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Telecommunications Reports presents.... TR DAILY January 12, 2001 -------------------------------------------------- PLEASE NOTE: This electronic publication is copyrighted by Telecommunications Reports International. Redistribution or retransmission of any part of this electronic publication -- either internally or externally -- is strictly prohibited. Violation will be cause for immediate termination of your subscription and liability for damages. You may print out one hard copy for your personal use. If you are interested in having this publication sent to colleagues at your company, additional authorized recipients may be added to your subscription for a fee. Call Subscriber Services at (800) 822-6338, or send an e-mail to info@tr.com for more details. If you prefer not to receive TR Daily, please reply to customerservice@tr.com. ****See Monday's TR for an On the Record interview with Benjamin H. Dickens and John A. Prendergast of the Washington law firm of Blooston, Mordkofsky, Dickens, Duffy & Prendergast. They'll discuss opportunities for paging carriers to compete in the alarm monitoring industry.**** Table of Contents Click here for the full issue: http://www.tr.com/online/trd/2001/td011201/index.htm COMMISSIONERS SPLIT ON CONDITIONS IMPOSED ON AOL-TIME WARNER MERGER http://www.tr.com/online/trd/2001/td011201/Td011201.htm KENNARD SUBMITS RESIGNATION, PLANS TO LEAVE FCC POST FOR THINK TANK http://www.tr.com/online/trd/2001/td011201/Td011201-01.htm FCC TRANSITION TEAM LEANS HEAVILY ON COMMON CARRIER REPRESENTATIVES http://www.tr.com/online/trd/2001/td011201/Td011201-02.htm FCC WON'T PREEMPT MISSOURI BAN ON CITY-OWNED TELECOM UTILITIES http://www.tr.com/online/trd/2001/td011201/Td011201-03.htm ALCATEL TO BUILD TRANSATLANTIC NETWORK FOR C&W http://www.tr.com/online/trd/2001/td011201/Td011201-04.htm TAUZIN CALLS HEARING ON ICANN's DOMAIN NAME PROCESS http://www.tr.com/online/trd/2001/td011201/Td011201-05.htm FCC AFFIRMS LIFTING OF 700 MHz TRANSMITTER POWER LIMITS http://www.tr.com/online/trd/2001/td011201/Td011201-06.htm AT&T WILL BOOST STAKE IN EXCITE AT HOME http://www.tr.com/online/trd/2001/td011201/Td011201-07.htm NEWS IN BRIEF http://www.tr.com/online/trd/2001/td011201/Td011201-08.htm *************************************************************** COMMISSIONERS SPLIT ON CONDITIONS IMPOSED ON AOL-TIME WARNER MERGER One of the FCC's last major actions during the tenure of Chairman William E. Kennard marks the agency's first effort to oversee Internet "instant messaging" services. The move last night came as the FCC announced its long-awaited decision to clear the merger of America Online, Inc., and Time Warner, Inc. All five Commissioners voted to approve the merger-related application, but the majority's vote to attach conditions as competitive safeguards prompted sharp criticism from the person widely expected to succeed Mr. Kennard. Commissioner Michael K. Powell warned that the FCC was taking a "substantial leap" by declaring broad jurisdiction over the Internet. And Commissioner Harold Furchtgott-Roth reiterated his strong view that the FCC lacks authority to extract conditions through its public interest reviews of merger-related license transfers. The FCC's merger conditions mandate that the combined company-- known as AOL Time Warner, Inc.--allow all customers to choose Internet service from any unaffiliated ISP that has a contract with the merged company to use its cable TV facilities. Customers must be able to have their chosen ISPs provide their "first screen" when they go online, without going through an AOL Time Warner-affiliated ISP as an intermediary. The merged company must allow unaffiliated ISPs to have direct billing relationships with its subscribers. And it may not discriminate in favor of its affiliated ISP in terms of caching services, customer technical support, multicasting capabilities, address management, or other technical functions. The FCC also indicated its concern that, without conditions, AOL Time Warner would be able to leverage its dominance in text-based instant messaging (IM) into the nontext-based IM market. As a condition of the merger approval, therefore, the FCC prohibited AOL Time Warner from offering any new advanced, IM-based high-speed service (AIHS), feature, or enhancement that includes one- or two- way streaming video communications using a "names and presence directory" (NPD). The prohibition could be