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Message-Id: <20011227234321.924B88423@chrivh40.cch.com<
Date: Thu, 27 Dec 2001 17:43:21 -0600 (CST) Return-Path: trd@cch.com X-OriginalArrivalTime: 27 Dec 2001 23:43:25.0516 (UTC) FILETIME=3D[46FB48C0= :01C18F30] -------------------------------------------------- Telecommunications Reports presents.... TR DAILY Dec. 27, 2001 -------------------------------------------------- For a Web version of today's TR Daily, go to=20 http://www.tr.com/online/trd/2001/td122701/index.htm -------------------------------------------------- Table Of Contents TELECOM REGULATION -- Mich. PSC: Ameritech Still Not Close To InterLATA OK -- Allegiance Complains AT&T Failing To Pay Access Charges -- Boeing Gets FCC License For In-Flight Broadband Service -- FTC Okays Four ISPs For AOL Time Warner=20 -- New York City Gets Extension On 10-Digit Dialing=20 -- FCC Bureau Extends CALEA Deadline=20 -- SBC To Pay $1.9M For Missed Performance Goals=20 TELECOM BUSINESS=20 -- Fewer Telecom Bond Defaults Seen For 2002 -- SBC To Buy Yahoo Stake Valued At About $295M -- Cablevision Sets 600 Layoffs, $55M Charge=20 -- Ault Inc. 2nd Qtr Sales Down 63%=20 -- IXCs Mimic Wireless `Bucket' Plans, TRAC Says=20 -- ACT Teleconferencing In Asset Purchase Deal -- Wireless Telecom Buys Microlab/FXR=20 CAPITAL MARKETS=20 -- TR Daily Telecom Index Gains 1.3% -- Intraco Closes $15M Investment Pact=20 PEOPLE ON THE MOVE=20 -- New CFO At Millennium Digital=20 ************************************************************ TELECOM REGULATION ************************************************************ PSC SAYS AMERITECH IS SEVERAL STEPS AWAY FROM WINNING InterLATA APPROVAL IN MICHIGAN The Michigan Public Service Commission says Ameritech-Michigan apparently has not complied with four items on the 14-point "competitive checklist" in section 271 of the federal Telecommu- nications Act of 1996. The PSC said it issued a preliminary order regarding Ameritech's compliance to give the company "forewarn- ing" that "redirection is needed" to gain the commission's endorsement of the telco's bid to enter the interLATA (local access and transport area) services market under section 271 of the Act. The PSC's order discusses checklist items two (access to network elements), four (local loop transport), seven (access to "911," and directory assistance), and 10 (access to databases and signaling). In examining checklist item two, the commission discussed WorldCom, Inc.'s complaint that Ameritech hadn't been sending line-loss reports on CLEC (competitive local exchange carrier)- to-CLEC migrations. Unless it receives notification that a customer has chosen to receive service from another provider, it continues to bill for its services, WorldCom said. When the new CLEC initiates billing, customers are double billed, WorldCom explained. WorldCom said Ameritech had a "cavalier" attitude about this problem. The commission said the problem had a "grave potential effect on competition for local exchange service and is one of the most serious of the problems raised in this case." It directed Ameritech to file a report on its efforts to resolve the problem within 20 days. To comply with checklist item four, the PSC said Ameritech would have to facilitate the migration of voice service from itself to a CLEC with "line splitting" over an unbundled network element platform (UNE-P). A CLEC doesn't need to gain approval from the data CLEC before providing voice service to a customer and migrating the service from "line sharing" to line splitting, the PSC said. It rejected Ameritech's assertion that the FCC supports its position that a data CLEC has a right of first refusal for the voice portion of the loop when a customer seeks to change his voice provider from the incumbent. The PSC also ordered Ameri- tech to streamline the process for ordering and provisioning UNE- P service when line splitting is involved. Regarding checklist item seven, the PSC said Ameritech must provide directory assistance listings (DAL) at cost-based rates.