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Telecommunications Reports presents....

                                  TR DAILY
                                  Oct. 29, 2001
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Table Of Contents
Click here for the full issue:
http://www.tr.com/online/trd/2001/td102901/index.htm


PROMISE OF RURAL BROADBAND SERVICE, CABLE TV COMPETITION
MAY NOT BE ENOUGH TO SAVE EchoStar-HUGHES MERGER       
http://www.tr.com/online/trd/2001/td102901/Td102901.htm

FINANCIAL HURDLES AWAIT EchoStar-HUGHES
http://www.tr.com/online/trd/2001/td102901/Td102901-01.htm

DESPITE PACKED AGENDA, LAWMAKERS TAKE ON
RURAL BROADBAND DEPLOYMENT, FCC UNE RULES         
http://www.tr.com/online/trd/2001/td102901/Td102901-02.htm

FCC, CARRIERS WORK ON DETAILS           
TO RESOLVE NextWave DISPUTE
http://www.tr.com/online/trd/2001/td102901/Td102901-03.htm

ALAMOSA RAMPS UP THIRD QUARTER REVENUES,
BUT NET LOSS WIDENS BY $20 MILLION
http://www.tr.com/online/trd/2001/td102901/Td102901-04.htm

TELECOM EARNINGS ROUNDUP
http://www.tr.com/online/trd/2001/td102901/Td102901-05.htm

NEWS IN BRIEF 
http://www.tr.com/online/trd/2001/td102901/Td102901-06.htm


****************************************************************
PROMISE OF RURAL BROADBAND SERVICE, CABLE TV COMPETITION
MAY NOT BE ENOUGH TO SAVE EchoStar-HUGHES MERGER       

Charles Ergen today told regulators what they like to hear ? that
he could provide rural broadband service and cable TV competi-
tion.  But the chairman and chief executive officer of EchoStar
Communications Corp. might find that encouraging words aren't
enough to win approval for EchoStar's effort to merge with Hughes
Electronics Corp.

On the surface, the merger of the two largest providers of direct
broadcast satellite (DBS) service would seem as ill-fated as
WorldCom, Inc.'s attempt to buy Sprint Corp. ? a merger of the
second and third largest long distance carriers.  But Mr. Ergen
says that's an "apples-to-oranges" comparison.  He's confident
that regulators will look at the broader picture, in which
EchoStar and Hughes are providers of pay-TV service, not just DBS
service.  In that universe, he insists they are small fish that
need to get bigger to compete against AT&T Broadband, AOL Time
Warner, and the other sharks in the cable TV ocean.

Attorneys at the Department of Justice "totally do understand
this industry," he said this morning during a press conference. 
"While there certainly are concerns that regulators will have,
this transaction ultimately will be approved," he said.  "We'll
work with regulators and Congress to alleviate their concerns."

Even before the ink was dry on the merger agreement, Mr. Ergen
began offering conditions to make the merger more palatable to
policy-makers.  He said he would agree to a national price plan
so that rural customers don't pay more than urban customers.  The
merger would leave a few million rural customers with a single
provider of pay-TV service, and there will be worries that those
customers could be gouged.  Mr. Ergen hinted that additional
conditions would be offered, but he declined to say what they
were.  "You don't negotiate those in the press," he said.

"We've made a $600 million bet that this transaction will be
completed," he said, referring to the breakup fee that EchoStar
will pay Hughes if regulatory concerns derail the merger. 

Blair Levin, an analyst with Legg Mason Wood Walker, Inc.,
expects derailment.  A national pricing plan is not enough to win
over DoJ, he said today in a report.  "Such a proposal would
involve DoJ in ongoing price and service regulation, which it is
loath to do.  Moreover, price is only one benefit of competi-
tion."

"EchoStar would have to convince DoJ officials that any negative
consequence of the transaction would be offset by a positive
impact: that the combined EchoStar-[Hughes] would provide a more
viable competitor to cable TV," Mr. Levin said.  He noted that a
similar tactic failed in the WorldCom/Sprint deal.  Those compa-
nies argued that they should be allowed to merge to create a more
powerful competitor in the local-service market.  But their
potential to dominate long-haul markets did them in.