lifted, however, if AOL Time Warner demon- strated that it had complied with certain safeguards. Commissioner Powell said the majority had "given in too much to their collective imaginations" in imposing the IM conditions. In a separate statement, he said he was unwilling to join them in mak- ing the "substantial leap" to find that the FCC "has jurisdiction to regulate virtually every Internet product." Neither the record nor anticompetitive theory supports mandating IM interoperability, Mr. Powell said. "No competent antitrust authority, to my mind, would conclude intervention was necessary, nor do I believe such an analysis would withstand judicial review," he said. During a press briefing this morning, Mr. Kennard insisted that the IM conditions were "very narrowly tailored and minimally intrusive." Although he wouldn't speak directly to Mr. Powell's criticism, the chairman said, "At the end of the day, I felt--and my two other colleagues felt--that in order to protect consumers we had to impose some conditions." For more details, see Monday's TR. *************************************************************** KENNARD SUBMITS RESIGNATION, PLANS TO LEAVE FCC POST FOR THINK TANK FCC Chairman William E. Kennard has submitted his resignation to the White House, effective Jan. 19, and will take a temporary senior fellow position at the Aspen Institute, a think tank in Washington. Ending a three-year term as the nation's top telecommunications regulator, Mr. Kennard made his resignation public during a press conference this morning to discuss the FCC's approval of the merger America Online, Inc.-Time Warner, Inc. merger (see story above). At the Aspen Institute, Mr. Kennard will be advisory board chairman of the Communications and Society Program. Although his term on the Commission does not expire until the end of June, Mr. Kennard said, "Our work is complete, and it's time for me to go." Most industry observers predict that President-elect George W. Bush will appoint FCC Commissioner Michael K. Powell chairman. In one scenario some see as likely, President Bush could nominate Texas Public Utility Commission Chairman Patrick H. Wood III to be an FCC commissioner to succeed Mr. Kennard. After Mr. Wood had been con- firmed and dealt with federal communications industry issues for a while, he could be named chairman of the agency, leaving Mr. Powell free to accept another appointment, possibly in the Justice Depart- ment, these sources say. Mr. Kennard has been FCC chairman since 1997; he was the Commission's general counsel from 1993-1997. Previously, he was a partner at the law firm of Verner, Liipfert, Bernhard, McPherson & Hand and counsel to the agency's reigns as interim chairman. *************************************************************** FCC TRANSITION TEAM LEANS HEAVILY ON COMMON CARRIER REPRESENTATIVES President-elect George W. Bush has begun rounding out the "transition advisory team" that will work with the incoming administration on critical FCC issues, including the selection of a new chairman. Earlier this week a handful of telecom policy advocates were added to the FCC team, which in its current form is top-heavy with common carrier service interests, observers note. Overall, the FCC group had 31 members as of late today, including the five advisers named to the team in late December (TR, Jan. 8). The entire FCC advisory team is listed on the Bush-Cheney transition team's Web site: http://www.bushcheneytransition.com/media/pdfs/teams.pdf. More names could be added later, says an industry source. Four FCC team members have been plucked from the Bell operating companies. The lone competitive local exchange carrier representative is Royce Holland, chairman and chief executive officer of Texas-based Allegiance Telecom, Inc. The new FCC transition team advisers from the Bell companies are William P. Barr, Verizon Communications, Inc.'s executive vice president and general counsel, who also is on the Justice Department's transition team; Timothy McKone, VP-congressional relations for SBC Communications, Inc.; Daniel Mattoon, VP-congres- sional affairs at BellSouth Corp.; and Thomas J. Tauke, Verizon's senior VP-external affairs and public policy. Numerous trade association officials have been added to the FCC advisory lineup, too. They include Information Technology Industry Council President Rhett Dawson; Information Technology Association of America VP and Counsel Mark Uncapher; Jay Kitchen, president