=20 During its examination of checklist item 10, the PSC determined that the access to calling name (CNAM) database should be consid- ered a UNE. Ameritech said it wasn't a UNE because the PSC didn't do an analysis concerning whether the database met the "necessary and impair" standards of sections 251 and 252 of the Act. The PSC says it doesn't need to do a "necessary and impair" analysis because the FCC already has done so. -- Gayle Kansagor, gkansagor@tr.com =09=09=09---------- AT&T FAILS TO PAY ACCESS CHARGES TO CLECs, ALLEGIANCE COMPLAINS TO TEXAS PUC Allegiance Telecom, Inc., has asked the Texas Public Utility Commission to require AT&T Corp. to pay for Allegiance's intra- state switched access services. Since 1998, AT&T has "intermit- tently paid" for some of Allegiance's terminating access services but has refused to pay for any of the company's originating access services, Allegiance said. AT&T is paying incumbents' intrastate access charges while it refuses to pay Allegiance's "lawfully tariffed rates," Allegiance said. AT&T is also paying its affiliates' intrastate access charges even when they "equal or exceed" Allegiance's rates, the company said. AT&T's "discrimination against unaffiliated competitive local exchange carriers confers a significant advan- tage" on AT&T's local service provider affiliates, Allegiance added. In November, AT&T paid XO Communications, Inc., more than $500,000 in intrastate access charges after XO filed a complaint with the Texas commission. AT&T asked the PUC to dismiss XO's complaint "without prejudice to AT&T's right to pursue a claim for XO's unreasonable switched access service charges." AT&T said it reserved its right to challenge XO's tariffed rates with any "appropriate court." -- Susan McGovern, smcgovern@tr.com =09=09=09---------- BOEING GETS FCC LICENSE FOR=20 IN-FLIGHT BROADBAND SERVICE Boeing Co. today said it had received a license from the FCC to offer in-flight high-speed Internet access, clearing the way for the firm to commercialize its Connexion brand of broadband serv- ice. The airline maker has been developing the high-speed Internet service since last year and earlier this year began operating a limited service on private and government aircraft based on an experimental license received from the FCC in April that allowed receive-only data transmission. The agency awarded the new license to Boeing late last Friday after a one-year application and review process. The license covers up to 800 transmit and receive mobile Earth stations aboard aircraft in the 14.0-14.5 GHz uplink band and 11.7-12.2 GHZ downlink band. Boeing's application had drawn some protest from PanAmSat Corp. and Lockheed Martin, which questioned whether Boeing could prevent interference with other devices in those frequency bands.=20 The FCC's order is premised on Boeing's ability to prevent such interference and to accept interference from all authorized Ku- band users.=20 "Receipt of the landmark two-way license, the first of its kind in the broadband satellite industry, will enable operators of commercial airliners and executive jets, such as private and government aircraft, to offer real-time, high-speed Internet and intranet access, television and e-mail above U.S. territory and waters," Boeing said today. "For the first time in history, air travelers will be able to experience real time, in-flight connectivity comparable to the speeds and quality of service they expect on the ground," com- mented Scott Carson, president of Connexion by Boeing.=20 Terrance Scott, a company spokesman, declined to comment on revenue targets and other financial estimates for the new broad- band offering. "We had some targets, but they went out the window after Sept. 11," the spokesman said. Boeing hopes to outfit Lufthansa long-haul jets with a prototype of the new service beginning in late 2002 or early 2003. -- John Curran, jcurran@tr.com =09=09=09--------- FTC OKAYS FOUR ISPs FOR AOL TIME WARNER --=20 The Federal Trade Commission today approved applications by AOL Time Warner for four independent Internet service providers to offer competitive ISP services on AOL Time Warner's cable TV systems. AOL Time Warner sought the approvals as part of agree- ments made with the FTC when the agency allowed the merger of America Online and Time Warner. Approved by the FTC were: In- ter.net, for competition on all of AOL Time Warner's cable sys- tems; New York Connect, for competition in the New York cable division; Internet Junction, for competition in the Tampa Bay and Central Florida cable divisions; and STIC.NET, for competi- tion in the San Antonio, Houston, and Austin, Texas, cable divisions. Separately, the FTC is seeking comments through Jan. 22 on an AOL Time Warner application seeking approval of Web One, Inc., as an alternative cable broadband ISP provider for compe- tition in the company's Kansas City division.