Opponents, some of them powerful, already are taking aim at the
EchoStar/Hughes deal.  Cable TV operators will oppose it, as will
News Corp. Ltd., a jilted contender for Hughes.  A merger of
EchoStar and Hughes "means there will be no choice for millions
of television consumers in rural America," News Corp. Chairman
and CEO Rupert Murdoch said.

Mr. Murdoch "has no intention of waving the white flag and may
pursue a number of strategies in an effort to block this transac-
tion," said David Kestenbaum of ABN-AMRO.  He suggested that
"leading banks with strong ties to News Corp. may be wary of
participating" in funding the EchoStar-Hughes transaction.

Northpoint Technology, Inc., which is seeking to launch a terres-
trial service that would share DBS spectrum, said the EchoStar-
Hughes merger agreement "caps a long history of anticompetitive
conduct by the satellite industry and demonstrates their failure
to provide competitive choices for rural Americans."  The FCC
surely could not have foreseen that the free spectrum it issued
to several major DBS companies a decade ago would come to be
controlled by a single monopolist," Northpoint President Sophia
Collier said.

The proposed merger is likely to generate hearings in the various
congressional committees with jurisdiction over telecommunica-
tions and antitrust issues.  Senate Commerce, Science, and
Transportation Committee Chairman Ernest F. Hollings (D., S.C.)
vowed today to give the proposed merger a close look, saying he
was "troubled by the prospects of the two largest satellite
companies becoming one.  That kind of consolidation would leave
consumers with few, if any, choices," he said.  "Our committee
will continue to look into this and other consolidation matters."

The Senate Judiciary Committee is also planning to examine the
proposed merger before Congress adjourns later this year, a
spokesman said.  Sen. Mike DeWine (R., Ohio), the ranking member
of the antitrust, business rights, and competition subcommittee,
said that while the proposed merger "clearly raises serious
antitrust concerns, they are not necessarily fatal to the deal."

"If this merger is completed, millions of consumers that now have
the benefit of competition for subscription TV may find their
choices narrowed to just two providers," he said in a statement
today.  "By the same token, the merger of these two companies
could generate efficiencies that allow the combined company to
provide new local services to a number of small and midsize
markets.  Furthermore, this deal may create a stronger satellite
competitor that is better able to aggressively compete head-to-
head with" the cable TV industry, Sen. DeWine said.  

? Tom Leithauser, tleithauser@tr.com
Ryan Oremland, roremland@tr.com


***************************************************************
FINANCIAL HURDLES AWAIT EchoStar-HUGHES

In addition to regulatory hurdles, EchoStar Communications
Corp.'s effort to merge with Hughes Electronics Corp. must
overcome some financial obstacles.  The companies will need $5.5
billion to complete the transaction and hope to get that amount
from capital markets that can best be described as stingy.

If capital markets don't cooperate, the companies have arranged
two $2.75 billion bridge loans from Deutsche Bank and General
Motors, Hughes?s parent company.  The GM bridge commitment is
secured by a pledge of $2.75 billion of EchoStar stock held in a
trust controlled by the company?s chairman and chief executive
officer, Charles Ergen.  He put up the stock after another bank
backed out of the deal, the companies said.

The transaction, valued at $30 billion, will be accomplished in
stages.  First, Hughes will be spun off from GM.  Then EchoStar
will be merged into Hughes.  The resulting entity will be called
EchoStar and will offer service under Hughes's DirecTV brand
name.  DirecTV has more than 10 million subscribers, while
EchoStar's DISH Network serves about 6.4 million customers.

Hughes also had a buyout offer from News Corp. Ltd., but GM
decided the EchoStar bid was superior.  "When we added up the
value we saw in the relationship with EchoStar it just far
exceeded any other option," said Jack Shaw, CEO of Hughes.  The
companies expect to complete the transaction in the second half
of next year.

? Tom Leithauser, tleithauser@tr.com


****************************************************************
DESPITE PACKED AGENDA, LAWMAKERS TAKE ON
RURAL BROADBAND DEPLOYMENT, FCC UNE RULES         

Congress's work on antiterrorism legislation and national securi-
ty matters may have relegated most big-ticket telecom items to
the legislative backburner in recent weeks, but that hasn?t
stopped some key  lawmakers from forging ahead on bills to spur
broadband service deployment in rural areas, and examine the
FCC's unbundled local switching rules.  
               
