On September 4, the FTC filed comments in response to the Federal Communications Commission ("FCC") Notice of Inquiry regarding development of a National Broadband Plan that will seek to ensure that every American has access to broadband capability. In its comments, the FTC states that the FCC should take into consideration the FTC’s two primary missions – promoting competition and protecting consumers in the marketplace.
On March 2, 2009, President Obama appointed Jon Leibowitz as Chairman of the Federal Trade Commission (“FTC”).
Mr. Leibowitz became a Commissioner at the FTC in September 2004. He was formerly the Democratic chief counsel and staff director for the U.S. Senate Antitrust Subcommittee from 1997 to 2000, focusing on competition policy and telecommunications matters. Leibowitz was chief counsel and staff director for the Senate Subcommittee on Terrorism and Technology from 1995 to 1996, and for the Senate Subcommittee on Juvenile Justice from 1991 to 1994. He also served as chief counsel to Senator Herb Kohl from 1989 to 2000, and he worked for Senator Paul Simon from 1986 to 1987. In the private sector, Leibowitz served as vice president for congressional affairs for the Motion Picture Association of America from 2000 to 2004, and worked as an attorney in private practice in Washington from 1984 to 1986.
On December 19, 2008, Teva Pharmaceuticals Industries Ltd.’s settled charges that its proposed $8.9 billion acquisition of rival generic drug maker Barr Pharmaceuticals Inc. would be anticompetitive. The consent order required Teva and Barr to sell assets in 29 relevant markets, including generic drugs commonly used to treat acid reflux disease, various types of cancer, bacterial infections, diabetes, and depression.
On December 11, 2008, Cynthia K. Ayer, Bambarg County (South Carolina) School District’s former technology coordinator, pled guilty for her role in a conspiracy to defraud the Federal Communication Commission’s E-Rate Program and agreed to serve two years in jail and pay a criminal fine of $468,496.
CALIFORNIA ELECTRIC COMPANY PLEADS GUILTY FOR ITS ROLE IN RIGGING BIDS ON FCC E-RATE PROJECTS FOR FRESNO AREA SCHOOLS
On June 18, 2008, Howe Electric Inc., a California-based electrical contractor, pled guilty and agreed to pay a fine of $3.3 million for rigging bids on Federal Communications Commission’s (“FCC”) E-Rate Program (“E-Rate”) projects in two Fresno, CA schools. The company will pay a total of $300,000 in criminal fines and $3 million in restitution.
KANSAS OWNER OF COMPUTER SERVICE COMPANIES AND FAMILY MEMBER CHARGED WITH CONSPIRING TO DEFRAUD FCC E-RATE PROGRAM
On April 24, 2008, Leonard Douglas “Doug” LaDuron, a former owner of three Kansas computer service companies (Serious ISP Inc., Myco Technologies Inc. and Elephantine Corporation), and his mother, Mary Jo LaDuron (a.k.a. Mary Jo Gault) pled guilty to conspiracy charges to defraud the Federal Communications Commission’s (“FCC”) E-Rate Program. The E-Rate Program was authorized under the Telecommunications Act of 1996 to provide economically disadvantaged school districts and libraries with funds to connect to the internet. Mr. LaDuron was also charged with making false statements by misrepresenting his employment status to gain housing assistance to the U.S. Department of Urban Development.
IHOP Corporation announced its plans to buy Applebee's International Inc. for $25.50 per share, as the newly restructured company seeks growth outside its pancake chain. IHOP franchises almost all of its restaurants, and believes it can improve the currently struggling chain by franchising a majority of Applebee's 508 company-operated restaurants.
In the race to build a more powerful marketing vehicle, Yahoo Inc. made its move by taking control of Right Media two weeks after Google agreed to buy DoubleClick in April. Right Media creates an open exchange to help buyers and sellers trade digital media more effectively, and Yahoo is counting on this acquisition to enhance its Internet ad sales. This form of advertisement is expected to be an increasingly popular method for companies to promote their brands rather than the use of newspapers, magazines, and television.
Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. are the only two corporations authorized by the Commission to provide satellite radio service in the United States. On March 20, 2007 they submitted an application to the FCC requesting permission to combine into a single entity. Each entity would own half of the company, and the equity ownership would be divided evenly between the shareholders of both corporations.
The FCC finally approved AT&T Inc.’s (“AT&T) merger with BellSouth Corp. (“BellSouth”) late on December 29, with the telephone companies agreeing to several conditions, including a controversial network neutrality provision aimed at protecting Web players such as Microsoft and Google. AT&T was eager to close the $80 billion-plus deal for several months. FCC approval was the last hurdle facing the merger. AT&T was forced to yield on network neutrality because FCC Democrats Michael Copps and Jonathan Adelstein insisted on protecting Internet-based providers of data, video, and applications from potential anticompetitive harms. Because four FCC members voted – Republican Robert McDowell did not participate – Copps and Adelstein held a veto over the deal.
