FCC Reopens; Issues Guidance on Revised Filing Deadlines

Now that this month's Federal Government shutdown is over, and after a 16-day suspension in normal operations, the Federal Communications Commission has issued a Public Notice announcing revised deadlines for submitting certain FCC filings. The changes were needed because many of the agency's regular electronic filing systems and web pages were inaccessible during the shutdown. As a result, licensees, applicants, participants in rulemaking proceedings and other interested parties will want to carefully review the Public Notice to help ensure that their FCC filings are made in a timely manner. 

FCC Seeks to Improve Compliance with its Broadband Data Collection Rules

“It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts.” (Sherlock Holmes, “A Scandal in Bohemia”) 

Broadband deployment data are critical to spectrum and broadband policy, both in Congress and at the Federal Communications Commission. Incomplete or incorrect data about infrastructure can hinder FCC initiatives, such as efforts to promote competition, to implement the National Broadband Map or proposals to direct Universal Service funding to underserved areas. Nevertheless, the FCC has determined that many service providers have not complied with mandatory reporting requirements designed to drive the FCC’s data collection, even as an open FCC proceeding considers possible reforms to the program. 

To encourage participation and to improve compliance, earlier today, the FCC hosted a webinar to review the basics of the rules and procedures for filing FCC Form 477 – the FCC’s primary data collection tool for broadband, voice and other services. The filing requirement applies to several categories of service providers, including facilities-based providers of broadband connections to end users, providers of wired or fixed wireless local exchange telephone service, providers of Interconnected VoIP and facilities-based providers of mobile telephony. As a result, the rules apply to companies such as telcos (fixed or mobile), cable operators, satellite companies, Wireless ISPs, managed ISPs, and VoIP providers (including “over-the-top” providers). The filing deadlines for Form 477 occur twice per year: March 1st (providers must file data as of December 31 of the previous year) and September 1st (providers must file data as of June 30 of the same year). 

In the webinar, Wireline Competition Bureau Chief Sharon Gillett emphasized two points for service providers. First, the requirement to file Form 477 is mandatory, and providers are expected to comply. Second, data submitted in Form 477 are afforded confidential treatment, meaning that no provider-specific information is shared with outside parties.  

The Bureau’s chief data officer Steve Rosenberg described how data collection or Form 477 submission problems often fall into three categories: 

  • Nonfilers: According to Rosenberg, several hundred providers don’t file with the FCC, so their data aren’t counted.
  • Improper certifications: Rosenberg indicated that sometimes outside consultants gather and submit the data, but he said that such certifications may make data more difficult to correct and may raise questions of reliability of the data.
  • Repeated mistakes: Rosenberg pointed out that some filers simply file incorrect data, for example, by putting too many subscribers into one census block in a county or build upon incorrect data from prior filings, even after working with FCC staff to correct prior filings. 

Yes, the Form 477 instructions are a bit dense, and gathering data at a granular level can be time-consuming for many providers. The key takeaway from the FCC’s webinar is that the FCC is prioritizing education and compliance efforts for broadband data collection – a move that is often a precursor to stepped-up enforcement efforts.

FCC Denies Requests for Waiver of Form 499-A Filing Deadlines

Sometimes, the footnotes contain buried gold.  Here’s a case in point. 

Earlier today, the Federal Communications Commission’s Wireline Competition Bureau (Telecommunications Access Policy Division) denied requests from two petitioners who sought waiver of the filing deadline for the annual FCC Form 499-A (the Telecommunications Reporting Worksheet) and for associated late fees.  I’ve blogged before about the Form 499-A requirement, which imposes, with limited exceptions, an annual April 1 filing deadline for providers of telecommunications services and interconnected VoIP services in the United States. 

The Division stated that a waiver “is appropriate only if both (i) special circumstances warrant a deviation from the general rule and (ii) such deviation will serve the public interest.”  One petitioner claimed that it “did not realize it was required to file the form until after the deadline,” but the Division stated that this claim “is not a unique circumstance to warrant a waiver of the deadline.” In footnote 16, the Division cited a 2008 decision by the U.S. Court of Appeals for the D.C. Circuit. In that case, the Court rejected the FCC’s grant of a waiver to a party who had timely filed an FCC complaint but later had to re-file after the deadline because the initial filing fee submitted was $5 short. The Court noted that 

procrastination plus the universal tendency for things to go wrong (Murphy’s Law) – at the worst possible moment (Finagle’s Corollary) – is not a ‘special circumstance,’ as any junior high teacher can attest. 

This is a classic way to remind parties to file early and to plan for the worst in trying to meet FCC filing deadlines. Murphy and/or Finagle may disrupt the best-laid plans at any time, and waiver proponents have a high burden under FCC rules.  

As for the other petition, the Division quickly dispensed with the claim that the petitioner’s form was “lost in the mail,” finding that without further evidence, a waiver was unwarranted.

