Telecommunications Reports - January 22, 2001

Bush Expected To Act Soon To Fill FCC Chair; Transition Team Discusses Agency 
Changes
FCC Focuses on International Detariffing, Intercarrier Compensation in 
Biennial Review
Furchtgott-Roth Says Departure Of Kennard Won't Bring Deadlock
Time Warner Telecom, Inc., intends to raise as much as $700 million...
UWB Operations Feasible In 3-6 GHz Band, NTIA Says
Angelos Amends Lawsuit Against Wireless Industry
NTIA Proposes Reimbursement Procedures For Relocated Government Spectrum Users
Antenna-Rule Violations Prompt Proposed Forfeitures of $327K
Fifth Circuit Joins Chorus On State Immunity Issue
AeA Seeking Federal Preemption Of Multiple State Privacy Laws
Libraries Mull Legal Challenge To New Internet-Filtering Law
Think Tank Slams City Telecom Efforts
Verizon Adds Data To Boost Massachusetts InterLATA Bid
Bureau Proposes SBC Pay $94K For Violating Collocation Rules
FCC Gets `Ahead of the Curve' With Inquiry on Interactive TV
Analysts See Shifting Alliance As BellSouth Sells Qwest Stock
Blaming Verizon for Bankruptcy, NorthPoint Plans Asset Auction
Qwest Touts Line-Sharing Pacts, Improved Service
WorldCom To Pay Users $88M To End Overcharging Lawsuit
Court Rejects AT&T's Appeal In Reseller Discrimination Case
One Step from Bankruptcy, Globalstar Stops Debt Payments
`Creative Financing' Seen As Asian Network Necessity 
Three Carriers Join Forces On European Wireless Data
Portugal Telecom Eyes Brazil As Fertile Ground for Expansion
Intelsat Plans Technical, Regional `Flexibility' 
WorldCom, Intermedia Need State OKs, Face Digex Lawsuit
Rhythms Trims Workforce, Operations To Reduce Losses
Level 3, SBC Reach Agreement On `Recip Comp' Rate Scheme
TMI, Motient To Unite Assets, Focus On Wholesale Services
New Entrants Will Prolong IXC Price Wars, Analysts Say
Report Offers Road Map To E-government Security
Motorola, Inc., says it will stop making mobile phones at its Harvard, Ill., 
facility...
FCC Suggests Streamlining Carrier-Change Process
Verizon Wireless Asks FCC To Delay 700 MHz Band Auction
Ex-RSA Cellular Licensee Meets Judicial Skepticism
The Broadband Wireless Internet Forum has released two technical papers...
Viatel To Cut Workforce, Phase Out Most Voice Service
CLECs Seek Cautious Approach to Regulating Their Access Fees; AT&T, WorldCom 
Want Caps
U.S. Telecom Revenues
Proposal To Streamline Service-Quality Reporting Gets Booed from All Sides; 
Some Question Timing
Time Warner Telecom, Inc., will be the first carrier...
NECA DSL Tariff
Rohde:  Spectrum Management Holds Key Challenge for Future
`Datacasting' License Caps To Be Imposed in Australia
Nigerian Sale Yields $855M For Three Cellular Licenses
BT To Prioritize Local Loop Unbundling in Top Exchanges
Court Allows Mobile Phone Lawsuit To Continue
Notes on the News. . .
Regulatory & Government Affairs
Industry News
FCC Reauction
Infostrada Acquisition
Interconnection Dispute
What's Ahead. . .
NTCA Makes Push for MAG Plan, Lifting Caps on Universal Service
Executive Briefings

Bush Expected To Act Soon To Fill FCC Chair; Transition Team Discusses Agency 
Changes

With most of his decisions regarding top cabinet-level positions out of the 
way, President Bush is expected to begin shifting his attention to selecting 
lower-level political appointees, including the FCC chairman and the 
administrator of the National Telecommunications and Information 
Administration (NTIA).

Late last week speculation was rife that a decision on the FCC top spot was 
imminent, with a handful of insiders even predicting that a new chairman 
could be appointed over the inaugural weekend or at the beginning of this 
week.

One factor that several GOP insiders say could spur quick action from the 
White House is the prospect of having Democratic Commissioner Susan Ness 
assume the chairman's duties.  As the most senior Commissioner at the FCC, 
Ms. Ness would slide into that role absent an interim appointment by the 
president, notes one longtime FCC observer.  "And that just doesn't sit too 
well with a Republican administration," the source said.

Most Washington insiders expect Commissioner Michael K. Powell to be named 
interim chairman, as no Senate confirmation is needed for a sitting 
Commissioner to assume that post.  "Mr. Powell is viewed by many as someone 
who can get the FCC up and running without a learning curve," an industry 
source told TR.

But the question of who gets the permanent FCC job has been the topic du jour 
for most telecom industry watchers.  Sources say Texas Public Utility 
Commission Chairman Patrick H. Wood III has been positioning himself for that 
role, but Mr. Powell also is considered a front-runner for the position if he 
wants it.

Under one scenario floated by a GOP insider, President Bush would name Mr. 
Powell interim chairman and then, later on, nominate Mr. Wood as permanent 
chairman and a new Democrat to replace Ms. Ness.  Ms. Ness' term expired in 
June 1999; she currently is serving under a recess appointment that 
then-President Clinton made late last month (TR, Dec. 25, 2000).  She may 
continue in her position until a replacement is nominated by President Bush 
and confirmed by the Senate, or until the end of the current congressional 
session.

L. Ari Fleischer, a Bush transition team spokesman who was slated to become 
White House spokesman after the inauguration, gave few clues during a Jan. 19 
press briefing about where the incoming administration stood on naming new 
agency heads.  Asked by TR whether a timetable had been developed for 
appointing a new FCC chairman, Mr. Fleischer replied,  "That will happen in 
due order as those announcements are ready."

A spokesman at the Commerce Department's NTIA said former Administrator 
Gregory L. Rohde hadn't made any decisions about his future plans.  As a 
political appointee under former President Clinton, Mr. Rohde stepped down 
from his post last Friday.

"The wireless community wanted him to stay on at NTIA to help oversee the `
3G' [third generation] initiative, but so far there's been no indication" 
that President Bush plans to renominate Mr. Rohde to be NTIA administrator, 
the NTIA spokesman told TR. 

Mentioned as possible candidates to succeed Mr. Rohde at NTIA are Earl 
Comstock, a partner at the Washington law firm of Sher & Blackwell and a 
former aide to Sen. Ted Stevens (R., Alaska); James Derderian, former House 
Commerce Committee staff director and a member of the NTIA transition team; 
and Kevin Martin, who oversaw communications policy issues for the Bush 
transition team.

FCC Transition Team Gathers

A Jan. 17 meeting of the Bush administration's FCC transition team may have 
failed to produce a name and a timetable for replacing Mr. Kennard.  But 
numerous industry participants described the meeting as a productive first 
step in smoothing out some of the rough edges at the FCC-particularly the 
pace at which the Commission makes decisions and its role in reviewing 
mergers.

Participating in the Jan. 17 meeting, sources say, were nearly all of the FCC 
"transition advisory team" members (TR, Jan. 15) and officials from the Bush 
administration's "in-house" transition team:  Mr. Martin; former Rep. Bill 
Paxon (R., N.Y.), who is chairman of the transition advisory committee; and 
Rebecca Armendariz, project director-FCC transition team.

Speaking briefly with TR last week, Ms. Armendariz described the meeting as "
good" and "productive" and said it was the "first and last" time that the FCC 
advisory team would meet with Bush transition officials.  Ms. Armendariz also 
reported that the FCC advisory team had grown to a total of about 42 members, 
which is "six to eight" more than was posted on the Bush-Cheney transition 
Web site (http://www.bushcheneytransition.com) as of Jan. 19.

An advisory team member who didn't want to be identified said the meeting 
lasted about one and a half hours and mostly focused on changes in general 
FCC procedures.  "There wasn't much time for a lengthy discussion on specific 
points, and they didn't mention any names" of potential chairman nominees, 
the source said.  "But there was a sense that things need to be speeded up at 
the FCC, and [that] there ought to be less FCC involvement in the 
merger-review context," the source reported.

Meanwhile, documents circulated among the FCC advisory team members show the 
Bush transition team sought feedback from the advisers on the following six 
subjects:  (1) the top five issues facing the FCC; (2) what rules and/or 
policies are in most need of reform; (3) what management, administrative or 
procedural issues need to be addressed; (4) what can be done to expedite the 
FCC's decision-making process; (5) what significant challenges will the new 
administration and FCC face with respect to Congress, public perceptions, or 
the press; and (6) what organizational changes should be considered early in 
the new administration.

Participants in last week's meeting were given a chance to go over papers 
containing their FCC "wish lists," sources report, and the Bush transition 
team "seemed to be interested and listening."  Still, one source described 
the meeting as "light on substance" and doubted whether "anyone had even read 
our paper yet." 

Jay Kitchen, an FCC advisory team member and president and chief executive 
officer of the Personal Communications Industry Association, told TR he was 
encouraged that finding more spectrum for third-generation (3G) technology "
was near the top of everybody's list."  

PCIA's paper to the Bush team stressed the need to "speed up the tower-siting 
process" and ensure that wireless carriers "receive all the interconnection 
rights they are due under" the Telecommunications Act of 1996, Mr. Kitchen 
said.

Progress & Freedom Foundation fellow Randolph J. May, also a member of the 
FCC advisory team, called the Jan. 17 meeting "productive" and said it gave 
the Bush transition team a "good chance to offer their views on what they 
thought were the most important and pressing" issues at the FCC.  "At the top 
of my list," Mr. May told TR, "was changing the strategic focus of the FCC 
toward becoming a market deregulator."

SBC Communications, Inc., recently submitted a paper to the Bush team 
recommending, among other things, "closing the reciprocal compensation 
loophole" and "ensuring that the marketplace regulates broadband Internet 
service," an SBC spokesman told TR.

SBC also proposed eliminating the "duplicative review of mergers" that 
carriers face at the FCC and Department of Justice.  But SBC didn't specify 
which review should be phased out.  "That's the policy question that needs to 
be answered by the new administration," he said.

Even telecom interests that weren't represented on the FCC transition 
advisory team have forwarded their telecom agendas to the Bush 
administration.  

In a letter sent to President-elect Bush on Jan. 18, the National Telephone 
Cooperative Association advised him to appoint FCC commissioners who "
understand rural America" and give "considerable thought to rural 
representation" at NTIA.

The Association for Local Telecommunications Services has submitted a paper 
calling the "the failure" of incumbent local exchange carriers (ILECs) to 
open their networks one of the "three greatest market failures that stymie 
full, effective competition."

"According to the FCC, after almost five years, the ILECs have opened their 
networks to competitors in only two states," ALTS wrote.  "As a result, 
[competitive local exchange carriers] have great difficulty interconnecting 
with the Bell company networks to provide advanced services."

The Cellular Telecommunications & Internet Association has had "extensive 
conversations" with the Bush team about spectrum management issues, wireless 
location privacy principles, repealing the 3% federal excise tax on telephone 
bills, and moving from intercarrier compensation for wireless calls to a "
bill-and-keep" regime, a CTIA spokesman told TR last week.

-Ryan B. Oremland

FCC Focuses on International Detariffing, Intercarrier Compensation in 
Biennial Review

The FCC has asked its staff to prepare proposals to eliminate or streamline a 
broad range of Commission rules, including those governing intercarrier 
compensation for terminating telecom traffic, wireless licensing terms and 
renewals, and international service tariffs for nondominant interexchange 
carriers.

The FCC issued its directives in a report released Jan. 17 in Common Carrier 
docket 00-175.  The biennial regulatory review provisions of the 
Communications Act of 1934 require the agency in even-numbered years to 
decide whether given rules remain in the public interest, the FCC said.  

The FCC doesn't have to take final action repealing or modifying the rules in 
the even-numbered years, it said.

The latest FCC directives reflect staff recommendations outlined in a revised 
version of the September 2000 staff report on the biennial regulatory review 
(TR, Sept. 25, 2000).  The FCC wants the Common Carrier Bureau to prepare 
rulemaking notices on the following:

   Identifying alternative approaches to inter-carrier compensation "that 
are more consistent with the long-term development of competition";

   Excluding rural telcos from the requirements that independent incumbent 
local exchange carriers provide interexchange service through separate 
subsidiaries;

  Simplifying FCC review of the "average schedules" used in determining 
certain telcos' costs and shares of the National Exchange Carrier 
Association, Inc.'s revenue pools; and

  Changing the schedule for NECA board elections to reduce the 
administrative costs of the association, which was created by FCC directive 
to maintain access charge tariffs for many local exchange carriers.

The International Bureau will prepare rulemaking notices to initiate the 
following streamlining efforts:

  Extending the detariffing regime adopted for domestic interexchange 
services to the international services of nondominant interexchange carriers, 
"including commercial mobile radio service providers and U.S. carriers 
classified as dominant solely because of foreign affiliations";

 Further streamlining the earth station and space station licensing 
processes;

 Requiring electronic filing of applications for earth station licenses, to 
save processing time;

 Expanding the availability of pro forma transfers of control and 
assignments of international facilities authorizations under section 214 of 
the Communications Act of 1934; and 

 Reducing the reporting burdens for international telecom carriers.

The FCC asked the Wireless Telecommunications Bureau to prepare rulemaking 
notices to pursue the following streamlining goals:

 Considering whether to eliminate restrictions "on the aggregate amount of 
broadband PCS (personal communications service), cellular, and specialized 
mobile radio spectrum that an entity can hold in any market";

 Extending license terms beyond 10 years and implementing automatic or 
default renewal procedures to avoid late-filing problems;

 Considering partially privatizing the site-by-site, frequency-by-frequency 
licensing process for the private and common carrier microwave services;

 Bringing the technical and operational rules-including radiated power 
restrictions-for cellular service, PCS, and general wireless communications 
service into conformity with each other;

 Considering whether any of its part 22 (cellular) rules are obsolete as a 
result of competitive or technological developments; and

 Bringing its radio frequency emission regulations into compliance with the 
International Telecommunication Union's radio regulations.

And the Commission asked its Office of Engineering and Technology to prepare 
rulemaking notices to address the following issues:

 Clarifying a variety of equipment authorization rules and eliminating 
ambiguities in equipment test procedures, including authorization procedures 
for transmitters that operate both in the U.S. and overseas; and

 Reviewing the emission limits on devices that operate in spectrum above 2 
gigahertz.

The FCC also agreed with a staff recommendation that when it evaluates new 
rules, it should use criteria similar to that used in the biennial review to 
evaluate existing rules.  It stopped short, however, of adopting any criteria 
in binding rules or procedures.

The FCC rejected a proposal the U.S. Telecom Association had offered in 
comments on the September staff report (TR, Oct. 16, 2000).  USTA had asked 
the FCC to set a firm time limit for acting to eliminate rules identified as 
unnecessary during biennial reviews.