=20 NEW YORK CITY GETS EXTENSION ON 10-DIGIT DIALING --=20 New York has been given more time to implement 10-digit dialing in the "212" and "646" area codes. The FCC's Common Carrier Bureau agreed that the Sept. 11 terrorist attacks on lower Manhattan had caused enough disruption that the state Public Service Commission should be given until March 28, 2003, to arrange for 10-digit dialing. The previous deadline was July 28, 2002. The PSC, the state Consumer Protection Board, and the City of New York had asked for a delay until September 2003. In an order released yesterday in Common Carrier docket 96-98, the bureau said the limited deadline extension would give the PSC "sufficient breathing room." FCC rules require 10-digit dialing wherever there is an area code "overlay." Without 10-digit dialing, overlays hurt competitive carriers, the FCC says. The "646" area code was overlaid on New York City's "212" area code in 1998. FCC BUREAU EXTENDS CALEA DEADLINE --=20 The FCC's Common Carrier Bureau has set a new deadline for 164 wireline carriers to comply with certain requirements of the Communications Assistance for Law Enforcement Act (CALEA) of 1994. The carriers had preliminary extensions that were due to end Dec. 31. But the bureau extended the deadline to March 31, citing the large number of deadline extension requests, the need to consult with the U.S. Attorney General, and the time and resources necessary to review each petition. Carriers say they need more time to muster the equipment and resources to comply with the "digital wiretap" capabilities mandated by CALEA. SBC TO PAY $1.9M FOR MISSED PERFORMANCE GOALS --=20 SBC Communications, Inc., will have to pay another $1.9 million for failing to meet performance targets it agreed to when it merged with Ameritech Corp. During December it fell short of its targets for providing wholesale service to competitive local exchange carriers, the company said. But a spokesman noted the December fine was the smallest SBC has had to pay since it completed the merger with Ameritech in late 1999. In November, for example, the company was assessed a $3.5 million penalty.=20 SBC agreed to the performance goals to win FCC approval for the merger. ************************************************************ TELECOM BUSINESS=20 ************************************************************ TELECOM TRENDS FOR '02: FEWER BOND DEFAULTS, STABLE DEBT RATINGS FOR EUROPEAN INCUMBENTS The telecom sector led the way in bond defaults this year, but the default rate will slow in 2002 and the industry's misery will have more company, debt-rating agencies say. "While defaults in the telecommunications sector accounted for nearly one-third of all defaults in 2001, defaults are expected to be more broad- based in 2002 with significant areas of weakness in the retail, restaurant, and consumer products categories," Standard & Poor's said. Fitch estimates that the telecom industry will end this year with $30 billion in defaults, for a sector default rate of 25%. The expected default rate for the remainder of the high-yield bond market is 5%, Fitch said. XO Communications, Inc., became the largest defaulter in November after it suspended payments on $4.9 billion in debt, according to Moody's Investors Service. The default rate for telecom companies will slow in 2002 -- if only because the weaker players have already defaulted, debt- rating agencies say. Moody's predicts the default rate for all industries will peak in the first quarter of 2002, while S&P foresees a peak in the third quarter. S&P expects junk-bond issuers to benefit from low interest rates and renewed enthusiasm among investors for high-yield securities. The influx of cash may spur companies to attempt acquisitions, S&P said. In Europe, incumbent telecom service providers should see their debt ratings firm up, Moody's said. Some European carriers spent so heavily on third-generation (3G) wireless licenses and infra- structure that they were in danger of losing their investment- grade ratings. But the trend now appears to be in their favor, Moody's said. "European investment-grade telecom service providers should be able to maintain their investment-grade ratings, even though many of them face not only higher-than-expected financial risk but for longer than anticipated," Moody's said. "Despite the increased risk, Moody's is assuming that incumbent operators will not only continue to enjoy their strong franchise and leading overall market position, growth in demand for servic- es, and high operating margins, but also remain in a strong competitive position to exploit their unique connectivity posi- tion in the local loop," Moody's said. Moody's