FCC Proposes To Eliminate International Settlements Policy Rockefeller Pushes For Adoption Of D-Block Legislation By 9-11 Anniversary

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FCC Proposes To Eliminate International Settlements Policy Rockefeller Pushes For Adoption Of D-Block Legislation By 9-11 Anniversary Powered By Docstoc
					                                                                                                          May 20, 2011

                             FCC Proposes To Eliminate International Settlements
                             Recognizing competitive strides in the international calling market, the FCC launched
                             rulemaking proceedings last Thursday to lift the agency’s long-standing international
                             settlements policy (ISP). The Commission voted to eliminate more than 25 “outdated
                             and unnecessary” reporting requirements that relate to international telecommunications
                             traffic and revenue. The ISP was established more than 80 years ago to ensure fair
                             treatment for U.S. carriers that negotiate settlement agreements with foreign carriers that
                             possess market power. Together with the FCC’s international benchmark policy enacted
                             in 1997, the ISP is credited with slashing the average cost of international calls from
                             $0.74 per minute in 1997 to less than $0.08 per minute today. Pointing to growth in
FCC Proposes To Eliminate    competition and in alternative traffic routing arrangements that are attributable, in part, to
International Settlements    the success of the ISP, the FCC concluded not only that the ISP is “less relevant and
Policy read more             necessary to ensure competition,” but it may also be “hindering attempts by U.S. carriers
                             to negotiate agreements that reduce international telephone rates for American
Rockefeller Pushes For
                             consumers.” As such, the FCC reasoned that elimination of the ISP “would give U.S.
Adoption Of D-Block
Legislation By 9/11          carriers greater flexibility to negotiate agreements with foreign counterparts that reflect
Anniversary read more        modern routing arrangements, resulting in lower rates.” While seeking comment on that
                             proposal, the rulemaking notice also seeks input on measures to “promote and protect
Verizon Challenges Data      competition on U.S.-international routes if the need arises.” Meanwhile, in a separate but
Roaming Rules In Court       related item, the FCC voted to eliminate international circuit addition, telegraph toll
read more                    division, and other annual traffic and revenue reporting requirements that pertain to large
                             and foreign-affiliated carriers. As FCC Commissioner Robert McDowell observed that
Study Cites Netflix As       the ISP notice “recognizes the fundamental progress made in the marketplace while also
Largest Source Of U.S. Web
                             asking important questions on areas where the Commission may need to maintain a more
Traffic read more
                             active presence,” a spokesman for AT&T praised the reporting order as “a welcome
Sprint To Lure T-Mobile      measure that will eliminate unwelcome burdens on industry and the FCC.”
Customers With Service
Credit read more             Rockefeller Pushes For Adoption Of D-Block Legislation
                             By 9/11 Anniversary
Ergen To Step Down As Dish
Network CEO read more        At a Capitol Hill news conference last Friday, Senate Commerce Committee Chairman
                             Jay Rockefeller joined with four other Senate Democrats in calling for passage of
                             bipartisan public safety legislation by the ten-year 9/11 anniversary that would allocate
                             the 700 MHz D-block to public safety. The legislation would also allow funds accrued
                             from voluntary incentive auctions of television broadcast spectrum to be used to deploy a
                             nationwide, interoperable public safety network in the D-block. Also appearing at the
                             news conference were Senators Charles Schumer (D-NY), Kirsten Gillbrand (D-NY),
                             Amy Klobucher (D-MN) and Barbara Boxer (D-CA). These lawmakers voiced support
                             for bipartisan draft legislation that combines elements of the D-block reallocation bill
                             introduced by Rockefeller last January and spectrum reform proposals championed by
Senator Kay Bailey Hutchison (R-TX), the ranking member of the Senate Commerce Committee. In addition to allocating the D block
to public safety users, the draft Rockefeller-Hutchison bill would establish a non-profit entity, known as the Public Safety Broadband
Corporation (PSBC), which would hold the D-block license and build the network using funds raised from voluntary incentive auctions
of broadcast spectrum. The PSBC would be empowered to sign roaming agreements with commercial providers and negotiate
contracts with commercial vendors that would construct and operate the network. While the PSBC would be authorized to set
interoperability and other rules for the D-block network, the FCC would be permitted to adopt rules “if necessary and in the public
interest” that would provide public safety agencies with priority roaming rights on commercial wireless networks in times of
emergency. The draft bill also includes various proposals to encourage spectrum sharing by federal agencies and improve spectrum
efficiency. Noting that the bipartisan draft bill projects a deficit reduction of $10 billion that will satisfy members of the House
Republican majority, Rockefeller voiced hope that the two chambers “will come together” to pass legislation in time for the 9/11
anniversary. Committee counsel Neil Fried stressed that there are “multiple issues” that remain to be resolved that will make it a
“tough challenge to actually pass law and get it to the president by that date.”