AT&T/T-Mobile Merger: Pushing the Edge of the Envelope

Obviously, Sprint must have been valuing T-Mobile for much less than the reported $39 billion price that AT&T has agreed to pay.  Given the high antitrust hurdles to approval of an AT&T/T-Mobile combination (this would give two carriers, AT&T and Verizon, a combined market share of almost 80 percent), we have to think that if Sprint had offered anything in the low $30s, Deutsche Telekom would have opted for a Sprint deal.  A combination of Sprint and T-Mobile would have had smooth sailing at the FCC and DOJ.

Notwithstanding, this is probably a good deal for T-Mobile.  First, if it goes through, this is a great price.  Second, if it doesn’t go through, T-Mobile gets a $3 billion break-up fee, which is equivalent to a whole year’s capital budget!

There is another important point to make.  Although I just threw out the 80 percent market share figure, as have many others, neither the FCC nor the DOJ looks at the USA as a single “market” for wireless services.  Traditionally, the regulators have looked at each metro area as a separate “market,” likening wireless service to local phone service.  Although there may be some individual metro areas where AT&T and T-Mobile combined have such a large market share that the regulators will balk, the likelihood is that this deal gets granted with “conditions,” as opposed to an outright denial from regulators.  To the extent that AT&T’s CEO says the FCC has to look at this merger on a market-by-market basis, he is just accurately summarizing what the FCC has done in the past.

At least in the short term, this deal is not good for Sprint or for other carriers whose main asset is ample spectrum, because T-Mobile gives AT&T additional spectrum, especially where AT&T needs it most, in the major metro areas.  That means AT&T has less need to go out and quickly acquire more spectrum somewhere else.

I say “in the short term,” because the flip side is this.  If and when this transaction is approved, it will then be very difficult for the regulators to say that Verizon can’t acquire Sprint, or for that matter, Clearwire.  So maybe, in a perfect world, this deal will turn out to be a big win for all these companies’ shareholders.  The impact is still unclear for consumers, who are bracing for higher prices; broadcasters, who are hoping that this transaction sheds new light on demand for spectrum; and wireless ISPs, who are concerned about preserving competition for spectrum and customers.  Keep your seat belts on, because this deal may take a year to 18 months to get done, if at all.

No Fooling: April 1st FCC Deadline Looms for Some Telecom Carriers, ISPs to File Form 499-A

April 1st is, as Mark Twain described, “the day upon which we are reminded what we are on the other three hundred and sixty-four.” More specifically, April 1, 2011 is an important date for internet service providers who provide voice services, as well as for telecommunications carriers. This is the deadline for filing this year’s Form 499-A with the Federal Communications Commission, and devoting due attention now to the Form 499-A requirements can help prevent “foolish” problems down the road. 

With limited exceptions, intrastate, interstate and international providers of telecommunications services and interconnected VoIP services in the United States must file FCC Form 499-A within one week of offering service to the public and by April 1 of each year. Form 499-A registers the provider with the FCC and the Universal Service Administrative Company. The Form 499-A filing also paves the way for the provider, where required, to file quarterly and annual regulatory filings for its contributions to the Universal Service Fund (“USF”) and other federal programs. The amount of a service provider’s contribution is based on a government-established percentage of a “contribution base,” which is usually based on the provider’s report in Form 499-A of revenues from interstate and international services. Form 499-A also serves to designate the provider’s agent for service of process in the District of Columbia. 

Interconnected VoIP providers take note: due to the difficulties in separating interstate revenues from intrastate revenues for interconnected VoIP service, the FCC has established a “safe harbor” percentage for interconnected VoIP providers, who may choose to report their interstate revenues as 64.9 percent of their total VoIP service revenue.  Interconnected VoIP providers also may calculate their interstate revenues based on their actual revenues or by using traffic studies. Interconnected VoIP providers are required to make USF contributions unless such contributions would be de minimis under FCC rules. Contributions are considered de minimis if the amount owed for a particular year would be less than $10,000 based on the FCC’s formula, which takes into account revenues from interstate traffic. Nevertheless, even providers that qualify for the de minimis exception must file FCC Form 499-A annually and must retain documentation of their contribution base revenues for three years. There is no filing fee for the form (contributions are billed separately during the year), but failure to file the form may lead to FCC enforcement action. Late, inaccurate, or untruthful filings may result in actions to recover costs or other penalties. 

Ben Franklin once said that “you may delay, but time will not” – so it is with the Form 499-A deadline. So, procrastinators who have not yet tackled their form have until April 1, 2011 to determine whether the FCC’s rules require filing of Form 499-A, and if no exemption applies, to gather the required revenue data and other information to complete the form on a timely basis. Service providers will also need to keep detailed records and to determine whether their service triggers requirements to make other common filings with the FCC. For those who are required to File Form 499-A, and have not already done so, don’t forget Henry Longfellow’s words to the wise: “time is fleeting.”