and CEO of the Personal Communication Industry Association; and Peggy Binzel, executive VP of the National Cable Television Association. The wireless industry has three representatives. They are Richard Barth, VP and director-telecom strategy and regulation at Motorola, Inc.'s Washington office; PCIA's Mr. Kitchen; and David Gross of Vodafone Group plc. FCC transition advisers who hail from the Washington "think tank" community are J. Gregory Sidak of the American Enterprise Institute; the Cato Institute's Adam Thierer; and Progress and Freedom Foundation fellows Jeffrey A. Eisenach and Randolph J. May. *************************************************************** FCC WON'T PREEMPT MISSOURI BAN ON CITY-OWNED TELECOM UTILITIES The FCC today said it wouldn't preempt a Missouri state law that effectively forbids city-owned utilities from providing telecom services. The Show-Me State cities had tried to distinguish their request from that of Texas cities that had asked in vain for FCC preemption of a similar law several years ago. In the Texas case the FCC refused to a preempt a state law barring cities from offering telecom services directly. The Missouri cities argued that their situation was different because they wished to offer telecom services through municipal utility companies. But the FCC said that in general, such utilities are a part of the state itself and, therefore, don't fall under provisions in section 253 of the federal Telecommunications Act of 1996 barring states from preventing an entity from entering a telecommunications service market. If a municipal utility has an "independent corporate identity" that's separate from the state, however, it may be eligible for protection under those "barrier-to-entry" provisions, found in sec- tion 253 of the Act, the FCC said. The Missouri utility company didn't show that they had such an independent identity, it added. In statements released with the decision, FCC Chairman William E. Kennard and Commissioners Gloria Tristani and Susan Ness said the utility companies represented a "promising class" of competitors. They asked Congress to amend the language in that section to "address clearly municipally-owned entities." Ms. Ness also suggested that states adopt "less restrictive measures" such as separation or nondiscrimination requirements to prevent city-owned utilities from having "unfair competitive ad- vantages" over private-sector service providers. *************************************************************** ALCATEL TO BUILD TRANSATLANTIC NETWORK FOR C&W Alcatel SA said it will build a transatlantic telecommunications network for Cable & Wireless plc of London, which will use the new undersea cable system in anticipation of data traffic growth between Europe and North Atlantic. The Apollo network project, which Alcatel said is worth "several hundred million U.S. dollars," will be designed to handle high-speed data transmissions and will be "adaptive to future traffic patterns." A Yankee Group analyst expressed confidence that Alcatel will complete the project by the promised delivery target of summer 2002, and cited Alcatel's proven track record in deploying top- notch submarine networks. Nancee Ruzicka, a long-haul telecom infrastructure analyst, also said that C&W's projections for transatlantic data-traffic growth likely will prove accurate. Ms. Ruzicka told TR she believes data capacity on the network, which will handle 3.2 terabit-per-second speeds, will be exhausted in a short period of time. Continued growth in the deployment of VPN (virtual private network) and Internet protocol systems will contribute to escalating demand, she said. "The demand is starting to show up," she said. "I think that capacity will get used up pretty quickly." Alcatel said the Apollo network will be built using DWDM (dense- wavelength division multiplexing) technology. Apollo will have four fiber pairs equipped with 80 wavelengths at 10 gigabits per second, "the highest capacity and lowest unit cost of any transatlantic system," Alcatel said. The project includes an additional four-year marine maintenance contract. Alcatel will devote two cable-vessels for cable fault and marine repair services. *************************************************************** TAUZIN CALLS HEARING ON ICANN's DOMAIN NAME PROCESS The House Energy and Commerce Committee's telecommunications subcommittee plans to hold a hearing in February to examine the process by which the Internet