In fact, with little fanfare, the Senate recently approved a
fast-track bill to set up ?competitively neutral? telecom grant
programs in rural areas that don't have basic, dial-up Internet
access services.  Added as an amendment to the fiscal year 2002
spending bill for the Department of Agriculture by Sen. Thad
Cochran (R., Miss.), the legislation would permit the Secretary
of Agriculture to distribute grants to the state public service
commissions, which in turn would oversee the establishment of
grant programs to encourage carriers to build advanced networks
and provide "affordable broadband" services in Internet-starved
communities.  The Senate approved the overall spending bill last
Thursday, Oct. 25, by a 91-5 vote.      

Other efforts to stimulate broadband service deployment through
financial incentives have also picked up in the House.  There,
Minority Leader Richard Gephardt (D., Mo.) has joined with
several Democrats to urge the Senate leadership to consider
attaching broadband tax credit legislation to that chamber's
"economic stimulus" package.  Writing last week to Senate Majori-
ty Thomas A. Daschle (D., S.D.) and Finance Committee Chairman
Max Baucus (D., Mont.), the lawmakers touted the Broadband
Internet Access Act (S 88, HR 267) as a way to increase network
connectivity, security, productivity, and infrastructure invest-
ment in rural communities.

The legislation has 189 cosponsors in the House and 62 in the
Senate, they said.  "Clearly, such broad support indicates the
need to extend a high-speed information system to all Americans. 
This legislation provides the vehicle for delivering such a
system, and we urge you [to] include it in the stimulus package,"
said the Oct. 25 letter, which was signed by Reps. Gephardt,
Robert Matsui (Calif.), Anna Eshoo (Calif.), Rush Holt (N.J.),
Zoe Lofgren (Calif.), Ellen Tauscher (Calif.), Rosa DeLauro
(Conn.), Mike Honda (Calif.), and Nancy Pelosi (Calif.).

Meanwhile, the House Small Business Committee plans to revisit
the telecom scene this week with a Nov. 1 hearing to review small
businesses' access to telecom services and "whether a decision by
the FCC unduly restricts access by small businesses to competi-
tive telecom services."  The hearing is set for 2 p.m. in the
panel's regulatory reform and oversight subcommittee, which held
a pair of telecom-related hearings earlier this year (TR, May 21
and May 28 ).
     
A subcommittee aide told TR Daily today that the "major focus" of
the hearing would be the FCC's rules governing when an incumbent
local exchange carrier (ILEC) must make unbundled local switching
available to carriers that provide service by leasing a platform
of combined unbundled network elements (UNE-P).  Under existing
rules, ILECs don't have to provide unbundled switching when CLECs
plan to use the network element to service business customers
with four or more lines in a "density zone 1" pricing area in the
top 50 metropolitan statistical areas.

Debate over access to unbundled local switching has been conten-
tious, pitting competitive local exchange carriers against the
incumbent telcos and, at times, against each other (TR, March 19,
2001). UNE-P--based carriers are urging the FCC to expand the
availability of unbundled local switching, while CLECs that have
their own switches and incumbent LECs are advocating that the
Commission scale it back.  Last week, for example, Verizon
Communications, Inc., asked the FCC to eliminate or "significant-
ly limit" ILECs' obligations to provide local switching to
competitors as a UNE (TR, Oct. 29).

Former Small Business Committee Chairman James M. Talent (R.,
Mo.) was highly critical of the FCC's rules regulating the
provision of UNEs to competitors, saying they were hindering UNE-
P carriers from obtaining the necessary switching services to
serve small-business customers  (TR, July 24, 2000).  

While Rep. Talent may no longer hold the gavel, the Small Busi-
ness committee's position on the FCC's unbundled local switching
rules "hasn't changed," the committee aide said today.  The
committee is "still very concerned that the FCC's UNE rules
violate the Small Business Act and the Regulatory Flexibility
Act. . .because they hinder small companies from obtaining
telecom services," the aide said.