Citing the need to make the best use of its limited resources and to retain 
flexibility, the FCC directed all bureaus and offices "to prioritize 
rulemaking proceedings stemming from this biennial review on the basis of 
various public policy considerations and a comprehensive evaluation of 
comments received" in response to the planned rulemaking notices.

Issuing a separate statement, Commissioner Harold W. Furchtgott-Roth said the 
FCC shouldn't view the biennial reviews as "a burden to be endured or a hoop 
through which we must dutifully jump every other year."  He added, "As the 
Commission moves forward, it is my sincere hope that we will devote 
full-time, year-round staff to this endeavor.

Furchtgott-Roth Says Departure Of Kennard Won't Bring Deadlock

Although the departure of FCC Chairman William E. Kennard leaves the agency 
temporarily with four members-two Republicans and two Democrats-Commissioner 
Harold W. Furchtgott-Roth doesn't expect the agency to be deadlocked.

"A lot is made about the political divisions" at the FCC, he said Jan. 18 
during his monthly briefing with reporters.  "But I really don't see it at 
all."

About 90% of the FCC's votes over the past three years have been unanimous, 
Mr. Furchtgott-Roth said.  Only about 2% or 3% have been 3-2 votes, he 
estimated.  So it's unlikely that many votes will be deadlocked with the two 
Republicans-Mr. Furchtgott-Roth and Michael Powell-voting against Democratic 
Commissioners Susan Ness and Gloria Tristani, he said.

Mr. Furchtgott-Roth commended then-Chairman Kennard for not trying to push "
11th-hour" initiatives before leaving the agency.  "A lot of people were 
worried that some things might be railroaded through," he said.  "Chairman 
Kennard has been very principled about this, not trying to do a lot of 
11th-hour rules."

Meanwhile, Mr. Furchtgott-Roth said, the FCC had made "significant progress" 
in its second "biennial review" of its regulations.  The Telecommunications 
Act of 1996 directs the FCC to review its regulations every two years and to 
eliminate or revise any rules that are no longer necessary or in the public 
interest.  

Last week, the FCC issued a report on what rule changes it would propose as a 
result of its second biennial review (see separate story).

The report represents a "substantial improvement over the really pathetic 
effort that was done two years ago" when the agency conducted its first 
biennial review (TR, Jan. 4, 1999), Mr. Furchtgott-Roth said.

Mr. Furchtgott-Roth also reiterated his complaints about the FCC's 
coordination with other agencies in reviewing mergers and related license 
transfers.  Regarding the proposed Deutsche Telekom AG-VoiceStream Wireless 
Corp. merger, Mr. Furchtgott-Roth disagreed with the FCC's decision to put 
its review on hold while the U.S. Department of Justice and the Federal 
Bureau of Investigation probe national security concerns (TR, Dec. 25, 
2000).  

He said it would be inappropriate for the FCC to impose conditions on the 
merger that are requested by DoJ and FBI.  That, however, has been the FCC's 
practice in past merger reviews, he said.

Time Warner Telecom, Inc., intends to raise as much as $700 million...

Time Warner Telecom, Inc., intends to raise as much as $700 million through 
the sale of stock and debt securities to help pay for its acquisition of GST 
Telecommunications, Inc.  Time Warner Telecom, of Littleton, Colo., revealed 
its plan in a filing with the Securities and Exchange Commission.  The funds 
would be used to repay an unsecured bridge loan that was used to pay for GST, 
Time Warner Telecom said.  Further details of the fundraising effort will be 
disclosed in future filings, it said.  Time Warner Telecom recently completed 
the $690 million acquisition of GST, a competitive local exchange carrier 
that was in bankruptcy (TR, Sept. 18, 2000).

UWB Operations Feasible In 3-6 GHz Band, NTIA Says

Ultrawideband (UWB) devices likely can operate in spectrum between 3 and 6 
gigahertz without harming incumbent users, including fixed satellite service 
(FSS) operators, according to test results released last week by the National 
Telecommunications and Information Administration.  But NTIA said that steps 
to mitigate interference probably would be necessary.

NTIA has been studying the interference potential of UWB devices since last 
year as part of a rulemaking proceeding launched by the FCC to explore 
allowing UWB devices to operate on an unlicensed basis under part 15 of its 
rules (TR, Nov. 6, 2000).

Separate tests of UWB devices' effect on Global Positioning System (GPS) 
receivers are expected to be released next month.  The test results released 
last week involved only non-GPS operations.

Results Will Aid Decision Making

NTIA Administrator Gregory L. Rohde said at a Jan. 18 news conference that 
the test results "will form the basis of negotiations between NTIA and the 
FCC to develop a final rule that will permit the development and availability 
of ultrawideband technologies."

UWB devices use precisely timed pulses of radio frequency (RF) energy spread 
across a wide swath of spectrum at extremely low power.  Proponents of the 
technology have hailed its potential in myriad applications, including law 
enforcement, fire and rescue services, the military, medicine, education, and 
home and office local area networks (TR, Sept 18, 2000).  They say it won't 
interfere with existing systems.

But aviation groups, the GPS and satellite industries, and others have 
expressed concern that the devices could interfere with existing systems.  
They've asked the FCC to hold off approving their use until tests show they 
won't cause such interference.

In its tests, NTIA assessed the interference potential of five UWB devices on 
federal air-route surveillance radar, airport surveillance radar, and air 
traffic control beacon systems.

Based on the results of those tests, NTIA engineers developed mathematical 
models to analyze the impact of UWB devices on nine other systems, including 
those operating between 3100 and 5650 megahertz, or 3.1 and 5.65 GHz.  The 
tests indicated UWB devices could operate in that range, although limits 
might need to be placed on power levels, distance, and pulse-repetition 
frequency.  However, there's a question about whether UWB devices would have 
a "big enough window" to operate if restrictions are imposed, Mr. Rohde said.

Among those operating in that spectrum are FSS users (3.7-4.2 GHz), microwave 
landing services (5.03-5.091 GHz), and Doppler weather radar (5.6-5.65 GHz).  
For FSS systems, "the worst-case situation" with regard to interference "
would occur for receivers located at ground level with a low antenna 
elevation angle of 5 degrees,"  NTIA's report said.  There would be much less 
interference potential for FSS systems on tops of buildings or with higher 
elevation angles, it said.

"However, at this time uncertainty exists as to the effect of UWB signal duty 
cycle on the performance of FSS earth stations which have digital signal 
processing," the report said.  "This information would assist in establishing 
the UWB signal peak power limit; NTIA study is continuing on this important 
consideration."

Regarding microwave landing services, UWB operations at power limits 
currently permitted for part 15 devices may exceed the receiver interference 
protection standard.  More analysis of the effect on such systems is needed, 
NTIA said.

Tests on systems operating between 900 and 1610 MHz and 1610-3100 MHz 
suggested there could be significant interference problems with incumbent 
systems, NTIA officials said at the news conference.

But NTIA's report indicated that UWB operations below 3.1 GHz were possible.  
It said that while UWB operations in that spectrum "will be quite 
challenging," mitigating factors "could relax restrictions" on UWB devices.

It also said that UWB emission levels would have to be significantly reduced 
to guard against interference.  And it concluded that further studies are 
needed to assess degradation of existing systems, as well as relative levels 
of noise, interference, and "clutter signals."

Mr. Rohde said NTIA engineers used existing standards for determining the 
potential interference of UWB devices.  "Obviously this is going to be an 
area that'll be the subject of a lot of debate. . .as to what really is the 
criteria that determines interference," he added.

Findings Draw Praise

NTIA's test results drew praise from the UWB industry.  Officials of Time 
Domain Corp., a leading marketer of UWB technology, said they were still 
reviewing NTIA's findings.  But they indicated they were happy the tests 
showed the devices could share non-GPS spectrum.

"While we have questions regarding some of the conclusions made by NTIA, we 
are pleased that the test results confirm that compatible operation of UWB 
devices with government services is possible," said Jeffrey L. Ross, Time 
Domain's vice president-corporate development and strategy.  "We have full 
confidence that the FCC will impose appropriate regulations and power limits, 
and look forward to the FCC's timely completion of its rulemaking," he added.

Last year, Time Domain questioned NTIA's testing methods, saying they must 
reflect real-world conditions to be accurate (TR, Sept. 4, 2000).

Another developer of UWB devices, Fantasma Networks, Inc., also hailed the 
test results.  "We are confident that our deployment of ultrawideband 
[devices] does not pose a threat of harmful interference to public safety 
agencies or to any other user of the radio spectrum," said Roberto Aiello, 
Fantasma's chief technology officer.

Angelos Amends Lawsuit Against Wireless Industry

As expected, noted plaintiffs' attorney Peter G. Angelos has entered the 
legal fray against the wireless industry over the safety of mobile phones.  
Mr. Angelos has filed an amended lawsuit on behalf of a Maryland doctor who 
claims that using a mobile phone caused his brain tumor (TR, Aug. 7 and Dec. 
25, 2000).

The lawsuit, filed last week in the U.S. District Court in Maryland, seeks 
$375 million in compensatory damages and $750 million in punitive damages.

The lawsuit says the industry failed to conduct adequate testing on the 
health effects of mobile phones and warn consumers about known risks.  The 
industry "manipulated the results of other testing, concealed evidence that 
[mobile phone] radiation is harmful and suppressed scientific and medical 
research," the lawsuit alleges.

According to the lawsuit, the medical and scientific communities have been 
aware of the biological effects of radio frequency (RF) exposure since the 
1920s.  The wireless industry was or should have been aware of evidence of 
such health hazards, the lawsuit alleges.

Michael F. Altschul, vice president and general counsel of the Cellular 
Telecommunications & Internet Association, which is named in the lawsuit, 
said he hadn't seen the amended complaint.

"Regardless of who the lawyer is. . .the legal requirements remain the same," 
Mr. Altschul said.  The plaintiffs have to show a link between RF radiation 
exposure and cancer, he said, and "that science just isn't there."  Spokesmen 
for Motorola, Inc., and Verizon Communications, Inc., which also are named as 
defendants, have made similar points.

Last week's amended lawsuit, Christopher J. Newman et al. v. Motorola, Inc., 
et al. (case no. CCB-00-2609) was filed after U.S. District Judge Catherine 
C. Blake last month dismissed a number of the counts in the original filing 
but gave the plaintiffs permission to amend their complaint.  The wireless 
industry had succeeded in moving the case from Baltimore City Circuit Court 
to federal court.

Mr. Angelos, owner of the Baltimore Orioles, has won major cases against the 
asbestos industry and represented Maryland in litigation against the tobacco 
industry.  John A. Pica, a lawyer in Mr. Angelos' Baltimore firm, has been 
quoted saying Mr. Angelos plans to file 10 lawsuits this year against the 
wireless industry.  Messrs. Angelos and Pica could not be reached for comment.

Bob Gordon, a consultant to Baltimore attorney Joanne Lynch Suder, who filed 
the original lawsuit on behalf of the Maryland doctor, said Mr. Angelos 
agreed to be the co-counsel in a number of cases that Ms. Suder planned to 
file against the phone industry.  Lawyers around the country also are working 
on the planned litigation, he said.

Meanwhile last week, German researchers said there could be a link between 
the use of mobile phones and cancer of the inner eye.  The results were 
published in the January issue of the research journal Epidemiology.

But the researchers, who interviewed 118 subjects with eye cancer and a 
control group of 475 people, said their findings were inconclusive because of 
the study's limitations.  In a statement, CTIA cited those limitations and 
the small size of the study group.

NTIA Proposes Reimbursement Procedures For Relocated Government Spectrum Users

The National Telecommunications and Information Administration is proposing 
procedures for relocating federal government spectrum incumbents to other 
bands to make way for commercial users.  Among the issues to be decided are 
the circumstances under which incumbents will be required to relocate and 
which relocation costs will be eligible for reimbursement.

NTIA Administrator Gregory L. Rohde said the rules could bolster a high-level 
effort to identify and allocate spectrum for third-generation (3G) wireless 
services.  Then-President Clinton launched the initiative by executive 
memorandum in October 2000 (TR, Oct. 16, Nov. 6, and Nov. 20, 2000; and Jan. 
8).

As part of that effort, NTIA is studying the possible use of the 1755-1850 
megahertz band, which is used heavily by the Defense Department.  The FCC is 
analyzing use of the 2500-2690 MHz band, which is used mostly by multichannel 
multipoint distribution service and instructional television fixed service 
operators.

NTIA's proposed rules would cover such future reallocations, Mr. Rohde said 
at an industry-government meeting on the 3G plan last week.  He said he hoped 
the final rules would be released this summer.

The National Defense Authorization Act for fiscal year 1999 required private 
entities to reimburse federal spectrum users for the cost of relocating or 
modifying their systems because of reallocation.  The notice of proposed 
rulemaking NTIA released Jan. 17 suggests ways to implement that mandate.  
Comments are due March 19 with replies due April 18 in docket no. 
001206341-0341-01.

In its rulemaking notice, NTIA seeks comments on whether federal government 
spectrum incumbents should be required to relocate if sharing is technically 
possible in their present bands.

If the incumbents are not required to relocate, under what conditions should 
they be permitted to remain in their current bands and who would pay for any 
system modifications that would improve spectrum sharing? NTIA asks.  For 
example, it asks, should the federal incumbent be allowed to stay in the band 
on a noninterference basis with 3G systems?

NTIA suggests that federal incumbents not be forced to relocate until a "
comparable facility" is available for a reasonable period of time.  It 
defines comparable facility as one that has the same or superior operational 
capabilities as the original spectrum.  NTIA suggests using four factors to 
determine comparability:  (1) communications throughput, (2) system 
reliability, (3) operating costs, and (4) operational capability.  It seeks 
comments on its definition and whether the four factors are sufficient.

NTIA outlines which relocation costs should be eligible for reimbursement.  
It also suggests a process for resolving differences over those costs, 
including a mandatory negotiation period, third-party mediation, and 
nonbinding arbitration.

NTIA seeks comments on what type of cost-sharing plan to adopt and asks 
whether a "band manager" or some other entity should serve as a clearinghouse 
to administer the plan.  And it wants input on whether it should "sunset" a 
cost-sharing plan five years after any auction of former government 
spectrum.  The rulemaking notice also seeks comment on how to treat spectrum 
with classified frequency assignments.

At the direction of the Omnibus Budget Reconciliation Act of 1993 and the 
Balanced Budget Act of 1997, NTIA identified 255 MHz of spectrum that can be 
reallocated from federal government to private use.  The bands identified for 
which federal incumbents would qualify for reimbursement are 216-220 MHz, 
1432-1435 MHz, 1710-1755 MHz, and 2385-2390 MHz.

The FCC has proposed allocating the 1710-1755 MHz band for 3G services.  In 
addition, Mr. Rohde said the reimbursement rules would apply to the 1755-1850 
MHz band if federal incumbents there are relocated under the 3G initiative.