remains skeptical, however, about financial returns from 3G wireless investments. "Moody's does not believe that the breakeven point for [3G] services could be reached before the fourth or fifth year of operation," the agency said. The ratings agency also remains doubtful about another European trend: carriers selling their real estate to raise money for debt reduction. Such sales require carriers to lease facilities, Moody's noted. These sale-and-leaseback transactions "will not benefit and could even harm [carriers'] debt ratings because they engender little real debt reduction," Moody's said, noting that "the ongoing lease obligations are themselves a form of debt." -- Tom Leithauser, tleithauser@tr.com =09=09=09---------- SBC TO BUY YAHOO STAKE VALUED AT ABOUT $295M SBC Communications, Inc., today said it would buy a stake in Yahoo, Inc., representing about 3% of the web portal provider's outstanding common stock and worth approximately $295 million based on current market trading levels.=20 SBC will buy the Yahoo shares from SOFTBANK America, Inc., a venture capital behemoth that will continue to own a 16% equity stake in Yahoo. The agreement appears to further cement rela- tions between SBC and Yahoo, which announced a deal in November to offer co-branded DSL (digital subscriber line) and dial-up Internet access services. Those product offerings are slated for roll-out in mid-2002. "This purchase will strengthen the new SBC and Yahoo relation- ship, further solidifying the premier alliance between the nation's largest DSL Internet provider and the number one global Internet destination," commented Edward E. Whitacre Jr., SBC's chairman and chief executive officer. Yahoo CEO Terry Semel said in a similar vein: "This transaction demonstrates SBC's strong confidence in Yahoo's future direction and marks another step forward in our relationship with a key new partner." The stock purchase is expected to close in the first quarter of 2002, subject to regulatory approval. -- John Curran, jcurran@tr.com =09=09=09--------- CABLEVISION SETS 600 LAYOFFS, $55M CHARGE --=20 Cablevision Systems Corp. said it plans to cut headcount by about 600 positions, or four percent of the firm's workforce, and take an associated $55 million charge in the fourth quarter. Layoffs will come from corporate, administrative and infrastructure functions, the firm said, adding that customer relations and field service positions are not expected to be impacted. "Today- 's announcement is an outgrowth of a thorough strategic review of 2002 and beyond," commented James Dolan, chief executive officer. AULT INC. 2nd QTR SALES DOWN 63% --=20 Ault, Inc., a Minneapolis-based maker of power conversion units used in broadband modems and other telecom applications, said revenue for the fiscal second quarter that ended Dec. 2 fell to $9.9 million from $26.7 million in the comparable period last year. The bottom line for the most recent quarter swung to a net loss of $2.0 million versus a profit of $813,000 in the year-ago quarter. "The decrease in sales is largely due to the overall economic slowdown. The company's primary markets, the telecommu- nications and data communications industry, have been especially hard hit, resulting in high inventory levels and slow order activity," the company said.=20 IXCs MIMIC WIRELESS `BUCKET' PLANS, TRAC SAYS --=20 The Telecommunications Research and Action Center (TRAC) has released its residential TeleTips Long Distance Comparison Chart, which details new plans and services long distance carriers have launched to attract customers and compete with wireless carriers.=20 TRAC has found that an increasing number of carriers are offering "block-of-time" plans similar to new wireless offerings. "This is in response to the overwhelming popularity of these plans used by wireless providers," TRAC researcher Karen Walls said.=20 "Consumers like establishing a preset amount for a certain number of minutes." Sprint Corp., WorldCom, Inc., Qwest Communications International, Inc., and Verizon Communications, Inc., all offer block-of-time pricing plans, TRAC said. ACT TELECONFERENCING IN ASSET PURCHASE --=20 ACT Teleconferencing will pay $4.8 million in stock and cash for Proximity, Inc., a Burlington, Vt.-based videoconferencing services provider. ACT said the acquisition should increase its 2002 revenue growth rate by about 15%. ACT's post-Sept. 11 reve- nue run rate now stands at about $8 million per year. WIRELESS TELECOM BUYS MICROLAB/FXR --=20 Wireless Telecom Group, Inc., a maker of telecom-related noise generation equipment, announced the acquisition of Microlab/FXR, which makes precision components for the wireless infrastructure industry. Terms of the deal will be announced next week, Wire- less Telecom said.