Verizon Challenges Data Roaming Rules In Court
In a petition filed last Friday, Verizon Wireless asked the D.C. Circuit Court of Appeals to overturn data roaming rules that were
applied by the FCC to wireless carriers last month, arguing that the FCC overstepped its authority in adopting rules that are “arbitrary,
capricious, and an abuse of discretion within the meaning of the Administrative Procedure Act.” By a 3-2 vote along party lines, the
FCC enacted rules on April 7 that require facilities-based wireless broadband carriers to open their networks to data roaming and to
offer competitors terms and conditions for data roaming that are “fair and reasonable.” Describing the mandate as a logical extension
of current rules that require mobile voice roaming, the FCC’s majority concluded that the rules would advance competition and
promote investment in wireless broadband networks while enabling subscribers of small and/or rural wireless carriers to maintain
broadband connectivity outside of their home markets. Notwithstanding these arguments, Verizon told the court that the FCC exceeded
its authority by imposing common carrier regulation on wireless information services. Mirroring claims made to the court in Verizon’s
earlier appeal of the FCC’s net neutrality rules, the company also said that, because the FCC relied upon its Title III licensing authority
to impose the data roaming mandate, the D.C. Circuit holds exclusive jurisdiction over the case at hand. (Although the court rejected
Verizon’s net neutrality appeal on grounds that the FCC’s order had not yet been published in the Federal Register, that problem will
not impact Friday’s appeal as the data roaming order appeared in the Federal Register on May 6.) Verizon also challenged the notion
that competitors have been stymied in their efforts to obtain data roaming rights, asserting that it has more than 40 data roaming pacts
in place that cover 60 roaming partners. Although the FCC offered no comment on Verizon’s petition, Rural Cellular Association
president Steve Barry proclaimed: “the FCC’s authority is clear, as the data roaming order was adopted in light of a longstanding
recognition that the FCC has authority over the public airwaves and a duty to oversee their use in the public interest.”

Study Cites Netflix As Largest Source Of U.S. Web Traffic
In a development that is expected to intensify the debate over metered versus unlimited pricing for Internet services, a study issued this
week by broadband analytics firm Sandvine points to Netflix as the single largest source of traffic on U.S. web networks. Sandvine’s
Global Internet Phenomena Report for spring 2011 confirms the rapidly-growing appetite among U.S. consumers for online streaming
video that, according to industry watchers, is beginning to supplant cable and direct broadcast television subscriptions as a primary
source of video entertainment. Based on data collected from more than 220 service providers worldwide, Sandvine’s report indicates
that Netflix represented 24.71% of U.S. Internet traffic for the surveyed period, outpacing BitTorrent (17.23%), HTTP (17.8%), and
YouTube (9.85%). Since introducing a streaming-only service option for U.S. customers last year, Netflix has added 6.7 million
customers to bring its total to 23 million users that represent a subscriber penetration of 28% in the U.S. On a broader scale, Sandvine
reports that “real-time” entertainment websites that include Netflix and YouTube currently account for 49.2% of peak aggregate
Internet traffic in North America, up from 29.5% in 2009. Sandvine further estimates that that category will swell to between 55% and

PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP                                                                                             2
60% of aggregate peak traffic by the end of this year. Sources believe that Sandvine’s findings will induce more ISPs to follow the
lead of Comcast and AT&T in capping data usage for broadband customers and in imposing overage fees on customers who exceed
their monthly limits. Earlier this month, AT&T began enforcing new data usage policies that limit fixed digital subscriber line
customers to 150 gigabytes per month and that limit U-Verse fixed broadband customers to 250 gigabytes monthly. Although net
neutrality rules adopted by the FCC last December prohibit ISPs from blocking the transmission of lawful content on broadband
networks, the agency has endorsed usage-based pricing as a valid means of managing traffic on congested web networks.

Sprint To Lure T-Mobile Customers With Service Credit
As it continued its campaign to convince federal and state regulators of the harms of the proposed merger of AT&T and T-Mobile
USA, Sprint Nextel offered T-Mobile customers an enticement in the form of a $125 service credit to individuals who decide to switch
from their current carrier to purchase a Sprint smart phone with a two-year contract. The offer, which runs through June 23, would
provide a $175 credit to business customers who purchase any Sprint phone. Basic phone service subscribers would be entitled to a
$50 credit. Although the offer applies to customers of any wireless carrier that competes against Sprint, a Sprint spokesman
acknowledged that the promotion is intended to target T-Mobile customers who may be leery of the effects of AT&T’s $39 billion
acquisition of T-Mobile upon their current wireless service. The spokesman also noted that the credit is intended to “give customers a
chance to try Sprint without having to worry about fees or charges for terminating their contracts with their current carriers.” To
qualify for a service credit, prospective customers must transfer their service from an existing contract on a rival carrier network, sign
up for a two-year Sprint contract, and remain active on the Sprint network for at least 61 days. New Sprint subscribers who fulfill these
conditions will receive their service credit within two months. Sprint will also credit early termination fees for new Sprint customers
who decide to switch back to T-Mobile if the AT&T-T-Mobile deal fails to win regulatory approval. Noting that there have been few
such examples of a carrier offering a blanket credit to new customers who sign up for any device, one analyst termed Sprint’s move as
“a smart and aggressive maneuver to take advantage of. . . T-Mobile’s ‘lame duck’ carrier status.”

Ergen To Step Down As Dish Network CEO
Charles Ergen, the founder of DISH Network Corp., confirmed plans on Monday to step down as the company’s president and CEO
effective on June 20. Observers say that Ergen is relinquishing day-to-day management control of DISH so he can more fully develop
the company’s strategy in his capacity as chairman. As such, the announcement mirrors Ergen’s actions at DISH’s sister company
EchoStar, where Ergen resigned as CEO and president in 2009 yet remained on as chairman to focus on EchoStar’s strategic direction.
Joseph Clayton, a current EchoStar board member and former CEO and chairman of Sirius Satellite Radio, will succeed Ergen as CEO
and President of DISH. Clayton, who has also served as president of Global Crossing North America and of Frontier Corp., will also
join the DISH board. Touting Clayton as a “38-year veteran of the consumer electronics, telecommunications and satellite
communications industries,” Ergen declared that Clayton “brings an enormous amount of executive-level experience . . . and we look
forward to his leadership as we continue to deliver video entertainment into the future.” Accepting the appointment, Clayton said, “I
look forward to building on DISH Network’s legacy of innovation,” as he explained to reporters: “I’m freeing Charlie to focus on the
big picture.”
                                                                 * * *

For information about any of these matters, please contact Patrick S. Campbell (e-mail: in the Paul, Weiss
Washington office.      To request e-mail delivery of this newsletter, please send your name and e-mail address to
(No. 2011-20)

PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP                                                                                            3