Rohde Uncertain of Effort's Future

At last week's 3G meeting, Mr. Rohde said he didn't know if the Bush 
administration would make any changes to the 3G effort, which is operating on 
a tight schedule that calls for the FCC to issue licenses for 3G spectrum by 
Sept. 30, 2002.  But he said he had stressed its importance in his dealings 
with Bush transition team staff members.  "I can't predict what's going to 
happen" beyond Inauguration Day, Mr. Rohde told reporters.

The Bush transition team staff member responsible for NTIA, James Derderian, 
a former Republican staff director of the House Commerce Committee, couldn't 
be reached for comment.  But at his confirmation hearing for Commerce 
secretary earlier this month, Donald L. Evans said the Bush administration 
was committed to finding 3G spectrum (TR, Jan. 8).

Industry Expresses Frustration

At last week's meeting, several industry representatives expressed 
frustration that they didn't have access to data they said they needed to 
make recommendations on use of the 1755-1850 MHz and 2500-2690 MHz bands in 
time for NTIA and the FCC to consider.  Industry representatives in 
NTIA-established working groups are reviewing the bands.

The 3G initiative calls for final reports on the two bands to be released in 
March, with the FCC issuing an order allocating the selected spectrum in July.

Rick Kemper, director-wireless technology and security for the Cellular 
Telecommunications & Internet Association, said determining the cost of 
relocating incumbents or whether band sharing or segmentation was feasible 
requires information on how many systems operate in the frequencies and how 
they are being used.  But he said that data wasn't available.

Donald Brittingham, director-wireless policy for Verizon Wireless, said he 
was concerned that the final band studies wouldn't reflect all the industry's 
input.  He urged the regulators to delay releasing the reports.

"One concern is we're going to do a lot of work and in the end it will be too 
late to be included in your final report," added Joanne C. Wilson, 
director-global public affairs for Lucent Technologies, Inc.

Frederick R. Wentland, NTIA's director-spectrum plans and policies, said some 
information wouldn't  be available until the final band studies were 
released.  "Unfortunately, time happens to be our enemy here," Mr. Wentland 
added.

But he urged industry officials to continue participating in the process, 
including filing comments in response to the FCC's recent notice of proposed 
rulemaking on 3G spectrum (TR, Jan. 8).

Diane J. Cornell, associate chief of the FCC's Wireless Telecommunications 
Bureau, said the current process was designed "to crystalize the issues," and 
she urged industry engineers to focus on technical issues concerning band 
sharing and segmentation.

Ms. Cornell also said industry should submit comments in response to NTIA's 
notice and an FCC rulemaking notice released in November 2000 suggesting 
allocations for 27 MHz of spectrum transferred from government to private use 
(TR, Nov. 27, 2000).

After the final band studies are released in March, she said, "I expect there 
will be differences of perspectives."  She said industry officials would get 
another chance to submit comments after that.

Antenna-Rule Violations Prompt Proposed Forfeitures of $327K

The FCC and its Enforcement Bureau have proposed that two wireless carriers 
and two tower companies pay $327,000 for violations of its antenna rules.

The largest proposed forfeiture was against American Tower Corp. for 36 
violations in 14 states and Washington, D.C.  The FCC has ordered the 
Enforcement Bureau to conduct a more thorough investigation of American Tower'
s compliance with its rules.

Separately, the Enforcement Bureau proposed an $80,000 forfeiture against 
Telecorp Communications, Inc.; an $18,000 forfeiture against AT&T Wireless 
Services, Inc.; and an $17,000 forfeiture against SpectraSite Corp.

In a notice of apparent liability for forfeiture, the FCC said American Tower 
failed to (1) properly light an antenna during construction, (2) register two 
existing antennas, (3) notify the agency of ownership changes involving 24 
antennas, and (4) post registration numbers on nine antennas.

"We are concerned that ATC continues to violate our rules despite both oral 
and written warnings regarding the Commission's antenna structure 
requirements," the FCC said in its Jan. 16 forfeiture notice.  It said more 
than half of American Tower's 36 violations were uncovered after a July 2000 
meeting between FCC field agents and American Tower officials.

In separate notices released the same day, the Enforcement Bureau found that 
Telecorp failed to light antennas properly on four occasions and that AT&T 
Wireless failed to post antenna registration numbers on nine occasions.  It 
also found that SpectraSite failed to post antenna registration numbers on 
four occasions and failed to notify the FCC of ownership changes on three 
occasions.  The violations were discovered by FCC field agents during routine 
investigations and inspections.

Russell Wilkerson, director-corporate affairs for TeleCorp PCS, Inc., told TR
, "We're talking to our folks in the field. . .to compare the cases by the 
FCC and some of their findings and then we will respond to them."  He added, "
We make it a practice to follow the FCC rules and regulations."  Spokesman 
for the three other companies could not be reached for comment.

Fifth Circuit Joins Chorus On State Immunity Issue

The U.S. Court of Appeals for the Fifth Circuit (New Orleans), echoing three 
other appellate circuits, has ruled that the U.S. Constitution doesn't 
protect state utility commissions from federal judicial review of their 
decisions regarding carrier interconnection agreements.

In a two-to-one decision issued Jan. 16, the Fifth Circuit rejected 11th 
Amendment immunity claims raised by the Louisiana Public Service Commission 
during proceedings stemming from a lawsuit filed by AT&T Corp.  AT&T was 
challenging the PSC's 1997 arbitration decision regarding its interconnection 
agreement with BellSouth Telecommunications, Inc.

Section 252 of the Telecommunications Act of 1996 directed state commissions 
to review, approve, and, when necessary, arbitrate carrier interconnection 
agreements.  The Act also says that parties aggrieved by state commission 
determinations in carrier interconnection proceedings can ask the appropriate 
federal district court to the review the carrier agreement.

In AT&T Communications v. BellSouth Telecommunications, Inc., et al. (case 
no. 99-30421), the Fifth Circuit reversed a ruling by the U.S. District Court 
in Baton Rouge.  The lower court had held that the 11th Amendment to the U.S. 
Constitution prohibited such lawsuits against state agencies or employees.  
(AT&T had named the PSC and its individual commissioners in the lawsuit).

The 11th Amendment grants states immunity from being sued in federal courts.  
But states may lose that immunity under an exception carved out by the U.S. 
Supreme Court in its 1908 decision in Ex parte Young.  The Ex parte Young 
doctrine allows lawsuits against state employees in order to prevent ongoing 
violations of federal law.

The Fifth Circuit found that the PSC and the commissioners had waived their 
constitutional sovereign immunity rights by agreeing to arbitrate the 
interconnection dispute under the provisions of the 1996 Act.  The court also 
ruled that the Ex parte Young doctrine applied to AT&T's request for 
prospective injunctive relief from PSC arbitration rulings that AT&T had 
argued contravened the interconnection requirements of sections 251 and 252 
of the Act.

The appeals court reversed the district court's ruling and remanded the case 
for further proceedings.  Circuit Judge James L. Dennis wrote the opinion and 
was joined by Judge Henry A. Politz.  Judge Jerry E. Smith dissented from the 
majority's opinion.

Finding Echoes Other Circuits

Appeals courts in the Sixth, Seventh, and 10th Circuits already have held 
that the Ex parte Young exception applies to federal court challenges to 
state commission decisions affecting carrier interconnection agreements (TR, 
April 5 and Oct. 25, 1999; and Jan. 24, June 26, and July 31, 2000).  Last 
fall, the U.S. Supreme Court refused to review the issue in a case arising in 
the Sixth Circuit (TR, Oct. 9, 2000).

In his dissent, Judge Smith cited the U.S. Supreme Court's 1996 decision in 
Seminole Tribe v. Florida.  Under that ruling, he said, Congress' referral of 
disputes surrounding state commission-arbitrated interconnection agreements "
supplants" a party's ability to sue the state commission under the 1908 
Supreme Court decision in Ex parte Young.  But, he added, Congress' referral 
of such disputes to the federal courts violates the 11th Amendment to the 
Constitution.

The Chicago-based Seventh Circuit rejected a similar argument last year in 
which state utility commissioners had invoked Seminole Tribe (TR, July 31, 
2000).

AeA Seeking Federal Preemption Of Multiple State Privacy Laws

Lawmakers in the 107th Congress should make federal preemption of multiple 
state privacy laws "one of the top legislative concerns" for the coming 
session, according to AeA, formerly the American Electronics Association.  
Federal privacy legislation "should play a crucial role" in maintaining 
consistency and certainty" in the marketplace, said William T. Archer, AeA's 
president and chief executive officer.

Mr. Archer warned, however, that "poorly crafted legislation" could have the 
unintended effect of "imposing burdensome, impractical new requirements" on 
e-commerce and Internet businesses.  "Only the federal government is in a 
position to create uniform U.S. privacy standards and work for international 
harmonization," he said.  "Otherwise, online business could face 50 
conflicting sets of privacy rules.  Consumers and businesses alike would 
lose."

AeA urged lawmakers Jan. 18 to consider its "privacy principles" in drafting 
federal preemption legislation.  The principles recommend creating uniform, 
technology-neutral national standards to protect privacy.  

AeA wants standards to require merchants to notify consumers of 
information-collection practices, while allowing them to "opt out of the use 
or disclosure" of information if it's unrelated to the initial transactions 
between consumers and merchants.

The AeA principles also urge lawmakers to build on private-sector privacy 
seal programs and privacy codes while relying on the Federal Trade Commission'
s existing authority to enforce data-collection notice requirements. 

Libraries Mull Legal Challenge To New Internet-Filtering Law

The American Library Association (ALA) has been given the green light from 
its executive board to launch a court challenge of the Children's Internet 
Protection Act (CIPA)  The law passed last year (TR, June 12, 2000) requires 
schools and libraries to install Internet- filtering software if they use 
federal funds-such as universal service "E-rate" support-to purchase 
computers or connect to the Internet.

ALA said its executive board had authorized the legal action "after more than 
a week of intense discussions among leaders and members during the 
association's annual midwinter meeting."  

ALA announced Jan. 18 that it was "researching and exploring its options in 
preparation for litigation," as it believes the law infringes on freedoms 
guaranteed by the First Amendment to the U.S. Constitution.  

The First Amendment protects free exercise of religion, free speech, freedom 
of the press, freedom to assemble, and freedom to petition the government for 
redress of grievances.

The Internet-filtering requirements would affect three federal funding 
streams that libraries frequently use to purchase computer equipment or 
connect to the Internet, ALA said.  They are the Elementary and Secondary 
Education Act, the Library Services and Technology Act, and the E-rate 
program.

"All three programs help ensure schools and libraries provide access to the 
resources communities need to thrive in the Information Age," ALA said.  "
CIPA runs counter to these federal efforts to close the digital divide for 
all Americans."  

Think Tank Slams City Telecom Efforts

Through government-owned telecom networks, some states and cities are trying 
to make sure their constituents don't have to wait for advanced telecom 
services.  But such efforts are counterproductive, according to a paper 
released by the Progress & Freedom Foundation, a Washington, D.C., think tank.

"Governments that have entered the telecom-munications business have been 
saddled with financial losses and obsolete, legacy technologies.  
Furthermore, government entry in the marketplace distorts incentives and 
slows the development of private-sector competition," writes PFF President 
Jeffrey A. Eisenach, author of Does Government Belong in the Telecom Business?

He views the pace of state and local government entry into telecom and 
Internet service businesses as "rapid and increasing," citing efforts by 
municipally owned utilities on Long Island, N.Y.; in Los Angeles; and in 
Chicago.  The paper lists 233 municipal utilities that were providing one or 
more of the following services in 1998:

 Cable TV,

 Internet access,

 High-speed data,

 Broadband data resale,

 Local telephony,

 Long distance services,

 Leased fiber, and

 Municipal data network services.

Of these services, the most commonly offered by municipalities is cable TV 
service, according to the PFF findings.  Eighty-seven cities offered cable TV 
service, compared with 73 cities that run data networks and 61 that provide 
Internet access.  Only 18 cities were found to be offering local telephony, 
and 10 cities offered long distance service.

Seven states had 11 or more cities offering telecom services:  22 cities in 
Iowa, including Cedar Falls; 16 cities in Minnesota; 12 cities in Georgia; 12 
cities in Missouri, including Columbia and Springfield; 11 cities in Florida, 
including Gainesville and Tallahassee; 11 cities in Massachusetts; and 11 
cities in Texas, including Brownsville and College Station.

Verizon Adds Data To Boost Massachusetts InterLATA Bid

Officials at Verizon New England are counting on new data to satisfy 
regulators' concerns about its application to provide interLATA (local access 
and transport area) services in Massachusetts.  Early last week, Verizon 
again asked the FCC to allow it to enter that market; late last month, the 
company withdrew a similar pending application it had filed last fall.

The officials are hoping the new data will answer questions regulators raised 
about last fall's application, including whether the telco provides 
nondiscriminatory access to DSL (digital subscriber line)- capable loops (TR, 
Dec. 25, 2000).

Under section 271 of the Telecommunications Act of 1996, a Bell company must 
obtain FCC approval before providing in-region interLATA services.  The FCC 
must determine whether the company has met a 14-point "competitive checklist" 
of market-opening mandates laid out in the Act.

Thomas J. Tauke, Verizon's senior vice president-external affairs and public 
policy, said that the new filing "demonstrates that we provide 
nondiscriminatory access to lines other DSL providers lease from us, as well 
as parity of service for installation and repair."

FCC Chairman William E. Kennard had focused on Verizon's provisioning of 
DSL-capable loops when the company withdrew its original Massachusetts 
application.  He cautioned Verizon that it should include in a new 
application "verified data reflecting acceptable levels of performance, 
including an independent showing for loops used to provide advanced services."

But competitors aren't so sure that the new application addresses those 
concerns-and other concerns raised in comments to the FCC.  Verizon "still 
didn't get it right," AT&T Corp. Vice President-federal government affairs 
Len Cali said, adding that the "refiled application has failed to adequately 
address the shortcomings of the original application."  AT&T particularly 
objected to Verizon's prices for unbundled network elements, saying they 
still weren't cost-based, as required by the Act.

Verizon included in its application last week new rates for switched services 
provided to competitors in Massachusetts.  It had informed the FCC of the new 
rates in ex parte filings regarding the earlier application.  Competitors had 
complained that the FCC shouldn't consider those rates in reviewing the 
earlier application because they were submitted after comment deadlines in 
the proceeding.  "Refiling puts to rest any concerns that interested parties 
did not have the opportunity to comment on all the issues," Mr. Tauke said.

The FCC now has 90 days to consider the new application.  Under section 271, 
it must consult with Massachusetts regulators and the Department of Justice 
before issuing a decision.  Justice had given Verizon's original application 
a thumbs-down (TR, Oct. 30, 2000).  The Massachusetts Department of 
Telecommunications and Energy had recommended that the FCC approve it (TR, 
Oct. 23, 2000).

The DTE's recommendation to the FCC is due Feb. 6; Justice must submit its 
recommendation by Feb. 21.  Comments and replies are due to the FCC by Jan. 
30 and Feb. 28, respectively.  Parties also are invited to meet with Common 
Carrier Bureau staff for ex parte discussions about the proceeding between 
Jan. 30 and Feb. 23.