Local governments will have 90 days to act on cable-franchise applications filed by AT&T Inc., Verizon Communications and other entities with existing rights to access city-owned conduits, the FCC ruled in an action on December 20 that split the agency along partisan lines. With support from major phone firms, FCC chairman Kevin Martin championed franchise reform as his proclaimed antidote for rising nominal cable rates and for spurring deployment of high-speed Internet-access facilities across the country. Because cable incumbents were not granted similar 90-day guarantees, the National Cable & Telecommunications Association (“NCTA”) called the FCC vote a rejection of a “level playing field” among cable providers.
To circumvent federal limits on radio ownership, investors trying to buy industry giant Clear Channel Communications Inc. (“Clear Channel”) plan to become passive owners in some radio stations they already own and divest others. According to their merger application submitted Friday, December 15, to the FCC, Thomas H. Lee Partners LP (“Lee”) and Bain Capital LLC (“Bain”) plan to insulate their interests in other radio companies in which they have a stake to avoid violating the agency’s limits on how many stations one company can own in a single market.
In a November 27 filing with the FCC, Cablevision Systems (“Cablevision”) said the agency’s rule banning set-top boxes with integrated security functions should not require the operator to deploy CableCARD-based boxes because all of its digital set-tops already contain removable smart cards. In the filing, Cablevision requested a limited waiver of the July 1, 2007, integration ban because the company, “alone among the nation’s cable operators, already has deployed set-top boxes that use separable, removable security on smart cards.”
On November 16, the Senate voted unanimously to confirm FCC chairman Kevin Martin to a second five-year term, according to the office of Senate Commerce Committee chairman Ted Stevens (R-Alaska). Martin was nominated by President George W. Bush to a Republican seat on the Commission and sworn in on July 3, 2001. Bush named him chairman on March 18, 2005.
On October 6, the FCC ended its investigation into Time Warner Cable’s (“Time Warner”) decision in August to drop the NFL Network without providing appropriate notice to subscribers. The FCC reached a consent decree in which Time Warner agreed that it violated an FCC rule that requires cable operators to provide customers 30 days notice before deleting a channel. The agency said it would take no action against Time Warner and closed the investigation. NFL Network complained to the FCC after Time Warner dropped the sports channel on some newly acquired systems from Comcast and Adelphia Communications.
On October 2, the FCC consented to the applications filed in connection with the proposed acquisition of Midwest Wireless Holdings, LLC (“Midwest Wireless”) by ALLTEL Communications, Inc. (“ALLTEL”), subject to certain conditions. ALLTEL provides wireless communications services to approximately 11 million wireless customers in 35 states. Midwest Wireless is a wireless provider with more than 400,000 customers in southern Minnesota, northern and eastern Iowa, and western Wisconsin.
On September 27, five major cable companies asked the FCC for conditions on AT&T’s merger with BellSouth to ensure that the combined phone giants cannot discriminate against cable’s competing digital-phone service. The cable companies seeking these conditions were Advance/Newhouse Communications, Charter Communications, Cablevision Systems, Cox Communications and Insight Communications.
On September 19, the Senate Commerce Committee unanimously reported on the nomination of FCC Chairman Kevin Martin for a second five-year term. Martin was approved following an off-the-floor markup held after the first vote on the Senate floor. According to Commerce Committee spokesman Joe Brenckle, the only senator to miss the 21-0 vote was Sen. John McCain (R-Arizona). Martin now awaits consideration by the full Senate.
FCC’s First Auction of Advanced Wireless Services Spectrum Licenses Raises Total Gross Bids of Nearly $13.9 Billion
The FCC’s first auction of Advanced Wireless Service (“AWS”) spectrum licenses ended on September 18. A total of 1,122 licenses were offered in the auction, and 104 bidders won 1,087 licenses. The AWS licenses can be used to provide any of a wide array of innovative wireless services and technologies, including voice, data, video, and other wireless broadband services offered over Third Generation (“3G”) mobile networks.
Internet Video Distributor VDC Complains to FCC about Inability to Secure Carriage Deals with Established Cable Networks
In an August 14 letter to the FCC, internet video distributor VDC Corp. (“VDC”), owner of VDC.com, complained that it is having difficulty securing carriage deals with established cable networks. While VDC.com distributes content from Discovery Communications, most of the company’s carriage deals are with smaller cable networks such as The Pentagon Channel and Mav TV. The broadband video site also carries home-shopping channels QVC and ShopNBC. VDC chairman Scott Wolf said that VDC plans to seek relief from the FCC “in the next few weeks” under the FCC’s program access rules. In his letter to FCC chairman Kevin Martin, Wolf alleges that some cable networks are balking at licensing their networks to VDC.com because of “external influence, mainly from the large [cable] MSOs.”