? Ryan Oremland, roremland@tr.com                                


****************************************************************
FCC, CARRIERS WORK ON DETAILS           
TO RESOLVE NextWave DISPUTE

The FCC and other parties involved in negotiations to resolve the
NextWave Telecom, Inc., dispute are still exchanging draft
settlement documents, a source told TR Daily on Monday.  Sources
last Friday said all the parties had reached a settlement to the
five-year saga over NextWave's "C" and "F" block PCS (personal
communications service) licenses and were hammering out the final
details (TR, Oct. 29).

"There's still a lot of details that have to be worked out," one
source said today.  Sources have said the FCC hoped to announce
the settlement early this week.  As part of the agreement,
NextWave would walk away with about $5 billion, while the U.S.
government would get about $11 billion.

Under an additional stipulation, NextWave has agreed to pay
Verizon Wireless about $120 million and AT&T Wireless Services,
Inc., between $25 million and $30 million, a source said.  The
payments are designed to cover the amount the carriers have lost
in interest on deposits they paid the government for NextWave
spectrum they bid on at an auction earlier this year, the source
said.  The money also will pay the costs of providing bank
letters of credit, the source said.

Those letters will be provided in January 2002 by Verizon Wire-
less and Alaska Native Wireless LLC--which is partly owned by
AT&T Wireless.  The two carriers were the top bidders at the
auction.  In addition, NextWave has agreed to pay the federal
government $50 million, the source said.  

? Paul Kirby, pkirby@tr.com


****************************************************************
ALAMOSA RAMPS UP THIRD QUARTER REVENUES,
BUT NET LOSS WIDENS BY $20 MILLION

Alamosa Holdings, Inc., which sells Sprint PCS service in 15
states mostly in the West and Southwest, generated booming
sequential revenue growth of 27% during the third quarter but
also saw its net loss balloon to $37.7 million as a result of the
rapid addition of new customers. 

For the quarter ended Sept. 30, Alamosa posted total revenue of
$107.8 million, up from $23.2 million in the same quarter last
year.  Of the third quarter total, $67.5 million was subscriber
revenue and $31.5 million was roaming revenue.  Alamosa added
88,000 customers to its rolls during the quarter, ending the
period with 404,000 subscribers.

"We had a tremendous third quarter fueled by phenomenal customer
acquisitions," declared David Sharbutt, chief executive officer,
in a conference call today.  The rapid customer growth was fueled
in part by an increased push for sales under Alamosa's "automatic
spending limit" program.   The ASL program requires no customer
deposit to begin service but limits the customer to $125 of
charges.  It allows Alamosa to refuse to provide additional
service above the customer's spending limit.  While the ASL
program allows customers with higher credit risk to obtain
service, bad debt expenses are held down by the $125 limit,
company executives explained.

As of Sept. 30, a total of 39% of Alamosa's customers were on the
ASL plan versus 31% at June 30.  "Results to date [from the ASL
program] have been better than our expectations," explained Mr.
Sharbutt.  The CEO added that ASL program customers yield higher
average revenue per user (ARPU) results than regular customers
and this metric tends to offset a higher customer churn rate
within the group.  For the quarter, Alamosa's monthly ARPU
trended slightly higher, to $92 per customer from $91 during the
second quarter.

Churn rates for the third quarter rose to 2.7% from 2.4% in the
second quarter.  Kendall Cowan, chief financial officer, offered
that third quarter churn rates were not alarming, as "second
quarter churn was unusually low for a company like us."  He
speculated that increased churn may be a result "possibly of the
slowing in the economy, though we are seeing no indication of
that in areas of the country that we cover."  

At least one Wall Street analyst was less optimistic about
results driven by the ASL program.   "Although things are working
well right now, we are concerned about potential repercussions of
the ASL program; namely higher churn and bad debt expense in the
future," commented Cynthia Motz of Credit Suisse First Boston. 

Going forward, Alamosa executives nudged upward full-year expec-
tations on customer count to a range of 500,000 to 525,000 from a
prior range of 425,000 to 465,000.  At the same time, Alamosa
increased its full-year EBITDA (earnings before interest, taxes,
depreciation, and amortization) loss forecast to a range of $55
million to $60 million from the prior guidance of $38 million to
$53 million.  