Bureau Proposes SBC Pay $94K For Violating Collocation Rules

The FCC's Enforcement Bureau has found SBC Communications, Inc., apparently 
liable for violating Commission rules regarding competitors' collocation of 
equipment in incumbents' central offices.  Specifically, the bureau says SBC 
failed to update its Web site to identify facilities that have run out of 
physical collocation space.

In a Jan. 18 notice of apparent liability (file EB-00-IH-0326a), the bureau 
proposed that SBC forfeit $94,500 for the alleged infraction, which the 
bureau uncovered during an "independent audit."  The FCC made the audit a 
condition of its approval of license transfers related to the merger of SBC 
Communications, Inc., and Ameritech Corp. (TR, Oct. 11, 1999).

The FCC's "posting rule" requires incumbent local exchange carriers to update 
their Web sites to list premises that run out of space for competitors to 
install facilities.  They must provide those updates within 10 days of using 
up the space.  But information provided by SBC to the bureau indicates that 
in "numerous instances" SBC failed to provide timely updates to its Web site.

SBC has 30 days to pay the $94,500 or file a written statement showing why 
the proposed forfeiture should be eliminated or reduced.

FCC Gets `Ahead of the Curve' With Inquiry on Interactive TV

Although the market for high-speed interactive TV (ITV) services is in the 
early stages of development, the FCC hopes to get "ahead of the curve" by 
collecting information on the status of the ITV market and whether it should 
regulate it.

The FCC issued the notice of inquiry in Cable Services docket 01-7 because 
comments in its recently completed proceeding on the America Online, Inc.-
Time Warner, Inc., merger (TR, Jan. 15) "raised the possibility" that a 
vertically integrated cable TV and ITV service provider could discriminate 
against alternative ITV service providers.  It asked for comments in the 
docket 01-7 proceeding by March 19 and replies by April 20.

The inquiry seeks comment on what services constitute ITV services, how they 
will be delivered, and other questions about the status of the ITV market.  
The FCC acknowledged that it was "difficult to specify a definition" for ITV 
services because of the technological and business changes in the new 
industry.  It sought comment on its initial characterization of ITV as a "
service that supports subscriber-initiated choices or actions that are 
related to one or more video programming streams.."

The FCC asked about the technical resources or "building blocks" a 
distribution system would require to support ITV.  The FCC said it saw three 
major building blocks:  (1) a video stream, (2) a two-way high-speed Internet 
protocol connection, and (3) specialized customer premises equipment.

"To assess the possibilities for discriminatory behavior and what enforcement 
procedures might be effective for any rules that might be proposed in the 
future, it is important to understand clearly how ITV providers will deliver 
their services to consumers, including what type of contractual arrangements 
will govern," the FCC said.

It also asked whether cable TV providers would have the "superior platform" 
for distribution of high-speed ITV service and sought comment on the ITV 
capabilities of direct broadcast satellite providers and digital subscriber 
line service providers.  The FCC also sought comment on the legal 
classifications of ITV services, what public and statutory objectives ITV 
rules would promote, and what authority the FCC has over such services.

The notice states that the Cable Television Consumer Protection and 
Competition Act of 1992 directed the FCC to adopt rules "limiting the share 
of cable capacity that could be used for commonly owned content and requiring 
vertically integrated cable programmers to provide their content to rival 
distribution platforms on nondiscriminatory terms."  The FCC added that if 
the "same factual predicates that Congress cited in the 1992 Cable Act were 
to apply to a distribution platform delivering ITV services, then some 
regulation of those distribution facilities might be warranted."

The notice also asks for comment on how the FCC could implement rules to bar 
providers of multichannel video programming from discriminating against 
unaffiliated ITV providers.  It asked for comment on how nondiscrimination 
rules should be enforced.  It suggested that ITV providers and cable TV 
operators "rely on private enforcement arrangements" or that aggrieved 
parties use the FCC's complaint procedures.

Kennard Warns against Discrimination

Then-FCC Chairman William E. Kennard acknow-ledged that ITV services were in 
the "early stages of development" but said the FCC would "do well to get 
ahead of the curve."  He said it was "clear" that cable TV would be an "
important platform for delivery of ITV services, at least in the near term, 
and I am concerned that a vertically integrated ITV service provider might 
have the incentive and ability to discriminate against unaffiliated ITV 
service providers."

Commissioner Gloria Tristani supported the inquiry but "regretted" that the 
FCC issued an inquiry rather than a notice of proposed rulemaking.  "This 
Commission must move promptly to ascertain the public interest in nascent 
industries to ensure appropriate measures are timely vetted and resolved," 
she said.

Commissioner Harold W. Furchtgott-Roth dissented from the FCC's decision, 
saying it was "premature" to address the issue of cable interactive TV 
services.  "While the item is framed as a notice of inquiry, it is no less 
damaging to raise the specter of government regulation. . .for services that 
are still in their gestational period."  He said he had "serious 
reservations" about the FCC's legal authority to address ITV issues. 

Robert Sachs, president and chief executive officer of the National Cable 
Television Association, was "pleased" that the FCC was launching an inquiry 
rather than a "rulemaking which presumes a regulatory outcome."  But he added 
that "asking dozens of hypothetical questions about regulating a business 
which has yet to take form still puts the cart before the horse, in 
regulatory terms. . .There is no evidence to suggest that government 
regulation is called for here."

Analysts See Shifting Alliance As BellSouth Sells Qwest Stock

It was the rumor du jour 21 months ago:  BellSouth Corp.'s purchase of a 10% 
stake in Qwest Communications International, Inc., meant the companies might 
merge.  Times have changed, however, and BellSouth now is cashing in much of 
its Qwest investment to raise $1 billion for other projects.

"The transaction underscores a change in the direction of the relationship 
between Qwest and BellSouth," said Marion Boucher Soper, a Bear, Stearns & 
Co. analyst, in a Jan. 16 report.  "While both appear to be interested in 
strategic expansion, other opportunities are likely to be higher on the 
priority list."

BellSouth's 10% stake already has been diluted to about 5% by Qwest's 
acquisition of U S WEST, Inc., Merrill Lynch & Co. analyst Adam Quinton 
noted.  "The gradual dilution and now sell down of the BellSouth stake speaks 
to the changing nature of the relationship between the two," Mr. Quinton said 
in a report also issued Jan. 16.

"BellSouth seems to be indicating it has other strategic priorities and that 
securing a strong relationship with a leading `next-gen' long distance 
provider can be done via commercial relationships, which do not need the 
backing of any equity position," Mr. Quinton said.

"Realistically, BellSouth's investment in Qwest is not strategic to its 
long-term growth strategy, and the $1 billion in proceeds will give it cash 
on hand," said Goldman, Sachs & Co. analysts Kathryn D. Willing and Frank J. 
Governali.

"We were a very different company two years ago when they invested in us," 
said Joseph P. Nacchio, Qwest's chairman and chief executive officer.  If 
BellSouth now needs cash instead of Qwest stock, Mr. Nacchio said, "I'm glad 
to be strong enough now to be able to help out."

The transaction satisfies both companies' needs, analysts said.  It gives 
BellSouth a cash infusion to spend on deployment of digital subscriber line 
service and on its wireless initiatives in the U.S. and Latin America.

Qwest, on the other hand, gains the opportunity to boost its stock value, Mr. 
Quinton said.  "Qwest's management is clearly sending a signal to the market 
that the company's stock is undervalued at current levels," he said.

The sale of 22.22 million Qwest shares back to Qwest will leave BellSouth 
with 52 million shares, or a 3% stake in Qwest.  BellSouth agreed to hold 
those shares until Jan. 16, 2002, except for 11 million shares it can sell 
after Feb. 16, 2001.

Qwest probably will not be the buyer if BellSouth decides to sell those 11 
million shares, Mr. Nacchio said during a Jan. 16 conference call.  Qwest may 
help BellSouth sell the shares to Qwest's independent pension fund, but Qwest 
can't buy any more shares without running the risk of hurting its credit 
rating, Mr. Nacchio suggested.

Qwest management consulted credit-rating agencies and decided $1 billion "was 
a good number we could handle.  It wasn't going to put any burden on us," Mr. 
Nacchio said.

Two credit-rating agencies agreed.  Qwest intends to fund the purchase by 
issuing commercial paper, a short-term funding solution.  "The company has 
adequate balance-sheet flexibility to absorb the additional debt," Standard & 
Poor's said.  Moody's Investors Service said it was "comfortable that Qwest's 
actions. . .are sensitive to the overall credit implications."

Despite the stock buyback, the relationship between the companies will 
increase.  In addition to continuing its co-marketing agreement with Qwest 
and using Qwest for long-haul transport, BellSouth will buy $250 million 
worth of services from Qwest, paying   with Qwest shares.

Blaming Verizon for Bankruptcy, NorthPoint Plans Asset Auction

NorthPoint Communications Group, Inc., doesn't expect to emerge from 
bankruptcy as an independent entity but has asked a bankruptcy court to allow 
a "structured sale" of its assets.

"The purpose of our filing is to use the breathing room Chapter 11 provides 
to sign an agreement with a financially sound strategic partner who is 
interested in our world-class network," said Elizabeth A. Fetter, NorthPoint'
s president and chief executive officer, in a conference call with financial 
analysts.

NorthPoint filed for protection under Chapter 11 of the U.S. bankruptcy code 
Jan. 16 in U.S. Bankruptcy Court for the Northern District of California.  
The filing follows a financial slide for which NorthPoint largely blames 
Verizon Communications, Inc.  In November 2000, Verizon canceled plans to 
acquire 55% of NorthPoint and provide $350 million in financing (TR, Dec. 4, 
2000).

NorthPoint has laid off workers, scaled back operations, and sold stakes in 
joint ventures in Europe and Canada, but those moves apparently weren't 
enough to keep the company solvent.  In conjunction with its bankruptcy 
filing, the company obtained agreements for as much as $38 million in "
debtor-in-possession" financing to continue operations.

"The company's available cash only funds its operations for a few weeks," 
said Kenneth Hoexter, an analyst with Merrill Lynch & Co.  "Even with the 
nearly $12 million in cash received through recent divestitures, we believe 
that the company has virtually run out of additional funds to keep operations 
running."

"The only surprise for most investors in this bankruptcy filing was that it 
wasn't announced sooner given the critical funding situation at NorthPoint," 
Credit Suisse First Boston Corp. analyst Mark Kastan said in a Jan. 17 report.

"With NorthPoint's assets now officially on the block, look for a number of 
telecom companies to express an interest," Mr. Kastan said.  Potential 
bidders include McLeodUSA, Inc., XO Communications, Inc., and any 
interexchange carrier that needs more local broadband infrastructure, Mr. 
Kastan said.

NorthPoint's condition has raised new doubts about the other major "data 
CLECs" (competitive local exchange carriers)-Rhythms NetConnections, Inc., 
and Covad Communications Group, Inc.-whose business models depend largely on 
deployment of DSL (digital subscriber line) service.

"Although both Rhythms NetConnections and Covad Communications have enough 
cash to last for several more quarters, we believe it will be extremely 
difficult for either of these companies to obtain additional financing," Mr. 
Kastan said.  "We expect significant scale-back initiatives-in addition to 
those already announced-from both of them."  Covad already has taken steps to 
conserve cash, and Rhythms announced similar steps last week (see separate 
story).

Credit Suisse First Boston analyst Daniel P. Reingold noted that the downfall 
of the data CLECs had left Bell companies and independent incumbent telcos 
well positioned to attack the market for high-speed Internet access.

"A year ago investors had genuine fear that DSL CLECs, using the FCC's highly 
discounted UNE [unbundled network elements] and line-sharing rates, would be 
able to profitably take significant share" from Bell companies and 
independent incumbent local exchange carriers, Mr. Reingold said in a Jan. 17 
report.

"Now with NorthPoint in bankruptcy, Covad and Rhythms cutting back coverage 
dramatically, AT&T [Corp.] and WorldCom [Inc.] nowhere in DSL, and Bell 
companies ramping [up] DSL install rates, it is apparent the consumer 
high-speed access market will be left to the cable [TV] and incumbent 
telephone companies, and the small-business market to the latter," he said.

Qwest Touts Line-Sharing Pacts, Improved Service

Qwest Communications, Inc., has said it improved its service to end-user 
customers and other carriers in 2000 in key areas-including those that have 
come under fire from consumers and state regulators.

Qwest filled almost 98% of it service orders for 2000 on time, Afshin 
Mohebbi, Qwest's president-worldwide operations, told reporters during a Jan. 
15 conference call.  Ninety-five percent of local service repairs were 
completed on time, Qwest's best performance in this category since 1996, he 
said.  He also cited reductions in the percentage of customers whose service 
was out for more than 24 hours and a decrease in "held or delayed" orders.

Last week, Qwest also unveiled permanent line-sharing agreements with 
MULTIBAND Communications, Inc., New Edge Networks, NorthPoint Communications, 
Inc., and Contact Communications.  Line-sharing agreements enable competitors 
to use the high-frequency portion of the loop for data transmission while 
Qwest continues to provide voice service over the low-frequency portion.  
Permanent line-sharing agreements now are available to all wholesale 
customers, Mr. Mohebbi said.

In other long-term plans, Qwest will seek the FCC's approval to offer 
interLATA (local access and transport area) services in at least one state by 
year-end; it plans to initiate state-level proceedings in several others, Mr. 
Mohebbi said.  He said Qwest hoped to obtain approval in all the states in 
its service area by the end of next year.

Under section 271 of the Telecommunications Act of 1996, a Bell company must 
obtain FCC permission before providing in-region interLATA services.  The FCC 
must consult with the relevant state commissions as well as the Justice 
Department to ensure that the Bell company has opened its markets to 
competition sufficiently. 

WorldCom To Pay Users $88M To End Overcharging Lawsuit

WorldCom Corp. has agreed to pay $88 million to customers who claim they were 
overcharged for direct-dialed calls.  The proposed settlement would end a 
class action lawsuit brought by subscribers who complained that MCI WorldCom, 
Inc. (now WorldCom) misled them about the conditions under which it would 
charge higher nonsubscriber rates for domestic and international calls.

While the company admits no wrongdoing, it has agreed to compensate customers 
for the higher charges on calls placed between Feb. 5, 1996, and Oct. 15, 
2000.  Under the terms of the settlement, WorldCom also agreed not to raise "
casual calling" rates for nonsubscribers this year.  Daniel Girard, an 
attorney who represents the subscribers, said a letter regarding the 
settlement would be sent to 5 million people who might be eligible for 
reimbursement.

The U.S. District Court for the southern district of Illinois will decide at 
a March 29 hearing whether to approve the terms of the settlement in the case 
In re MCI Nonsubscriber Telephone Rates Litigation (docket no. 1275).

In the lawsuit, the subscribers claimed that MCI didn't provide sufficiently 
clear tariff information describing when it would charge them the higher 
nonsubscriber rates and surcharges for placing direct-dialed calls.  The 
tariff stated that customers who remain "presubscribed to MCI after [their] 
account(s) are removed from MCI's billing system" would be charged 
nonsubscriber rates.

