CIRE resolution specifies that all web content (as opposed to just legal content) must be treated equally as Internet service providers (ISPs) are ill equipped to judge the legality of specific web transmissions. Although the resolution recommends that the EC assess the need for further regulation within six months of the ECs completion of a planned study on discriminatory ISP practices, it asserts that there is no clear need for immediate legislative action to protect the net neutrality rights of consumers against ISPs who engage in restrictive or discriminatory behavior. The resolution also acknowledges that reasonable traffic management is required to ensure uninterrupted end user connectivity in times of network congestion.

UN Panel Sets Global Broadband Access Goals

In a document issued on Tuesday, the United Nations Broadband Commission for Digital Development (UNBC) set the ambitious, but achievable goal of connecting at least half of the population of developing nations to broadband networks by 2015 so as to enable citizens of developing and other nations to fully participate in tomorrows emerging knowledge societies. Unveiled at the opening of the International Telecommunications Union (ITU) Telecom World conference in Geneva, the UNBCs Broadband Challenge sets four targets to be met by governments and private industry in realizing the top policy priority of expanding global access to broadband infrastructure and services. By 2015, the UNBC calls on all countries to adopt a national broadband strategy or to include broadband in their definitions of universal service or access. By that same year, broadband user penetration should reach at least 60% in developed nations, 50% in developing nations, and 15% in the least developed nations. The UNBC also states that at least 40% of households in developing nations should be connected to broadband networks by 2015 and that entry level broadband services should be made affordable to the citizens of such nations through adequate regulation and market forces that achieve a suggested service rate of no more than five percent of average monthly income. Describing communication as not just a human needit is a right, the UNBC document calls on the private sector to develop innovative business models needed to realize this vision and on governments to adopt the enabling policy and regulatory frameworks to ensure that industry has a stable regulatory space in which to operate, flourish, and harness broadband for sustainable human development.

CEA Predicts 99% Of Electronic Devices Will Be Web Connected By 2021

Officials of the Consumer Electronics Association (CEA) unveiled a glimpse of the electronic future on Monday at a CEA industry forum at which it was predicted that 99% of consumer electronic devices will be connected wirelessly to the Internet or to other devices and information pools within a decade. Citing CEA figures that 171 million connected devices sold last year leveraged some type of spectrum, CEA research director Shawn DuBravac told forum participants that, ten years from now, were going to look back at that number and say, look how small that was. That connectivity, added CEA senior vice president Jason Oxman, will extend beyond traditional electronics devices, such as Blu-Ray players, digital televisions and smart phones, to products such as dog collars, heart sensors, pill bottles and automobiles. The heart of connectivity in the years to come will be in cloud technologies that enable consumers to shift storage of data and applications from their electronic devices to the Internet. As a result, DuBravac said there will be a shift in emphasis from download speeds to upload speeds and how fast we can move content up into the cloud and then pull it back down. Roger Cheng, a senior writer for CNET, cautioned, however, that cloud-based services remain in their infancy and that wireless networks are not yet mature enough to handle the full potential that cloud services have to offer. Oxman, meanwhile, declared that the emergence of cloud-based services highlights the looming spectrum crisis faced by the wireless industry as he reiterated CEAs position that expanded access to scarce spectrum resources is required by the wireless industry to meet future demand. PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP 3

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