Corporation for Assigned Names and Numbers (ICANN) selects Internet domain name suffixes, Commerce Chairman W.J. (Billy) Tauzin (R., La.) announced today. "There have been a number of reports that ICANN's process to create a new generation of Internet domain name suffixes may be thwarting competition in the registration and assignment of Internet domain names," Rep. Tauzin said in a letter that was sent today to ICANN President and Chief Executive Officer Michael M. Roberts. "As the committee of jurisdiction over the issue, the committee wants to ensure that this process is open and fair, and most important, successfully sparks competition," Rep. Tauzin added. *************************************************************** AT&T WILL BOOST STAKE IN EXCITE AT HOME AT&T Corp. will boost its stake in Excite@Home after two partners, Comcast Corp. and Cox Communications, Inc., decided to trade $2.9 billion worth of Excite@Home shares for AT&T shares. Comcast and Cox were given the right to exchange their shares in an agreement announced last year (TR, April 3, 2000). AT&T said the exchange would increase its voting interest in Excite@Home to 79% from 74%. Its economic interest would increase to 38% from 23%. The March agreement also allows Comcast and Cox to end their exclusive relationship with Excite@Home and invite other cable modem service providers onto their systems as early as December 2001. If they do that, however, Comcast and Cox will forfeit warrants that give them the right to purchase Excite@Home stock at favorable prices. *************************************************************** FCC AFFIRMS LIFTING OF 700 MHz TRANSMITTER POWER LIMITS The FCC has affirmed its decision to permit base station transmitters to operate in both the lower and upper commercial 700 megahertz bands, which are scheduled to be auctioned, beginning March 6. Last year, the Commission removed power limits that some companies had said prevented the deployment of base stations using time- division duplex (TDD) or other single-channel technologies in the upper 700 MHz band (TR, June 26 and July 10, 2000). Motorola, Inc., filed a petition for reconsideration or clarification of that decision (TR, Aug. 21 and Sept. 25, 2000). In a second memorandum opinion and order released today in Wireless Telecommunications docket 99-168, the Commission said its rule changes "allow for the broadest possible use of this spectrum, consistent with sound spectrum management, and will expand participation in the auction and increase the potential for new technologies and new services." *************************************************************** NEWS IN BRIEF Commerce Secretary Norman Y. Mineta will join information technology industry executives Tuesday, Jan. 16, to announce the opening of a new Information Technology Information Sharing and Analysis Center. The announcement is scheduled for 11:30 a.m. at the Department of Commerce in Washington. Mr. Mineta will step down as Commerce secretary later this month and has been tapped by President-elect George W. Bush to become Secretary of Transportation in the new administration.... Wisconsin Gov. Tommy Thompson (R.), another Bush administration cabinet choice (to be Secretary of the Department of Health and Human Services), announced that John H. Farrow has asked not to be reappointed to the Wisconsin Public Service Commission when his term expires March 1. Mr. Farrow intends to return to his faculty position at the Milwaukee School of Engineering (MSOE), where he taught for 10 years before his appointment to the PSC in 1998.... AOL Time Warner, Inc., today named board members for the newly merged company. They are Daniel F. Akerson, chairman and chief executive officer, XO Communications, Inc.; James L. Barksdale, partner, the Barksdale Group; Stephen F. Bollenbach, president and CEO, Hilton Hotels Corp.; Stephen M. Case, chairman AOL Time Warner; Frank J. Caufield, partner, Kleiner Perkins Caufield & Byers; Miles R. Gilburne, partner, CGLS Fund; Carla A. Hills, chairman and CEO, Hills and Co.; Gerald M. Levin, CEO, AOL Time Warner; Reuben Mark, chairman and CEO, Colgate-Palmolive Co.; Michael A. Miles, former chairman and CEO, Philip Morris Companies, Inc.; Kenneth J. Novak, vice chairman, AOL Time Warner; Richard D. Parsons, co-chief operating officer, AOL Time Warner; Franklin D. Raines, chairman and CEO, Fannie Mae; R.E. Turner, vice chairman and senior adviser, AOL Time Warner; and Francis