In 1998, the FCC found that the tariff was "too confusing" (TR, Nov. 19, 
1998).  The FCC's decision "opened the door" for the lawsuit and resulting 
settlement, Mr. Girard said. 

Court Rejects AT&T's Appeal In Reseller Discrimination Case

A federal appeals court has upheld a lower court's decision directing AT&T 
Corp. to pay $2.1 million in damages for discriminating against a reseller in 
favor of its own retail customers.

The U.S. Court of Appeals for the Second Circuit (New York) last week said 
there was enough evidence to support a Manhattan federal district jury's 
finding that AT&T had favored its own end-user customers in providing 
software-defined network (SDN) services to reseller National Communications 
Association.

The appeals court rejected AT&T's claim that the district judge should have 
dismissed the case and set a new trial, adding that the lower court had "
acted within its discretion" by denying AT&T's requests.  A three-judge panel 
of the Second Circuit held that there was sufficient evidence to support the 
jury's finding of discriminatory service under section 202(a) of the 
Communications Act.

The appeals court also rejected AT&T's argument that the district court judge 
erred in instructing the jury that AT&T bore the burden of proving that its 
different treatment of NCA and its own end-user SDN customers wasn't 
unreasonable and unjust under section 202(a).

In its original claim, NCA charged that AT&T delayed resale orders for up to 
nine months in an effort to "intentionally discriminate against the 
resellers."  Citing the nondiscrimination clause of the Act, U.S. District 
Judge Loretta A. Preska in February 1998 directed AT&T to pay $1.8 million in 
damages.  In June 1999, the district court augmented NCA's damages award to 
$2.1 million in damages and prejudgment interest.

The Jan. 12 appeals court ruling in National Communications Association, 
Inc., v. AT&T Corp. (consolidated cases beginning at no. 98-9673) was written 
by Chief Judge John M. Walker Jr.  He was joined by Circuit Judges Thomas A. 
Meskill and Sonia Sotomayor.

In their opinion, the judges said there was "sufficient evidence on the basis 
of which a jury could reasonably have found that AT&T's discrimination was 
willful."

One Step from Bankruptcy, Globalstar Stops Debt Payments

A skeptical audience confronted Bernard Schwartz as he announced Globalstar 
Telecommunications Ltd.'s plan to suspend payment on its debts.  As Mr. 
Schwartz, Globalstar's chairman and chief executive officer, hosted a 
conference call unveiling the plan, he was confronted by investors who 
demanded to know why they shouldn't force the company into bankruptcy.

"A premature action to cause bankruptcy. . .would be damaging to the 
prospects of all" Globalstar investors, Mr. Schwartz argued during the Jan. 
16 call.  "We're buying time to add the kinds of resources we think are 
necessary to turn the situation around."

But some analysts don't give the company much hope.  Globalstar is about as 
close to bankruptcy as a company can come, analysts say.  It would take only 
three disgruntled bondholders to initiate an involuntary bankruptcy action 
against the company now that it has stopped its debt payments, Mr. Schwartz 
acknowledged.

Even before Globalstar's announcement last week, Credit Suisse First Boston 
Corp. analyst Cynthia M. Motz urged clients to sell the company's shares.  In 
an October report, she declared, "There is a decent probability the company 
will be shut down over the next 12 months."

"We are not surprised that Globalstar has decided to stop making payments on 
its debt," she said in a report last week.  "At this point, we remain 
unconvinced that there will be sufficient market demand to sustain Globalstar'
s operations in their current form."

But Mr. Schwartz urged investors to be patient and to wait for a report from 
The Blackstone Group, which Globalstar hired to devise a new plan to fund and 
operate the business.  

Like its predecessors in the global mobile arena-Iridium LLC and ICO Global 
Communications Ltd.-Globalstar appears to be falling prey to the ability of 
terrestrial wireless service providers to offer comparable, worldwide service 
at lower prices and with smaller handsets.  Iridium and ICO both ended up in 
bankruptcy.

With only 31,200 subscribers for its global mobile telephone service, 
Globalstar must do more to recruit customers, must make its handsets and 
service more affordable, and must deploy new services, Mr. Schwartz said.  
Globalstar's decision to suspend payments on its credit facility, vendor 
financing agreements, senior notes, and preferred stock dividends will give 
the company time to retool, he said.

Suspension of debt payments will save the company $400 million this year, 
enabling it to continue operations into next year, Mr. Schwartz said.  
Globalstar's main creditors and investors, including QUALCOMM, Inc., and 
Loral Space & Communications Ltd., said they supported Globalstar's move.  
But Standard & Poor's and Moody's Investors Service lowered Globalstar's 
credit ratings.

The new ratings "reflect the very limited prospects for recovery for 
Globalstar's creditors in a restructuring given the company's very low 
subscriber levels and very modest growth," Moody's said.

`Creative Financing' Seen As Asian Network Necessity 

Future telecom infrastructure projects in Asia will require "creative 
financing solutions" if development is to keep pace with demand, a 
Washington, D.C.-based international telecom lawyer says.  The greatest 
obstacle to meeting Asia's demand for Internet and other telecom networks is "
meeting the communications sector's demand for capital," according to Glenn 
S. Gerstell, a Milbank, Tweed, Hadley & McCloy LLP partner.

Speaking Jan. 15 at the Pacific Telecommunications Council's conference in 
Hawaii, Mr. Gerstell presented a white paper describing the benefits and 
drawbacks of various financing methods-and how a combination of approaches 
can secure needed financing in spite of the reluctance of financial 
institutions to take risks in less-developed nations. 

Techniques for Financing Telecoms and Internet Infrastructure Buildout in 
Asia, which was co-authored by Milbank, Tweed Senior Associate Alisa Fiddes, 
focuses on projects and companies in "start-up  mode," rather than on more "
mature" businesses. 

Vendor financing historically has provided limited options to purchasers.  
Continued telecom industry privatization, combined with a "proliferation of 
start-up companies," has further limited this option, according to the 
paper.  However, national export credit agencies (ECAs) often are eager to 
finance and participate in projects involving sales of domestic high-tech 
goods.

Combining vendor financing with ECA or multilateral credit agency funding 
could help overcome weaknesses in either financing method, the paper says.  
Likewise, reaching out to a combination of commercial bank markets and 
capital markets or entering into strategic partnerships "can reduce project 
risks by bringing together partners with different resources and expertise," 
it adds.

Three Carriers Join Forces On European Wireless Data

An agreement to form a joint venture to deploy wireless data services 
throughout Europe has been unveiled by KPN Mobile NV, NTT DoCoMo, Inc., and 
Telecom Italia Mobile SpA.  The venture will attempt to extend to the 
European market NTT DoCoMo's experience in providing its "i-mode" service in 
Japan.  

The companies aim to deploy mobile data services-including games, e-mail, 
messaging, and Internet access-in the second half of this year in Belgium, 
Germany, Italy, and the Netherlands.

Separately, NTT DoCoMo and KPN Mobile will create a new wireless data company 
that will be 25% owned by NTT DoCoMo and 75% owned by KPN Mobile.  Creating 
the company is the latest step in an ongoing alliance that was launched when 
NTT DoCoMo acquired a 15% stake in KPN Mobile (TR, May 15, 2000).

The new company will begin life with $132 million in funding-$85 million from 
KPN Mobile and $47 million from NTT DoCoMo.  

The company will take possession of the mobile data assets of KPN Mobile and 
its subsidiaries, E-Plus Mobilfunk GmbH and KPN Orange.  The new company will 
be based in the Netherlands and will be established in March, the companies 
said.

Portugal Telecom Eyes Brazil As Fertile Ground for Expansion

Portugal Telecom SGPS SA plans to expand its Brazilian presence by acquiring 
wireless operator Global Telecom SA, which operates networks in the Parana 
and Santa Catarina states.  Those states are neighbors to Sao Paulo, where 
Portugal Telecom already offers wireless service through its Brazilian 
subsidiary, Telesp Celular Participacoes SA (TCP).

Under an agreement announced Jan. 15, TCP will pay $556 million in cash and 
assume $654 million in debt to acquire Global Telecom from its current owners-
Japan's KDDI Corp., Argentina's ITX Corp., and Brazil's Inepar SA Industria e 
Construcoes.

Global Telecom's area has 15 million "pops" (potential customers), of which 
the carrier has captured 463,000 subscribers.  TCP has about 4 million 
subscribers.  

The combination of the two requires the approval of Brazilian telecom 
regulator Anatel.  TCP intends to pay for the transaction with its cash 
reserves and debt financing.

The announcement prompted Moody's Investors Service to place the debt ratings 
of Portugal Telecom on review for possible downgrade.  

By acquiring Global Telecom, Portugal Telecom would take "advantage of a 
unique investment opportunity in a high-growth wireless business," Moody's 
said.  But "the magnitude of the investment may constrain the financial 
ratios" of Portugal Telecom, Moody's said, "as well as expose it to a 
higher-risk operating environment."

Intelsat Plans Technical, Regional `Flexibility' 

Intelsat's chief executive officer says that the intergovernmental 
organization is building flexibility into its business plans in preparation 
for its expected July 18 privatization.  

Rather than limiting the group to its traditional focus on the space segment 
of satellite communications, Intelsat intends to expand the terrestrial 
elements of its operations, said CEO Conny Kullman.

Intelsat is planning to build technological "intelligence" into its ground 
segment, instead of having most of that technology on board the satellites, 
he said.  

This approach is less risky, can be brought to market more quickly, is "less 
complex," and "will come at a lower price tag for us," Mr. Kullman told 
reporters during a Jan. 17 briefing at Intelsat's Washington, D.C., 
headquarters. 

WorldCom, Intermedia Need State OKs, Face Digex Lawsuit

WorldCom, Inc.'s planned purchase of Intermedia Communications, Inc., and the 
latter's 55% controlling stake in Web host Digex, Inc., cleared the final 
federal regulatory hurdle last week when three FCC bureaus approved the 
transfer of licenses involved in the proposed transaction.

The transaction still needs additional state regulatory approvals, and 
WorldCom is facing a lawsuit from Digex minority shareholders seeking to 
block the merger (TR, Dec. 18, 2000).  They've argued that WorldCom's 
proposed takeover of Intermedia would deprive Digex shareholders of the full 
value of their investment.

WorldCom Chief Operating Officer Ronald R. Beaumont wouldn't comment about 
the status of the Digex lawsuit during a presentation last week at the 
company's Ashburn, Va., offices.  But he told reporters and analysts that the 
company was "doing all the right things to bring this deal to closure, and I 
feel confident we'll get it done."

Acting on delegated authority in an order issued Jan. 17, the FCC bureaus 
said WorldCom's taking control of Digex would serve the public interest by "
increasing competition for next-generation data services provided to business 
customers."  The Jan. 17 order notes that the U.S. Department of Justice has 
required WorldCom to divest Intermedia's competitive local exchange carrier 
assets, essentially leaving WorldCom with just Intermedia's Digex stake (TR, 
Nov. 20, 2000).

Meanwhile, WorldCom officials at the Ashburn event stressed that acquiring 
Digex would bolster its "generation D" portfolio of Web-based services (TR, 
April 17, 2000).  Asked whether WorldCom planned to be back on the 
acquisition trail anytime soon, Mr. Beaumont said the company might consider 
pursuing some "smaller acquisitions" but added that its own size and sluggish 
stock price likely would complicate any efforts to take over a large telecom 
company.  "It'll be very, very difficult for WorldCom to do large 
acquisitions," as evidenced by the failed merger with Sprint Corp., he 
acknowledged.

And even though it doesn't have a strong nationwide cellular presence, Mr. 
Beaumont said WorldCom planned to address the growing demand for mobile data 
services through "a number of different strategies," including partnerships 
and resale agreements.  "Ultimately, we'll be a virtual operator, and tackle 
the wireless world in that manner," he said.

Rhythms Trims Workforce, Operations To Reduce Losses

Rhythms NetConnections, Inc., intends to reduce its expected losses this year 
by 15%, to $395 million, by cutting 450 employees-or 23% of its workforce-and 
by suspending operations in about 20 of its smaller markets.  The Englewood, 
Colo.-based "data CLEC" (competitive local exchange carrier) won't eliminate 
its presence in those smaller markets but will sharpen its focus on its 40 
largest markets, enabling it to cut 100 employees who work in the smaller 
markets, the company said.

Productivity gains and improved back-office systems, meanwhile, will enable 
the company to cut 300 installer positions.  By scaling back-as other data 
CLECs already have done-Rhythms will be able to last a few additional months 
before having to seek funding in an iffy capital market.  Rhythms said it 
would have enough funding to stay in business until early next year.

"Clearly we'll need additional funding as we get further into 2001" to 
support operations in the following year, said Catherine Hapka, the company's 
chairman and chief executive officer, in a Jan. 18 conference call with 
analysts.  "We're exploring a myriad of options."

Some Wall Street analysts, however, seemed unimpressed by Rhythms' efforts to 
reduce spending.  Eliminating 300 installer positions is an "aggressive" move 
that "could result in a degradation of service," said Merrill Lynch & Co.'s 
Kenneth Hoexter.

Rhythms' losses could be deeper than the $395 million the company predicts, 
Mr. Hoexter said in a report.  "We are only lowering our loss estimate by 10% 
to $430 million. . .as we believe employee cutbacks will also result in 
slower revenue growth."

Mark Kastan, an analyst with Credit Suisse First Boston Corp., estimates that 
the cutbacks will give Rhythms only two additional months to obtain funding.

Contrary to the company's projection that it can last until early 2002, the 
company will require new financing late this year, Mr. Kastan said in a 
report.

"While we are somewhat relieved to see that Rhythms management has scaled 
back its business plan, we still estimate that the company needs to raise 
over $1 billion of additional capital to be fully funded, and we believe that 
the capital markets will remain closed to data CLECs for the foreseeable 
future."

Level 3, SBC Reach Agreement On `Recip Comp' Rate Scheme

Level 3 Communications, Inc., and SBC Com-munications, Inc., have agreed on a 
two-tiered reciprocal compensation scheme designed to resolve disputes about 
payments for terminating dial-up calls to Internet services providers (ISPs).

The agreement covers 13 states and sets two rates, one for "in-balance" 
traffic and a lower rate for "out-of-balance" traffic.  Traffic is considered 
in balance if the carriers' ratio of originating to terminating traffic is 
3-to-1 or less; it is out of balance if the ratio is more than 3 to 1.

Although rates vary by state, the companies said the average rate for 
in-balance traffic is $0.0032 cents per minute.  The average rate for 
out-of-balance traffic is $0.0018 per minute (retroactive to Sept. 1, 2001) 
and declines to an average of $0.00101 by June 1, 2002.  The agreement runs 
through May 2003.

"Our agreement should be helpful to state and federal regulators," said 
Tricia Paoletta, vice president-government relations at Level 3.

"This freely negotiated agreement proves that a reasonable solution to the 
reciprocal compensation issue can be reached in the marketplace," Ms. 
Paoletta said.