Newly appointed FCC member Robert McDowell supports agency involvement to ensure that phone companies can enter local cable-TV markets without having to overcome a lot of red tape. On August 8, during his first meeting with reporters at FCC headquarters, McDowell said “I do think we can do a lot to help speed the deployment of video penetration and marry it up with that broadband penetration by clearing some of that regulatory underbrush.”
On August 7, the FCC reaffirmed its ruling that Time Warner Cable (“Time Warner”) had to carry the NFL Network for 30 days on systems just acquired from Comcast and Adelphia Communications. On August 4, Time Warner threatened to take the FCC to court if the agency did not back down and allow it to drop NFL Network. Following the release of the FCC’s second decision, Time Warner did not commit to a court fight over the need to provide consumers a 30-day notice before deleting a channel. “Time Warner Cable continues to believe that the FCC has misconstrued the notice rules and has ordered a remedy that is in clear violation of the First Amendment. The FCC's action has resulted in exacerbating, not avoiding, consumer confusion,” Time Warner spokesman Mark Harrad said.
On July 28, the FCC issued a public notice in which its Wireless Telecommunications Bureau (“Bureau”) identifies 168 applicants found to be qualified to bid in the upcoming auction of Advanced Wireless Services licenses in the 1710-1755 MHz and 2110-2155 MHz bands (“AWS-1”) (Auction No. 66). Bidding in Auction No. 66 is scheduled to begin on Wednesday, August 9, 2006.
Competitors, Regulators, and Law Enforcement Officials Seek Halt Sale of Verizon’s Puerto Rico Telecom Assets
Also on July 14, several parties asked the FCC to deny license transfers related to the proposed sale of Verizon Communications, Inc.'s (“Verizon”) Puerto Rico telecom assets – including the incumbent local exchange carrier and its second largest wireless service operator – to America Movil S.A. de C.V. (“American Movil”). Competitors are concerned that the new operators will block the development of competition, regulators in Puerto Rico are dubious of the proposed deal's public-interest claims, and law enforcement officials want more time to examine national security and other questions.
On July 14, a federal judge said he wants to examine internal FCC documents regarding two large recent telephone company mergers to see if the Justice Department protected market competition in approving the buyouts. U.S. District Court Judge Emmet G. Sullivan's review concerns the now-completed mergers of SBC Communications Inc. (“SBC”) with AT&T Corp. (“AT&T”) and Verizon Communications Inc. (“Verizon”) with MCI Inc. (“MCI”).
On July 13, the FCC approved the sale of substantially all of the cable systems and assets of Adelphia Communications Corporation (“Adelphia”) to Time Warner Inc. (“Time Warner”) and Comcast Corporation (“Comcast”), the exchange of certain cable systems and assets between affiliates or subsidiaries of Time Warner and Comcast, and the redemption of Comcast’s interests in Time Warner Cable and Time Warner Entertainment Company.
On June 21, Federal Communications Commission chairman Kevin Martin said that the agency would likely act on the acquisition of Adelphia Communications Corp. (“Adelphia”) by Time Warner Inc. (“Time Warner”) and Comcast Corp. (“Comcast”) in mid-July. Martin indicated the mid-July action in comments to reporters following the agency’s public meeting, stating “I think the commission will try to address it by the middle of July." Time Warner and Comcast have agreed to buy bankrupt Adelphia’s 5 million cable subscribers in a $16.9 billion transaction. The Federal Trade Commission approved the deal without conditions in January. The FCC has had the merger under review for 382 days, but only since June 1 has Martin had a 3-2 Republican majority. Opponents of the deal have called on the FCC to impose a host of conditions, including access to regional sports programming owned or controlled by Time Warner and Comcast.
The American Civil Liberties Union (“ACLU”), a group of small telecommunications companies, and Sprint Nextel Corp. (“Sprint”) have joined to oppose AT&T Inc.'s (“AT&T”) bid to acquire BellSouth Corp. (“BellSouth”). In its June 5th filings with the FCC, the ACLU said it wants the commission to hold up approval of the merger until the phone companies settle allegations that they had released customer information to the National Security Agency (“NSA”). Sprint and the telecom group, meanwhile, are looking to squash the deal completely, with the group citing “irreparable harms to competition” from a combination. AT&T dismissed the claims.