=20 ************************************************************ CAPITAL MARKETS=20 ************************************************************ ON SLOW DAY FOR NEWS OR INVESTING TRDaily TELECOM INDEX GAINS 1.33% On a day with little news flow to influence the few investors bothering to trade, big telecom company stocks posted modest gains. The TRDaily Telecom Index of 90 telecom service provider and equipment supplier stocks today gained 14.19 points, or 1.33%, to close at 1,079.32. The index was inaugurated on Nov. 2 at a baseline value of 1,000 points. Elsewhere, the Dow Jones Industrial Average rose 43.17 points, or 0.43%, to close at 10,131.31. The S&P 500 average gained 7.76 points, or 0.68%, to close at 1,157.13, and the Nasdaq composite average added 15.72 points, or 0.8%, for a close of 1976.42. The moderate gains in the major indexes was attributed to positive Wall Street comments about semiconductor stocks and investor expectations for an economic rebound in the coming year. Time Warner Telecom was a big winner in the telecom sector, gaining $1.36 per share, or 7.78%, to close at $18.85 on no apparent news. Bear Stearns last week identified Time Warner Telecom, along with Allegiance Telecom, as the two likely survi- vors in the competitive local exchange sector. Meanwhile, Time Warner Telecom's parent, AOL Time Warner, posted a gain of $0.98 per share, or 3.12%, to close at $32.43. The company today took a step toward clearing one of the conditions imposed on the merger of AOL and Time Warner. The Federal Trade Commission cleared the company's plan to provide four unaffiliat- ed Internet service providers access to its cable modem platform. Yahoo, Inc., common stock was up $0.26, or 1.48%, on news that it SBC Communications would buy a stake in the company. SBC shares rose $0.57 each, or 1.46%, to close at $36.69. The day's top price losers included Marconi plc, the British telecom equipment maker that has suffered along with others in that sector. Its stock lost $0.09 per share, or 7.03%, to close at $1.19. -- Tom Leithauser, tleithauser@tr.com For a Web version of today's TR Daily Telecom Index report with graphics and index components, go to: =20 http://www.tr.com/online/trd/2001/td122701/index.htm =09=09=09---------- INTRACO CLOSES $15M INVESTMENT PACT --=20 Intraco Systems, Inc., a provider of speech recognition technolo- gies, closed on an agreement to issue convertible preferred stock to International Finance Corp., a unit of Anglo American plc, in return for an investment of $15 million worth of Anglo American stock. The firms indicated they would cooperate on product offerings, and Intraco Systems expects to begin generating additional resulting revenues in 2002.=20 ************************************************************ PEOPLE ON THE MOVE=20 ************************************************************ NEW CFO AT MILLENNIUM DIGITAL --=20 Steven Cochran has been named chief financial officer of Millen- nium Digital Media, a St. Louis-based provider of cable TV and telecom services. He was the company's senior vice president- finance and accounting. ******************************************************** 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.=20 Published by the Business & Finance Group of CCH INCORPORATED. Editor-in-Chief: John Curran Senior Editor: Tom Leithauser Associate Editor: Lynn Stanton Associate Editor: Brian Hammond Associate Editor: Ryan Oremland Associate Editor: Paul Kirby Associate Editor: Ed Rovetto Associate Editor: Michael Romanello Associate Editor: Margaret Boles Publisher: Stephen P. Munro 1333 H Street, NW, 1st Floor-East Tower, Washington, DC 20005 Editorial Information: Telephone: (202) 312-6060 Fax: (202) 312-6111 Email: jcurran@tr.com tleithauser@tr.com Customer Service: Telephone: (202) 312-6100 (800) 822-6338 =20 Fax: (202) 312-6065 Email: customerservice@tr.com 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 sub- scription 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 customerservice@tr.com for more details. If you prefer not to receive TR Daily, please reply to customerservice@tr.com. Federal copyright law prohibits duplication or reproduction in any form, including electronic, without permission of the publisher. =1A
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