The agreement comes as the FCC continues trying to craft an order addressing 
reciprocal compensation.  FCC Chairman William E. Kennard recently said he 
wanted to complete work on the matter before his Jan. 19 departure from the 
Commission (TR, Jan. 15).

Sources say that the Commissioners haven't been able to agree on some aspects 
of the proposed order and that the issue is likely to remain a priority even 
after Mr. Kennard's departure.

Financial analysts at Merrill Lynch & Co. saw the Level 3-SBC agreement as "
modestly positive" for both companies.  "The agreement removes an ongoing 
uncertainty relating to fluctuations in both costs for SBC and revenues for 
Level 3," Merrill Lynch said.   

"But in neither case is the impact sufficiently material for us to alter our 
revenue/expense projections, since the amounts fall within any normal range 
of forecasting error," it said.

TMI, Motient To Unite Assets, Focus On Wholesale Services

TMI Communications & Co. L.P. of Ottawa and Motient Corp. of Reston, Va., 
plan to integrate their mobile satellite communications operations.  The new 
entity, tentatively named Mobile Satellite Ventures, will focus on 
provisioning wholesale satellite service to North American carriers.

The companies said they would consolidate some facilities to maximize the 
joint venture's efficiency, assuming regulatory approvals.  Columbia Capital, 
Spectrum Equity Investors, and Telcom Ventures LLC are investing about $50 
million in the new entity.

"We are convinced that a satellite-only system is ideal for rural and remote 
areas, and with terrestrial enhancements can also be affordable and  
competitive in urban communities," said Gary M. Parsons, Motient's chairman.

New Entrants Will Prolong IXC Price Wars, Analysts Say

The financial future of interexchange carriers (IXCs) continues to be clouded 
by downward pressure on rates for voice long distance services, financial 
analysts say.  That pressure will intensify-and will begin to affect data 
service, too-as new entrants like Global Crossing Ltd. and Level 3 
Communications, Inc., finish building networks and Bell companies gain 
permission to offer in-region interLATA (local access and transport area) 
service, they predict.

"We are deeply concerned about the incumbent long distance companies," said 
Daniel P. Reingold, managing director-equity research for Credit Suisse First 
Boston Corp.  New entrants will be able to offer cut-rate service because 
their next-generation networks cost less to run than older networks, Mr. 
Reingold said Friday, Jan. 19, during a conference call with clients.

Rosemarie Kalinowski, an analyst for the credit-rating agency Standard & Poor'
s, agreed that pressure would intensify on long distance carriers.  

Incumbents like AT&T Corp. and WorldCom, Inc., are building new Internet 
protocol networks, she noted.  But it's unclear whether those networks will 
be finished in time to "produce the cost efficiencies necessary to offset the 
pricing pressures and compete head-to-head with the new entrants," she said 
during a teleconference earlier in the week.

Managers at incumbent IXCs apparently were in a state of denial or were 
caught off guard by a steeper-than-expected decline in rates, Ms. Kalinowski 
said.  They mistakenly thought they could correct the situation by cutting 
rates-and thereby reducing their profitability, she said.

Although Mr. Reingold advised investors to steer clear of most incumbent long 
distance carriers, he said he thought Sprint Corp. might increase in value 
because of a potential merger with Qwest Communications International, Inc.  
He said he expected a Qwest-Sprint merger to be announced in the next 12 
months.

Merger activity in general may increase under a Republican administration, 
Mr. Reingold asserted.  But some combinations will remain difficult or 
impossible because traditional antitrust laws and the Telecommunications Act 
of 1996 will stand in the way, no matter who is in power, he said.  For 
example, he said, recent speculation that a Bell company might buy WorldCom 
is misguided; the regulatory hurdles are simply too high.

But Mr. Reingold said he thought a merger of SBC Communications, Inc., and 
BellSouth Corp. might be possible in a few years' time.  Those companies 
already have merged their wireless units to form Cingular Wireless.  Bell 
companies are well positioned for the current economic climate because they 
typically outperform the stock market during recessions, he said.

Bell companies also will benefit from the turmoil in the competitive local 
exchange carrier (CLEC) industry, whose inroads into local markets have 
slowed as a shortage of funds has forced CLECs to cut back, Mr. Reingold 
said.  "I don't believe the CLECs are going away," he said.  "However, there'
s a reality here . . .There are going to be fewer of them coming out of this" 
financial strife.

But the CLEC industry already is beginning to show signs of recovery, Credit 
Suisse First Boston analyst Mark Kastan said.  "Sentiment has bottomed and 
now is improving for the first time since spring of last year," he said.

After a long drought, financing now appears to be available for a select 
group of CLECs, Mr. Kastan said.  McLeodUSA, Inc., and XO Communications, 
Inc., are engaged in successful fund-raising efforts, he noted, and Time 
Warner Telecom, Inc., is poised to attempt to raise $300 million through the 
sale of stock.

Report Offers Road Map To E-government Security

U.S. government agency officials now have guidance on how to address key 
security concerns when offering Internet and other electronic services.  A 
new publication, Securing Electronic Government, is the product of an 
eight-month partnership of the Information Technology Association of America 
and two councils for the chief information officers (CIOs) and chief 
financial officers (CFOs) in various governmental units.

The report covers electronic security concerns in three principal areas:  
government electronic procurement, Web-based information services, and 
governmental financial transactions.

"We will. . .provide this to the federal community and, based on [the] 
feedback, we will expand to other areas or refine these three areas," said 
John Gilligan, deputy chief information officer and principal deputy 
assistant secretary for business and information management for the U.S. Air 
Force.

Mr. Gilligan stressed that the government needs to ensure the security of 
electronic documents to avoid a loss of public confidence.  ITAA, the CIO 
Council, and CFO Council initially met in May 2000 to develop guidelines for 
adequate security.

The report states that information availability and integrity are the most 
important priorities in providing Web-based information services, such as 
data on taxes and unemployment rates.  Denial-of-service "attacks"-attempts 
to overload a Web site or server with information requests or e-mail messages-
and malicious data change were identified as the biggest threats to these 
priorities.  "Techniques do exist to safeguard these priorities," said David 
Nelson, deputy chief information officer for the National Aeronautics and 
Space Administration.

Regarding Internet-based government procurement, the report says that current 
industry security solutions for credit card purchases are adequate for 
transactions of $100,000 or less, which make up the bulk of government online 
procurement deals.  Midsize procurements between $100,000 and $10 million 
require heightened time sensitivity and confidence, necessitating more 
extensive security precautions.  Purchases of more than $10 million require 
customized solutions to ensure the integrity of data.

"The public holds government to high standards. . .and [the government needs] 
to ensure high public confidence," said Sky Lesher, deputy chief financial 
officer at the Department of the Interior.  "They need to feel like they are 
in a secure environment."

Mr. Lesher said the report advocates a proactive approach to government 
electronic security.  "We prefer to be in a prevention mode rather than a 
recovery mode," reacting to security breaches, he said.  Mr. Nelson added 
that the report provides government managers with security "know-how" from 
industry representatives.

Motorola, Inc., says it will stop making mobile phones at its Harvard, Ill., 
facility...

Motorola, Inc., says it will stop making mobile phones at its Harvard, Ill., 
facility as part of a long-term effort to consolidate manufacturing and 
improve financial performance.  The company's decision will cost about 2,500 
workers their jobs.  Last month, Motorola announced an outsourcing alliance 
that will cut 2,870 more positions (TR, Dec. 11, 2000, notes).  Earlier this 
month, Motorola reported disappointing fourth quarter results.

FCC Suggests Streamlining Carrier-Change Process

The FCC has proposed rule changes that would make it easier for carriers to 
sell or transfer exchanges.  The existing rules require carriers to get an 
FCC rule waiver or obtain permission from all their customers before 
switching them to a new service provider. 

The Commission is considering an alternative scheme to its current "
subscriber selection change" rules as part of its "biennial review" 
proceeding.  The Telecommunications Act of 1996 directs the FCC to conduct 
reviews of its regulations every two years and to eliminate or revise those 
rules that it finds are no longer necessary (see separate story).

Under section 64.1120 of the FCC's current rules and section 258 of the 
Communications Act of 1934, as amended, a carrier must obtain and verify a 
customer's permission to change his or her service provider.  Those rules are 
designed to deter "slamming," or the authorized switching of a customer's 
preferred carrier. 

In a third further notice of proposed rulemaking released last week in Common 
Carrier dockets 00-257 and 94-129, the FCC said it receives numerous requests 
a month from carriers seeking waivers of those rules in order to complete 
transactions involving transferring customer accounts to another carrier.

The Commission suggested an "expedited process" for such carriers whereby the 
carrier would be required only to notify its customers of the upcoming change 
and to provide them with an opportunity to switch carriers.  Comments are due 
on the rulemaking notice 21 days after it is published in the Federal 
Register.  Replies are due 10 days later.

Under the FCC's proposal, the acquiring carrier would be required to notify 
the affected customers 30 days before the close of the transaction.  The 
Commission is seeking input on the 30-day interval as well as the kind of 
information that should be included in the notification.  It also proposed 
that carriers notify the Commission of any such transactions.

In its rulemaking notice, the Commission asked if the advance-notice 
requirements should differ based on the type of service that the carrier 
provides.  It also asked if any additional obligations should be placed on 
the carriers, such as establishing a toll-free number to answer customers' 
questions.  

The Commission also asked how it could tailor the rules to prevent "
unscrupulous" carriers from selling customer accounts to evade enforcement 
actions.

Verizon Wireless Asks FCC To Delay 700 MHz Band Auction

Citing a host of concerns, Verizon Wireless has asked the FCC for another 
six-month delay of the auction of spectrum in the 700 megahertz band, which 
is scheduled to begin March 6.  The auction has been delayed three times 
already.

In a Jan. 18 letter to Wireless Telecommunications Bureau Chief Thomas J. 
Sugrue, Verizon asked that the sale be postponed until September.  The letter 
was signed by John T. Scott, Verizon Wireless' vice president and deputy 
general counsel-regulatory law.

Mr. Scott said that if the auction was held as scheduled, potential bidders 
wouldn't have enough time to assess their spectrum needs because a reauction 
of "C" and "F" block PCS (personal communications service) licenses is still 
ongoing (see separate story).  "Short form" applications for the 700 MHz band 
auction are due Feb. 2, under the current schedule.

"If the 700 MHz [band] auction begins on the current schedule, there would be 
no time for companies that are bidding in the PCS reauction to reassess their 
business plans and develop bidding strategies for [the] 700 MHz [band 
auction]," Mr. Scott said.

The FCC immediately sought comments on Verizon's request.  Comments are due 
Jan. 24 and should reference DA 01-143.

Package Bidding Rules Cited

Mr. Scott also said carriers need more time to prepare because of new package 
bidding rules that will be used in the auction (TR, July 10, 2000).  He also 
cited continued concerns over when winning bidders would be able to build out 
systems to use their newly licensed frequencies.  Similar concerns were cited 
by the wireless industry when they successfully petitioned the FCC to move 
the 700 MHz band auction from September 2000 to March 2001(TR, Aug. 7 and 21, 
2000).

Carriers had complained about the uncertainty of when the spectrum would be 
available.  TV broadcasters with licenses for channels 60-69 now occupy large 
chunks of the spectrum and don't have to leave until 2006 at the earliest as 
part of the transition to digital TV.

Mr. Scott said the uncertainty over when incumbent broadcasters would leave 
the spectrum was still an issue.  He also noted that the FCC hadn't yet 
adopted proposed band-clearing mechanisms for those frequencies.  Even if 
such mechanisms were adopted immediately, 700 MHz band auction bidders wouldn'
t have time to use them, he said.

Mr. Scott also mentioned the high-level government-industry effort to 
identify and allocate spectrum for third-generation (3G) services (see 
separate story).  He noted that the 700 MHz band could be used for such 
offerings and said the FCC should not auction that spectrum until it issued 
an order allocating 3G bands.  That order is expected this summer.

"There remains considerable uncertainty about the process for the auction, 
the availability of the 700 MHz band itself, and the availability of 
alternate spectrum," Mr. Scott said in the letter.  "As a matter of sound 
spectrum-management policy, this spectrum should not be auctioned until these 
issues are resolved."

"Conducting the auction before prospective bidders are able to make the 
necessary assessments about spectrum use will jeopardize the efficient 
assignment of this spectrum and ultimately disserve the public interest," he 
added.  "Greater certainty will enable the 700 MHz band to realize its full 
economic and public benefit."

A spokesman for the Cellular Telecommunications & Internet Association told 
TR that Verizon Wireless' request to delay the auction "is legitimate" and 
said the trade group planned to file comments in support of a postponement.

During a briefing with reporters last week before Verizon Wireless' letter 
was submitted (see separate story), Commissioner Harold W. Furchtgott-Roth 
said he had opposed the previous delays of the auction and would oppose any 
effort to put it off further.  "I would be very disappointed if there were 
any more delays," he said.

Ex-RSA Cellular Licensee Meets Judicial Skepticism

A three-judge panel of the U.S. Appeals Court in Washington expressed 
skepticism at a former cellular licensee's argument that the FCC wrongly 
revoked its license for "lack of candor."  Alee Cellular Com-munications had 
falsely maintained that all of its partners were U.S. citizens.

The judges appeared to agree with the FCC's contention that substantial 
evidence showed the licensee's partners knowingly deceived the agency to 
retain a rural service area (RSA) license for Catron, N.M.  The license was 
awarded by lottery in 1988, when noncitizens were barred from holding an 
ownership stake in FCC licensees.

Hearing oral arguments in Alee Cellular Commun-ications v. FCC (case no. 
99-1460) Jan. 16 were Chief Judge Harry T. Edwards and Judges Douglas H. 
Ginsburg and A. Raymond Randolph.

In 1992, FCC Administrative Law Judge Walter C. Miller ruled that Alee had 
told the Commission falsely that all of its 14 partners were U.S. citizens 
when it knew one wasn't (TR, Jan. 11, 1993).  The finding was part of a 
broader proceeding in which Mr. Miller found that nearly two dozen cellular 
license applicants, including Alee, had agreed to share with each other the 
revenue earned using RSA licenses.  Those "risk-sharing agreements" were a 
violation of FCC rules, the ALJ found..

The FCC's review board upheld Alee's license revocation in 1994.  In 1997, 
the full Commission upheld the decision, saying Alee's "lack of candor" 
required the revocation (TR, June 9, 1997).

Alee:  License Revocation Unfair

Alee attorney Philip J. Mause told the court that the FCC arbitrarily and 
capriciously relied on Mr. Miller's findings about the credibility of 
witnesses that had testified in a hearing on the risk-sharing agreements.  
Mr. Mause said Mr. Miller compiled no written record of his judgments about 
the witnesses to indicate why he found them credible or incredible.

Mr. Mause also contended that the FCC rejected substantial, credible evidence 
that showed that Alee's partners hadn't intended to deceive the Commission 
regarding the noncitizen partner.  He also said the agency's decision was not 
supported by substantial evidence.