On June 20, the FCC approved without conditions Sprint Nextel Corp.’s (“Sprint Nextel”) acquisition of affiliate Nextel Partners, Inc., which sells Nextel services in 58 mid-sized and rural markets, in a deal worth $6.5 billion. The transaction gives Sprint Nextel the two-thirds stake in Nextel Partners it didn’t already own. It is one of seven such transactions where Sprint Nextel is acquiring affiliates. Five of the remaining transactions have closed, while the acquisition of UbiquiTel, Inc., which has already gotten DOJ clearance, is still pending.
On June 19, the FCC approved Intelsat Ltd. (“Intelsat”) and PanAmSat Holding Corp.'s (“PanAmSat”) $6.4 billion cash-and-debt deal, concluding the transaction is unlikely to have an adverse effect on Fixed Satellite Services (“FSS”) price, quantity or transponder availability for customers from broadcasters to the U.S. government. The FCC’s five commissioners approved the deal unanimously.
On June 16, a U.S. appeals court affirmed the FCC’s most recent stab at spelling out local phone monopolies' obligation to lease their networks to startup competitors at discounted prices. “The FCC is pleased that the court has upheld its pro-competitive rules governing network unbundling,” an FCC spokesman said in a statement. “The court's decision provides long-awaited certainty for the telecommunications industry and consumers.” The rules required the local giants to provide transport and access to local loops at wholesale rates, except in certain big cities and business centers where sufficient competition exists. To many industry watchers, however, the June 16 decision was a case of too little, too late for the startup rivals, many of them VC-backed, known as competitive local exchange carriers (“CLECs”).
On June 6, the Federal Trade Commission authorized the filing of a joint amicus brief with the U.S. Department of Justice in the case of Latino Quimica-Amtex S.A. v. Atofina, et al., No. 05-5754-CV (2d Cir.). The case involves an international price-fixing conspiracy by manufacturers of two chemicals, sodium monochloroacetate and monochloroacetic acid, which are used in manufacturing foods, pharmaceuticals, herbicides, and plastics.
On May 26, the Senate approved by unanimous consent Robert McDowell's appointment as an FCC commissioner. The vote came after a tussle over a series of holds placed on his nomination in the past couple of months. McDowell's arrival will bring the Commission to a full slate of 5 members for the first time in more than year and give FCC Chairman Kevin Martin a Republican majority.
On May 22, it was reported that FCC Chairman Kevin Martin is putting pressure on senior agency staff to complete their review of the $17.6 billion carve-up of Adelphia Communications Corp. (“Adelphia”) by Comcast Corp. (“Comcast”) and Time Warner Inc. (“Time Warner”). According to sources close to the agency, Martin hopes to receive a draft of an order clearing the transaction, with some conditions, before the end of May. If Martin signs off, that order would then be distributed to the four other FCC commissioners. Martin expects his colleagues would approve the deal a few weeks later.
On May 9, a judge with the U.S. Court of Appeals for the D.C. Circuit raised questions about EarthLink, Inc.'s (“EarthLink”) assertion that the FCC erred when it stopped requiring the Bell operating companies (“BOCs”) to make available unbundled network elements for the broadband market because there isn't any competition in the sector. The judge noted that telcos are not the leading provider of high-speed Internet services nationally. Judge David B. Sentelle asked EarthLink attorney Mark O'Connor how the Bells could be the dominant player in the market, as the Internet service provider charged, when they have less of the market than cable modem service providers.
On May 2, AT&T Inc. (“AT&T”) and BellSouth Corp. (“BellSouth”) confirmed that the DOJ had issued a second request with respect to AT&T's nearly $90 billion acquisition of BellSouth. This transaction will make AT&T the dominant phone carrier in 22 states and comes on the heels of two other large telecom deals and amid growing concern about the impact of consolidation on control of America's rapidly growing broadband communications networks. Last year, regulators approved SBC Communications Inc.'s $16 billion merger with AT&T Corp., forming ATT Inc., and Verizon Communications Inc.'s $6.75 billion takeover of MCI Inc. The Federal Communications Commission also must approve the deal.
Speaking to the Tennessee Telecommunications Association on May 2, FCC Commissioner Deborah T. Tate said that any revamping of the 1996 Telecommunications Act should include language that permits the government to play a limited role in creating fair rules, while allowing the marketplace to drive industry development and innovation in such areas as broadband and advanced services. According to Tate, ensuring competition is an important goal for any telecom bill passed by Congress this year. While some regulation is necessary, it has to let companies “take into account their business plans and the economic realities they face” so they can operate their business, she said. “A light regulatory touch is particularly critical to encouraging the deployment and use of broadband.”