U.S. Appeals Court: Antitrust Case May Proceed Against Wireless Carriers

Despite the apparent lack of a “smoking gun,” a federal appeals court is allowing a class action lawsuit to proceed against several major wireless carriers in a decision that calls to mind the maxim: “if it quacks like a duck…”

On December 29, 2010, the U.S. Court of Appeals for the 7th Circuit rejected efforts by these carriers to seek dismissal of a class action lawsuit alleging that the carriers’ text messaging services violated antitrust laws.  In Text Messaging Antitrust Litigation, Case No. 10-8037, the three-judge panel upheld the trial court’s decision that the plaintiffs had sufficiently alleged a violation of the antitrust laws (in particular, the Sherman Act).  Defendants, Verizon Wireless, et al., had argued that plaintiffs’ allegations, even if true, did not constitute price-fixing or any other violation.  Circuit Judge Posner, however, wrote that the plaintiffs had adequately alleged a violation of law, and therefore the case should go forward to discovery.

The case revolved around the plaintiffs’ efforts to file an amended complaint stating that the major wireless carriers have conspired to fix prices and not compete against each other in the provision of text messaging services.  The defendants argued that the complaint “only” alleged that the wireless carriers do not compete with each other vis-à-vis text messaging, and the law does not prohibit companies from individually deciding not to compete.  The defendants argued that the law requires a plaintiff to allege specific actions of collusion among the defendants, in addition to the absence of competition among them.

The court agreed that the Sherman Act does not prohibit wireless carriers from each making the same decision, by coincidence, not to compete with respect to text messaging service.  However, the court disagreed that the law requires a plaintiff to allege a specific “smoking gun” at the complaint stage.  The court summarized the allegations that were in the complaint, including “a mixture of parallel behaviors, details of industry structure and industry practices, that facilitate collusion.”  As the court went on to explain:

Parallel behavior of a sort anomalous in a competitive market is thus a symptom of price fixing; though standing alone it is not proof of it; and an industry structure that facilitates collusion constitutes supporting evidence of collusion.  *  *  *  [T]he complaint in this case alleges that the four defendants sell 90 percent of U.S. text messaging services, and it would not be difficult for such a small group to agree on prices and to be able to detect “cheating” (underselling the agreed price by a member of the group) without having to create elaborate mechanisms . . .

The court went on to note that, according to the complaint, the defendants exchanged text pricing information via their trade association; defendants were all on a “leadership council” within the trade association, a leadership council whose stated mission was to “substitute ‘co-opetition’ for competition;” in the face of steeply falling costs, each defendant chose to raise prices; and finally, “all at once the defendants changed their pricing structures, which [had been] heterogeneous and complex, to a uniform pricing structure, and then simultaneously jacked up prices by a third.”

In other words, the complaint alleged that the defendants walked like a duck, swam like a duck, and quacked like a duck, and therefore must be a duck, even if there is, as yet, no photograph of the defendants to prove they are a duck.

The court held that, when taken together, the allegations in the complaint pass the laugh test for whether there might be a price-fixing violation going on.  (The court said “plausibility standard,” the legalese version of “laugh test”).  The court said the complaint does not have to allege that on a particular day, the vice president of one defendant met with/telephoned the vice president of another defendant to go over the details the price fixing, or any similar “smoking gun.”  The complaint has alleged enough detail and enough anomalous behavior on defendants’ part to make the defendants respond to discovery.

If you are a smaller wireless carrier having roaming agreements with the defendants, the rates those major carriers charge their subscribers for texting will directly affect how much those carriers will pay you to perform text services for their incoming roamers.  If you are a wireless subscriber, you are probably a co-plaintiff in this case, since it is a class action covering 90% of all domestic text messaging.  Either way, it will be interesting to see where this case goes from here.

Let Me In, Innovation Man: FCC Revisits Experimental Licensing

The FCC has announced new proposals to promote investment and create jobs in wireless broadband. On November 30, the FCC announced at its open meeting that it sought to boost innovation in the telecommunications marketplace and to help restore the country’s prominence in research and development through two new proceedings.

In the first proceeding, citing past achievements such as Wi-Fi and PCS that grew out of experimental licensing, the FCC is proposing to overhaul its experimental licensing rules to streamline the process by which new devices and technologies can move from R&D to deployment. Utilizing a new license called a “program license,” the FCC will establish “innovation zones” -- specifying areas where experiments can be conducted without command and control licensing. The FCC also will make it easier for universities and labs to conduct experiments and will enable health care institutions to obtain program licenses for telemedicine research. The FCC also signaled that it would ease some of the restrictions surrounding market trials to allow consumers to have more access to new products. Interestingly, Commissioner Baker suggested that improved experimental licensing rules could provide some answers to improve spectrum efficiency in the TV bands.

For the second item, the FCC adopted a Notice of Inquiry on “dynamic spectrum access” and “opportunistic” uses of spectrum to promote more efficient spectrum use. “Dynamic” access refers to the availability of spectrum in certain locations for brief intervals and whether radio technologies can evolve to take advantage of these dynamic spectrum opportunities and thus promote wireless broadband. The NOI also invites public comment on the benefits of mandating a database model – such as the white space geo-location database – to promote efficiency. The NOI will also look at ways the FCC’s secondary markets rules could be enhanced by allowing opportunistic or “spot” use of spectrum.

Taken together, these items demonstrate the FCC’s ongoing push to increase broadband opportunities and to boost availability and efficient use of spectrum resources. These proceedings may offer new opportunities particularly for colleges and universities to move the state of the art forward.