Even if there was such evidence to indicate a lack of candor, Mr. Mause said, 
the punishment of license revocation was too harsh considering that (1) Alee 
reported the infraction to the agency and (2) other licensees in similar 
situations had received more mild sanctions.

But FCC attorney Joel Marcus told the court that before upholding the license 
revocation, the Commission conducted an independent review of the case, in 
which it arrived at the same conclusion Mr. Miller had.

Mr. Marcus said the agency's decision was supported by substantial evidence.  
"That standard is easily met here," he said, citing the testimony of 
witnesses and documentary evidence.

Mr. Marcus also said the rule violations by other licensees were not as 
severe as Alee's.  He added that agencies are given broad deference in 
developing sanctions for rule violations.

The judges seemed to agree with the Commission's argument.  "It looked to me 
like it was doing its own independent evaluation," Judge Randolph said of the 
FCC.

"They rely on documentary evidence, which they cite," Judge Edwards added.  
Judge Ginsburg noted that the FCC cited both documentary evidence as well as 
evidence of the witnesses' demeanor in reaching its decision to uphold the 
license revocation.

The Broadband Wireless Internet Forum has released two technical papers...

The Broadband Wireless Internet Forum has released two technical papers that 
provide background and explanation of the technology advocated by the group.  
The forum supports fixed broadband systems based on vector orthogonal 
frequency division multiplexing (VOFDM).  The papers can be found at 
http://www.bwif.org.

Viatel To Cut Workforce, Phase Out Most Voice Service

Viatel, Inc., has disclosed plans to cut 30% of its workforce while phasing 
out residential voice telephony services "in countries that do not meet 
long-term corporate objectives."  The New York City-based company, which 
operates a transatlantic cable system and pan-European network, said that 
instead it would focus on higher-growth broadband and corporate 
communications services. 

It didn't disclose which operating units would be consolidated, nor did it 
specify the countries in which it would cease providing residential voice 
service.  Viatel said its Jan. 18 decision followed the "logical evolution" 
of the company, which is completing a three-year network build-out. 

"By streamlining operations and concentrating principally on the pan-European 
communications needs of major corporations and carriers, Viatel will 
immediately strengthen its current financial profile and improve its EBITDA" 
(earnings before interest, taxes, depreciation, and amortization), said 
Michael J. Mahoney, Viatel's chairman and chief executive officer.

CLECs Seek Cautious Approach to Regulating Their Access Fees; AT&T, WorldCom 
Want Caps

Many competitive local exchange carriers (CLECs) seem resigned to the FCC's 
adoption of a "benchmark" rate essentially capping the access charges they 
can levy on interexchange carriers (IXCs).  

But they urged the FCC to take a cautious approach, recognizing that they 
often have higher costs than incumbent local exchange carriers (ILECs), 
particularly if they serve rural areas.

IXCs oppose any effort to exempt CLECs operating in rural areas from 
complying with future benchmark rates.  Some CLECs and IXCs agreed that a 
recent proposal from the Association for Local Telecommunications Services 
(ALTS) offered at least a step toward resolving the simmering disputes 
between CLECs and IXCs over access charges.

Seeking additional comments in its long-running proceeding in Common Carrier 
dockets 96-262 and 97-146, the FCC late last year asked parties to address 
(1) the need for a "rural exemption" to any benchmark established for CLECs' 
interstate access charges, and (2) the extent of abuses by CLECs in setting 
terminating and originating access rates.

The Association for Communications Enterprises (ASCENT) reiterated its call 
for the FCC to adopt "safe harbor" ranges for CLEC access charges; charges 
within those ranges would be deemed reasonable and lawful.

ASCENT said there was "significant merit" to the ALTS proposal (TR, Jan. 15), 
which would impose ceilings on CLECs' access charges and bar IXCs' "
self-help" actions-meaning their refusal to pay CLEC access charges that they 
deem excessive.

In joint comments, e.spire Communications, Inc., KMC Telecom, Inc., Talk.com 
Holding Corp., and XO Communications, Inc., supported ALTS' Guaranteed 
Reduced Exchange Access Tariffs (GREAT) proposal.

"The GREAT proposal recognizes that the entire industry can benefit from the 
establishment of benchmark access rates that are deemed reasonable by the 
Commission and that the access charge rates of ILECs and CLECs are not 
readily comparable, primarily because ILECs and CLECs do not necessarily 
employ the same rate structures or network architectures," they said.

Other CLEC comments didn't address the GREAT proposal directly and urged the 
FCC to proceed with caution-if at all-in imposing a benchmark limit on CLEC 
access charge rates.

"The vast majority of access charges assessed by CLECs are comparable to 
those of ILECs, which is significant in and of itself given the higher costs 
CLECs face in providing such access," said Focal Communications Corp., RCN 
Telecom Services, Inc., and Winstar Communications, Inc., in joint comments.

If the FCC sets a benchmark for CLEC access rates, it should be done "on the 
basis of ensuring that CLECs are able to collect their rightful charges and 
that their customers are able to make and receive long distance calls," they 
said.  They supported an exception to the benchmark for CLECs serving rural 
and other high-cost areas.

Z-Tel Communications, Inc., also supported the use of a benchmark but opposed 
mandatory detariffing for CLEC access rates, regardless of their level.  (The 
GREAT proposal envisions mandatory detariffing for charges above the 
specified ceilings). 

Requiring CLECs to detariff would allow ILECs to continue to "bind IXCs with 
tariffs," while Z-Tel and other CLECs would have to negotiate access 
arrangements with hundreds of IXCs, it said.  "By forcing CLECs to incur 
negotiation costs not incurred by incumbents, mandatory detariffing raises a 
barrier to entry in local exchange markets," Z-Tel said.

McLeodUSA Telecommunications Services, Inc., said the record "does not 
clearly establish" the need for regulation of CLEC access charges.  Any 
FCC-established benchmark rate for CLEC access charges thus should "reflect 
the higher costs that CLECs incur in providing access service and provide an 
exemption for CLECs providing service to customers outside of defined 
metropolitan statistical areas," he said.

CTSI, Inc., and Madison River Communications said the FCC should ensure that 
any benchmark system "does not legally, or [practically], prescribe a rate 
structure for CLECs."  The FCC would need to establish a methodology for "
converting rates of CLECs that choose" a different rate structure from that 
reflected in the benchmark rate, they said.  For instance, some CLECs choose 
not to charge a separate presubscribed interexchange carrier charge.

USTA:  No Rules Necessary

The U.S. Telecom Association said the FCC should not regulate CLEC access 
rates.  "A benchmark should not be adopted based on the arguments raised in 
this or any other proceeding by AT&T," it said.  "Neither AT&T nor any IXC 
should be permitted to unilaterally determine which CLECs' access rates are 
too high and, therefore, which CLECs' access services it will not purchase."

USTA said the record didn't justify imposing a benchmark rate for CLECs' 
access fees.  "At a time when the Commission is seeking to encourage 
competition and reduce regulation in competitive areas, new regulations 
imposed on competitive entrants are not justified," it said.

The National Telephone Cooperative Association said a single nationwide 
benchmark for CLEC access charges would lead to "further disputes," "possibly 
result in confiscatory rates," and "continue to hinder the development of 
facilities-based competition in poorly served rural areas."  The FCC should 
establish a separate benchmark for rural CLECs or create some other "
regulatory alternative" to allow them to recover their legitimate costs, NTCA 
said.

The FCC should not create a "rural exemption" to any prohibition on CLECs' 
tariffing rates above those charged by the ILEC in a given service area, said 
AT&T Corp.  "There is neither a legal nor an economic justification for 
creating any exclusion for `rural' CLECs" from a general rule linking CLEC 
and ILEC access rate levels in the same service area, it said.

A rural exemption would "improperly support operations of a class of CLECs in 
some as-yet-undefined `rural' areas through subsidies that are implicit in 
tariffed access rates that are higher than those of the ILEC operating in the 
same geographic service territory," AT&T said.  Plus, the exemption would "
inequitably place the burden of funding these CLECs' subsidies in rural areas 
solely upon those carriers' access customers (including, in particular, IXCs 
such as AT&T that serve large numbers of end users in nonurban regions)," it 
said.

WorldCom, Inc., joined AT&T in opposition to a rural exemption.  A single, 
nationwide benchmark is the "most effective, most easily administered way to 
bring about CLEC access charge reductions," it said.

The "general approach" advocated in ALTS' GREAT proposal is "consistent with 
sound public policy and merits serious consideration," WorldCom said.  It 
worked with ALTS in developing the proposal but said it didn't support all of 
its provisions.  Specifically, it opposed ALTS' recommendation for a 
six-month transition period before implementing a tariff ceiling.  WorldCom 
said such a lengthy transition period was unnecessary.

WorldCom also submitted data on access charges that it said showed that many 
CLECs charge substantially more than ILECs.  Nearly one third of the CLECs 
from which WorldCom purchases switched access services charge rates that are "
more than five times higher" than the average rates of ILECs.

"IXCs will not be able to continue to absorb these costs for much longer," 
WorldCom said.  "Unless the Commission takes action, it is inevitable that 
IXCs will begin blocking switched access traffic from all CLECs with the 
highest charges."

U.S. Telecom Revenues

U.S. spending on telecom services and equipment increased by 12.5% last year, 
generating revenues of $609.2 billion, according to a report released last 
week by the Telecommunications Industry Association.  

In its 2001 MultiMedia Telecommunications Market Review and Forecast, TIA 
says spending on telecom transport services reached $287.6 billion in 2000, 
which is an 8.9% increase over 1999 levels.  Spending on "specialized" 
services such as unified messaging, voice messaging, and broadband Internet 
access, reached $5.8 billion last year, a 62.2% increase over the previous 
year's figures, the report says.

Proposal To Streamline Service-Quality Reporting Gets Booed from All Sides; 
Some Question Timing

The FCC's proposal to reduce service-quality reporting requirements for 
incumbent local exchange carriers (ILECs) got a big thumbs-down last week as 
state regulators, end-user interests, and competitive carriers argued the 
need for the ILEC data.  And even the ILECs themselves-which ostensibly would 
benefit from the reduced obligations-objected to portions of the plan.

Competitive carriers and small to midsize ILECs took issue with the FCC's 
proposal to subject them to the same service-quality reporting requirements 
that large ILECs must follow.  And state regulators in particular worried 
that reducing the amount of available service-quality data could hamper state 
proceedings.

Overall, most parties commenting last week on the proposal criticized it for 
adding-rather than eliminating-regulations.  The rulemaking proposal in 
Common Carrier docket 00-229 was undertaken as part of the Commission's 
biennial regulatory review, which is required by the Telecommunications Act 
of 1996.

The biennial reviews are aimed at reducing regulations that are no longer 
necessary as a result of increased competition (TR, Nov. 13, 2000, and 
separate story in this issue).  Many industry members and state regulators 
commenting last week questioned whether competition in local markets had 
developed sufficiently to warrant streamlining the reporting requirements.

ILECs are required to submit to the FCC data about their performance in 
providing retail service to end-user customers.  The data is submitted in the 
carriers' Automated Reporting Management Information System (ARMIS) reports.  
Citing increases in competition in local markets, the FCC had proposed, among 
other measures, slashing the number of reporting categories from 30 to six 
and making the data more consumer-oriented.

States:   We Need ILEC Data

The National Association of Regulatory Utility Commissioners said that 
monitoring ILECs' service quality is particularly important "in situations 
where no competitive alternatives exist."  It noted that "large incumbents 
still hold in excess of 98% of at least the residential market across the 
country," and several large ILECs have reported "long-term negative trend[s] 
in service quality."  It pointed to instances in which state regulators 
relied on the data reported to the FCC to make decisions about an ILEC's 
service quality.  

The Florida Public Service Commission not only objected to any reductions in 
reporting requirements but also pressed the FCC to require ILECs to submit 
even more specific data.  It said ILECs' service-quality data should be "
disaggregated" to a state or smaller geographic level to give customers more 
useful information.  "It is easy to demonstrate high-quality service 
performance overall while performing poorly in small geographic areas," it 
said.

The Wyoming Public Service Commission questioned the timing of the 
deregulatory proceeding.  Under the Act's biennial review provisions, the FCC 
is required to examine its regulations to determine whether they are 
necessary "as a result of economic competition between providers."  
Competition has had very little influence on the residential local exchange 
market nationally, the Wyoming PCS said, adding that competition in Wyoming 
is nascent. 

"Why would customers living in rural America, much of which is served by 
price cap companies without competitive options, want to limit the 
service-quality data that could be used by state and federal regulators?" the 
PSC asked.  "It is too soon to narrow the focus of the quality-of-service 
reporting to only that desired or needed by customers in a competitive 
market."

The service-quality data reported to the FCC is important because it "can be 
compared across state lines," the Indiana Utility Regulatory Commission said. 
 And the reporting requirements are useful even in a competitive service 
market, the IURC added.  "The FCC and the states must be vigilant, ensuring 
that unwarranted deregulation does not cause service quality to deteriorate," 
it said.

The Illinois Commerce Commission asked the FCC to ensure that states be able 
to impose additional service-quality reporting requirements in the absence of 
federal requirements.  In its rulemaking notice, the FCC sought comments on "
alternative ways the FCC can continue to work with states" on service-quality 
issues.

The Wisconsin Public Service Commission acknowledged that streamlining 
service-quality reporting requirements might be justified.  But some of the 
FCC's proposals go "too far," it said, and prevent states from accessing 
meaningful data.  Monitoring service quality still "is one of the most 
important regulatory roles," the Wisconsin PSC said.

The FCC's reference in its rulemaking notice to deregulation in the airline 
industry is "interesting," the Texas Public Utility Commission said.  "
Competition in that industry has driven the need to create the reporting of 
basic comparative retail performance data."  It said that during times of 
industry "transition," regulators must have access to service data to prevent 
"backsliding."

The federal service-quality reports are often used in state proceedings 
evaluating the Ameritech Corp. telcos' service, the Michigan Public Service 
Commission said.  "These reports have allowed us to monitor [Ameritech's 
performance in] our state [and] compare . . .it to that of other states in a 
meaningful way."

The Ohio Public Utilities Commission supported the FCC's proposal to require 
ILECs to submit data that is more useful to consumers. The FCC had suggested 
that carriers report consumer-oriented data including time required for 
installation, maintenance, and repair of equipment.  The Ohio commission said 
ILECs wouldn't need to "develop or retain any data that they do not currently 
keep for their own business practices." 

End Users Say Data Is `Crucial'

End-user groups mostly opposed reductions in service-quality reporting, which 
they said gives customers a means of making informed decisions about 
telecommunications service providers.  Most supported various extensions of 
the FCC's data reporting rules.

The FCC should continue to require carriers to submit service-quality data 
that differentiates between business and residential customers, the General 
Services Administration said.  Responding to the rulemaking notice on behalf 
of federal agency telecom service customers, GSA said carriers also should be 
required to disaggregate data for urban and rural areas, since "these regions 
have different competitive conditions and cost characteristics," it said.