Lending assistance to better bottom-line performance, Alamosa cut
its full-year guidance on capital expenditures to a range of $140
million to $150 million from the previous estimate of up to $160
million.  Echoing the drive toward better profitability, Mr.
Sharbutt commented:  "We continue to see improvements in operat-
ing efficiencies as we are nearing the completion of our network
buildout and have transformed the company from being in the mode
of launching markets quickly to adding subscribers and operating
those markets in the most productive manner."  He added that
Alamosa expected to begin offering third generation (3G) services
in the middle of next year, but he didn't say what the financial
effect of that would be.

? John Curran, jcurran@tr.com


****************************************************************
TELECOM EARNINGS ROUNDUP 

Grupo Iusacell SA de C.V., a wireless cellular service provided
based in Mexico City, grew third quarter revenues to $1.68
billion, up 16% from the year-ago quarter.  For the most recent
quarter, Grupo Iusacell generated EBITDA (earnings before inter-
est, taxes, depreciation, and amortization) of $771 million,
including gains from sales of dark fiber and cellular towers.  
Excluding the one-time gains, EBITDA for the third quarter grew
to $576 million, up 8% from last year. 

Telesp Celular Participacoes SA, holding company for the leading
cellular service provider in Brazil, reported that revenues for
the first nine months of 2001 totaled $798.5 million, up 6% from
the comparable period last year.  EBITDA for the nine-month
period amounted to $249.4 million, up 0.8% from last year. 

KPNQwest NV posted third quarter revenues of $178.5 million,
compared with $119.9 million of revenues in the year-ago quarter. 
For the most recent quarter, the company generated positive
EBITDA of $2.4 million versus an EBITDA loss of $28.1 million a
year ago.  Net loss for the latest quarter grew to $54.6 million,
from $21.5 million, largely because of higher depreciation and
amortization expenses.  Based on the nine-month results, KPNQwest
increased its full-year revenue guidance by about $18 million, to
a total of $723 million.  

Deltathree, Inc., the Internet telephony provider formerly
controlled by RSL Communications, said third quarter revenues
fell to $3.4 million, from $8.5 million in the year-ago quarter,
primarily due to the bankruptcy of RSL, deltathree's largest
customer.  The firm?s net loss improved to $6.2 million in the
most recent quarter, from $10.3 million a year ago. 

Wireless Telecom Group, Inc., posted third quarter revenues of
$4.2 million, accompanied by a profit of $718,000.  In the
comparable quarter last year, the firm had revenues of $4.7
million and net income of $543,000.  Based in Paramus, N.J.,
Wireless Telecom makes test equipment for measuring power of RF
and microwave systems used in multiple telecom markets. 


****************************************************************
NEWS IN BRIEF

Nokia Corp.'s board has extended Jorma Ollila's contract as
chairman and chief executive officer through 2006.  He joined
Nokia in 1985, was appointed president and CEO in 1992, and
became chairman and CEO in 1999....

Lance B. Boxer has been named president and chief executive
officer for Sphera Optical Networks, Inc.  He was president and
CEO with Somerset, N.J.-based content-delivery developer XOSoft,
Inc.  Sphera builds metropolitan area networks and is based in
Edison, N.J....

Polaris Networks, Inc., has named William C. Tucker vice presi-
dent-marketing.  He was VP and general manager of Ramp Networks
Europe.  Polaris, based in San Jose, Calif., makes optical
transport switching systems....

The FCC is seeking comments on a petition for reconsideration
filed by the Cellular Telecommunications & Internet Association
related to the allocation of spectrum for third-generation (3G)
wireless services.  Oppositions to the petition are due 15 days
after the public notice of the petition is published in the
"Federal Register."  Replies to oppositions are due 10 days after
that.  In its petition filed Oct. 15 in Engineering and Technolo-
gy dockets 00-258 and 95-18 and International docket 99-81, CTIA
asked the Commission to reconsider its denial of the group's
earlier request that it reallocate the entire 2 gigahertz mobile
satellite service band for other services (TR, Aug. 13).  "The
Commission has neither followed its own regulations, which
require that the petition be placed on public notice, nor clearly
articulated any basis for the denial," CTIA argued.


****************************************************************
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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Associate Editor: Tom Leithauser
Associate Editor: Ryan Oremland
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