T. Vincent Jr., chairman Vincent Enterprises.... Ten members of the Washington law firm of Greenberg Traurig have left to join Akin, Gump, Strauss, Hauer & Feld's telecom and information technology practice in McLean, Va., an Akin Gump spokesman said. Eric Cowan, Richard Rubin, and Marjorie Connor were named partners; Glynna Parde and Joseph Triano were named counsel; and Roger Cepeda, Brad Haque, Alex Konde, Jeffrey Neuman, and Fadi Samman were named associates.... The FCC is seeking additional comments on whether and how it should adopt a proposal by the Rural Task Force for revising the federal universal service mechanism used by rural local exchange carriers. It applauded the plan as "a good foundation," but in a further rulemaking notice released today in Common Carrier docket 96-45, it asked for suggestions about how the plan should be implemented. The FCC zeroed in on issues that the federal-state joint board on universal service had flagged for further public comment, including the proposed "safety net" and safety valve" provisions (TR, Dec 25). It also sought input on the RTF's reccommendation to fix per- line support in competitive study areas. Comments are due 30 days after publication in the Federal Register. Replies are due 15 days thereafter.... Venezuela concluded an auction of a second block of wireless local loop (WLL) licenses today, collecting $9.9 million for five licenses. Genesis Telecom SA won four of the licenses with $5.6 million in bids, while BellSouth Corp.'s Telcel CA unit won one license with a bid of $4.3 million. Bidding on a third block of licenses is scheduled to begin Monday, Jan. 15. Bidding on the first block of licenses ended last month and raised $16.3 million (TR, Dec. 18). In that block, Telcel won the rights to four licenses for $5.8 million, while Netsat Telecommunications SL of Spain won the fifth license for $10.5 million.... Net bids in the FCC's ongoing reauction of 422 "C" and "F" block PCS (personal communications service) licenses reached $15.2 billion by the end of bidding today. After round 51, Verizon Wire- less still led, with $6.2 billion in bids. It was followed by Salmon PCS LLC--partly owned by Cingular Wireless LLC--which offered $3.0 billion. Alaska Native Wireless LLC, which is partly owned by AT&T Wireless Services, Inc., was third with bids of $2.6 billion. Activity continued to drop in the sale; only 32 new high bids were offered in the 51st round. Thirty-nine bidders remained eligible.... Crown Castle International Corp. intends to raise $315 million through the sale of 12 million shares of common stock. Crown Castle, a Houston-based provider of antenna towers and other wireless infrastructure, will use the funds for acquisitions and general corporate purposes. The sale is scheduled later this month.... Tritel PCS, Inc., will attempt to raise $250 million through the private sale of subordinated notes. The sale is contingent on Tritel, a subsidiary of TeleCorp PCS, Inc., receiving permission from its current noteholders for a subordinated offering. If Tritel doesn't get permission, the company said it would proceed with an offering of unsecured notes. Tritel, which offers PCS (personal communications service) under the AT&T brand name, intends to use the funds for, among other things, the purchase of PCS licenses.... Similar-sounding PCS operator Triton PCS, Inc., also is seeking to sell $250 million worth of subordinated notes to private investors to raise funds for capital expenditures. Triton, of Berwyn, Pa., offers PCS (personal communications service) under the AT&T brand name. ******************************************************** TR DAILY Copyright 2001 Telecommunications Reports International, Inc., (ISSN 1082-9350) is transmitted weekdays, except for holidays. Visit us on the World Wide Web at http://www.tr.com. Published by the Business & Finance Group of CCH INCORPORATED. Editor: George E. Brandon Associate Editor: Steve Peacock Editor in Chief: Victoria A. Mason Publisher: Stephen P. Munro 1333 H Street, NW, 1st Floor-East Tower, Washington, DC 20005 Editorial information: Telephone: (202) 312-6100 Fax: (202) 842-3047 Email: gbrandon@tr.com Customer Service: Telephone: (202) 312-6050 (877) 874-8737 Fax: (202) 842-3023 Email: customerservice@tr.com Federal copyright law prohibits duplication or reproduction in any form, including electronic, without permission of the publisher.=0F:
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