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Telecommunications Reports presents....

TR DAILY
January 12, 2001
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****See Monday's TR for an On the Record interview with Benjamin H.
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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
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Published by the Business & Finance Group of CCH INCORPORATED.

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