The Texas Public Utility Counsel, which represents business and residential 
customers in state and federal proceedings, said the FCC should extend 
service-quality reporting requirements to regulated DSL (digital subscriber 
line) services.  It added, however, that "neither consumers nor regulators 
would benefit significantly from an expansion of FCC service-quality 
reporting requirements to encompass" competitive local exchange carriers 
(CLECs).  It also urged the FCC to require companies to post their 
service-quality data on their Web sites and to notify customers periodically 
about the available information.

Siemens Medical Solutions Health Services Corp. said that making 
service-quality data available enables "consumers to distinguish among 
service providers and choose a vendor based on service and value."  ILECs 
should be required to submit data about "the length of time a customer has to 
wait on hold before speaking to a customer-service representative and the 
percentage of callers who hang up while waiting," Siemens said.

ILECs Not Enthusiastic

Incumbent local exchange carriers applauded the FCC's plan to reduce their 
reporting requirements, but they disagreed with many other aspects of the 
rulemaking notice, including the FCC's proper role in collecting the data and 
monitoring service quality and the FCC's plan to require carriers to provide 
consumer-oriented data.

The U.S. Telecom Association said the FCC's proposal would increase the level 
of detail required for the remaining six service-quality categories.  Despite 
the reduction in the number of categories, "it is unclear whether the 
reporting burden will be reduced," it said.

USTA also sharply disagreed with the FCC's statement that its "basic role in 
service quality is to serve as an efficient clearinghouse for information."  
USTA said that role was not statutorily defined and added that it's "unlikely 
that ARMIS reports, even a streamlined version, will be a primary source of 
information for consumers."

Under the biennial review process, "ILEC service- quality requirements must 
be based only upon a predicate of finding federal regulatory necessity in 
light of meaningful competition and the public interest," Qwest Corp. said.  "
This would exclude reporting elements claimed to  be `useful' or `helpful.'"  
The FCC should determine what the federal interest in service-quality 
reporting requirements is and eliminate all requirements that don't meet this 
standard, Qwest said.

Service-quality reporting requirements are "a perfect example of the type of 
obsolete regulation that Congress had in mind when it enacted" the biennial 
review provisions of the Act, Verizon Communications Corp. said. "Elimination 
of obsolete regulations is not optional-the Act states that the Commission `
shall' repeal or modify any regulation that is no longer necessary." 

Verizon accused the FCC of shifting the focus of the reporting requirements 
to consumers as a way of evading the Act's mandate to remove regulations that 
have outlived their usefulness.  "To concoct a new rationale for an obsolete 
rule evidences a lack of commitment to [the] biennial review," it said.

BellSouth Corp. suggested that service-quality reporting be done at the state 
level.  The categories the FCC has proposed leaving in place "relate to the 
provision of local service and therefore should be left to the state public 
service commissions to establish appropriate requirements for these 
categories," it said.

SBC Communications, Inc., was skeptical of the FCC's proposal to use ARMIS 
data to inform consumers.  The information in ARMIS reports isn't available 
to the public in an accessible format and doesn't allow customers to compare 
a wide range of carriers, SBC said. 

The Independent Telephone & Telecommunications Alliance, which comprises 
midsize ILECs, strongly objected to the FCC's proposal to extend 
service-reporting requirements to all its members.  The FCC currently 
requires only ILECs that are regulated by a price cap mechanism to file 
service-quality reports.

ITTA objected to the FCC's introducing the proposal during a biennial review 
proceeding.  "It is unclear under what authority the Commission seeks to 
extend service-quality reporting burdens to new classes of carriers and 
service providers" in such a proceeding, it said.

Imposing such conditions on carriers that serve less than 2% of the nation's 
access lines would place an unfair burden on small and rural carriers, ITTA 
said.  "Congress has long endorsed differentiating between LECs [local 
exchange carriers] on the basis of size," it added.

Requiring rural LECs to provide service-quality data isn't necessary, the 
National Telephone Cooperative Association said.  "Rural LEC customers living 
in small, closely-knit communities are intimately familiar with the quality 
of service provided by rural LECs.  It is hard to see how such data would be 
more valuable to consumers than the reputation a company has in its local 
market."

Small and rural carriers are "focused on their communities, and they respond 
quickly to problems because they are not insulated from the consumer by 
distance or size," NTCA added.

A group of small ILECs from Vermont said in a joint filing that they already 
submit service-quality reports to the state commission, and additional 
reporting requirements for smaller ILECs would be "an unnecessary and 
inefficient use of resources."  The carriers were Franklin Telephone Co., 
Ludlow Telephone Co., Northfield Telephone Co., Perkinsville Telephone Co., 
Shoreham Telephone Co., Topsham Telephone Co., Vermont Telephone Co., Inc., 
and Waitsfield-Fayston Telephone Co., Inc.

CLECs, IXCs Want More Data

Most CLECs had harsh words for the FCC's proposal to extend service-quality 
reporting requirements to other classes of carriers, including CLECs.  Most 
blasted the plan as favoring ILECs and pushed for additional reporting 
requirements.

"Streamlining regulations does not lead to a more competitive market but 
rather should be a response to a market that has already moved toward 
competition," the Association for Local Telecommunications Services said.  
Regulations should be reduced only to the extent that there is a "proven 
level of competition," ALTS said.

Some of the reporting requirements that the FCC is considering eliminating 
provide "vital" data to CLECs, ALTS said.  "The Commission's actions in this 
proceeding could also be setting a dangerous precedent" for other 
proceedings, it added.  It cited proceedings related to section 271 of the 
Act, under which Bell companies can apply for authority to provide in-region 
interLATA (local access and transport area) services once they open their 
local exchange markets to competition.

In future section 271 applications, the Bells "may argue that they are no 
longer required to report submetrics vital to OSS (operation support system) 
performance and [preventing] backsliding," ALTS said.

In joint comments, the Competitive Telecommunications Association, e.spire 
Communications, Inc., KMC Telecom, Inc., Net2000 Communications, Inc., XO 
Communications, Inc., and Z-Tel Communications, Inc., said the FCC's 
proposals would reduce regulation of ILECs while increasing regulation of 
CLECs.

"If anything, a review of the state of competition in the local exchange 
market reveals that the Commission should institute additional reporting 
requirements for ILEC provisions of [unbundled network elements] and 
wholesale services the CLECs," the CLECs said.

Measuring CLEC service quality is unnecessary, since CLECs are "beholden to 
the ILECs in their provisioning of services," Focal Communications Corp. 
said.  Requiring CLECs to report such data would "further hinder competition 
by placing an additional burden on carriers already experiencing difficulties 
competing with ILECs."

The FCC should use this proceeding as "an ideal opportunity to police the 
incumbents' market-opening behaviors," Covad Communications Co. said.  It 
suggested that the FCC collect data on ILECs' wholesale service quality and 
then use that data to "streamline the section 271 and enforcement 
processes."  This could "end the `he said, she said' battle of data 
reconciliation," it added.

Advanced TelCom Group, Inc., opined that the reasons the FCC mandated the 
reporting requirements "remain valid today."  It pointed out that increases 
in the reporting requirements had been included as conditions of the FCC's 
approval of several mergers involving large ILECs.  "It seems wholly 
inconsistent to increase the reporting requirements for SBC and Bell Atlantic 
[now Verizon] and, at the same time, propose reducing the reporting 
requirements for price cap LECs generally," Advanced TelCom said.

Making the reporting requirements voluntary, rather than mandatory, as the 
FCC suggested, "would defeat the purpose" of the requirements, Dynergy CLEC 
Communications, Inc., said.  The FCC's proposed changes of the reporting 
system "are unnecessary and will yield an inaccurate service picture of 
carrier performance."

CLEC reporting requirements aren't necessary, since CLEC customers are 
service-quality-sensitive, Teligent Inc., said.  "To the extent that a CLEC's 
service quality is not comparable to an ILEC's, its customers will migrate 
back to the ILEC and the CLEC will find itself without customers."

EarthLink, Inc., applauded the FCC's proposal to require ILECs to report 
service-quality data on the provisioning of DSL service.  "Limited reporting 
obligations for DSL services by large ILECs and their data affiliates would 
well serve the public with relevant service information, while reducing 
carriers' overall filing burden as compared to the current ARMIS 
obligations," it said. 

Retaining the current reporting requirements would bring "no material adverse 
consequences," AT&T Corp. said.  Meeting those obligations is not a 
significant burden for ILECs, it said.  "The systems seeded to generate the 
ARMIS data are already established and were funded by captive ratepayers 
years ago," AT&T added.  "In fact, introducing different reporting 
requirements may be more costly for the ILECs than maintaining the current 
ones, because any changes to current requirements will necessitate systems 
changes," AT&T concluded.

Interexchange carriers (IXCs) don't have "bargaining power to obtain 
good-quality access service provisioning from ILECs," WorldCom Corp. said.  
ARMIS data shows a "steady decline" in service quality from ILECs over the 
past two years, showing that "ILECs are engaged in precisely the type of 
behavior that the service-quality reports are intended to reveal:  maximizing 
earnings by reducing service quality," it said.

Time Warner Telecom, Inc., will be the first carrier...

Time Warner Telecom, Inc., will be the first carrier to deploy Lucent 
Technologies, Inc.'s WaveStar 1.6T, an optical networking system that Lucent 
said can transmit the equivalent of 320 million simultaneous one-page e-mail 
messages.  The competitive local exchange carrier has signed a $100 million, 
three-year agreement with Lucent to deploy the DWDM (dense-wave-division 
multiplexing) equipment. 

NECA DSL Tariff

The National Exchange Carrier Association, Inc., has filed its first FCC 
tariff transmittal for a DSL (digital subscriber line) promotional offering.

Under the terms of transmittal 888, the rural telcos that participate in NECA 
tariffs will waive the installation fee for asymmetric and symmetric DSL 
services for customers who agree to take the service for 12 months.

Rohde:  Spectrum Management Holds Key Challenge for Future

Spectrum management, including identifying and allocating spectrum for 
third-generation (3G) services, is one of the key issues facing federal 
regulators in the coming year, says Gregory L. Rohde, who last week finished 
his service as head of the National Telecom-munications and Information 
Administration.

At a news conference last week, Mr. Rohde discussed NTIA's achievements over 
the past year and its future challenges.  The Commerce Department agency 
outlined many of these points in the annual report it submitted to Congress 
last week.

Citing highlights from the past year, Mr. Rohde noted numerous 
spectrum-management issues, including ultrawideband (UWB) technology testing, 
the Clinton administration's effort to identify and allocate bands for 3G 
services (see separate story), and U.S. success at last year's World 
Radiocommunication Conference (WRC-2000).

Mr. Rohde also cited NTIA's efforts to bridge the "digital divide," its 
Technology Opportunities Program, and its work with the FCC to improve 
telecom access on tribal lands.   NTIA has revitalized its Minority 
Telecommunications Development Program, Mr. Rohde said, and it has worked to 
protect online privacy and raise awareness about online profiling.

Looking to the future, he stressed the importance of allocating 3G spectrum 
and said regulators must realize the implications of the shift from 
traditional telephony to data-transmission services.  He said the nation must 
continue to close the digital divide for Americans who don't have Internet 
access, and the universal service support system for "high-cost" areas must 
be reformed.

Mr. Rohde said the U.S. should reach out to developing countries, or it could 
find itself isolated in international telecom policy-making.  "I firmly 
believe that it's in our self-interest to work with the developing world to 
get more people online," Mr. Rohde said.

At the International Telecommunication Union's World Telecommunication 
Standardization Assembly last fall, the U.S. was the only ITU member country 
that objected to cost-sharing for international Internet interconnection and 
targets for international settlement rates (TR, Oct. 9, 2000).

`Datacasting' License Caps To Be Imposed in Australia

The Australian Communications Authority intends to impose ownership limits on 
"datacasting" transmitter licenses, which it expects to auction in the first 
half of the year.  

Datacasting providers would be limited to holding one license in each of the 
nation's eight datacasting service areas.  The regulatory body is putting its 
spectrum-allocation plans in final form.

Richard Alston, Minister of Communications, Information Technology, and the 
Arts, said Jan. 18 that ownership restrictions were necessary to ensure 
competition.  "At this early stage of a new industry, it is important to 
encourage the maximum amount of competition in the market, and this is best 
done by imposing a limit on the number of licenses that may be purchased by 
one player [`or its associates'] in each market," he said. 

Upon completing its spectrum engineering and allocation plans, the Australian 
Communications Authority probably will defer any further increases in 
spectrum availability in the eight service areas "until at least 2003," Mr. 
Alston said.  

Meanwhile, the government has lifted obligations under the Telecommunications 
Act of 1992 that would have required datacasters also to obtain carrier 
licenses.  These actions will "increase certainty for potential datacasters," 
he added.

The government hasn't ruled out allocating datacasting licenses in regions 
other than the eight specified service areas, "once the channel planning in 
regional areas has been completed," Mr. Alston said.

Nigerian Sale Yields $855M For Three Cellular Licenses

A Nigerian auction of three cellular licenses concluded Friday, Jan. 19, 
garnering $285 million for each license.  Spectrum auctions in Canada, New 
Zealand, and Venezuela are ongoing.

The winning bidders in the Nigerian auction were Communication Investments 
Ltd., Econet Wireless Nigeria Ltd., and MTN Nigeria Communications Ltd.  A 
fourth license was reserved for state-run Nitel and its Mtel mobile phone 
unit; the payment for that license also will be $285 million.  Five groups 
bid on the licenses, which were awarded after three days of bidding.

In other international spectrum developments, a Canadian auction of 
third-generation (3G) PCS (personal communications service) licenses opened 
last week and generated $262.9 million Canadian (US$173.8 million) in bids by 
Friday.  Seven companies are bidding on 62 licenses covering 16 markets.

In New Zealand, the first part of an auction for licenses in the 2 gigahertz 
band is over after no new bids for management rights were submitted (TR, Dec. 
25, 2000).  A second phase of the auction is upcoming.

And in Venezuela, an auction on a third group of five wireless local loop 
licenses continued with Empresa Nacional de Telecomunicaciones SA (Entel 
Chile) and Digicel CA winning licenses with bids of $1.5 million and 
$300,000, respectively (TR, Jan. 15).

BT To Prioritize Local Loop Unbundling in Top Exchanges

British Telecommunications plc has agreed to make unbundling the local loop 
in the urban exchanges most sought by competitors a top priority, the United 
Kingdom's Office of Telecommunications has announced.  

Oftel, which held a Jan. 18 meeting to discuss solutions to collocation 
problems often encountered by BT's competitors, also has launched an 
investigation into the costs of providing collocation space. 

Although Oftel last year modified BT's license to require local loop 
unbundling, "operators did not place as many firm orders for collocation 
space as had been anticipated," it said (TR, Aug. 14 and Nov. 13, 2000).

Some operators that ordered collocation space last year have decided not to 
pursue local loop unbundling, Oftel noted.  "Other operators want to wait 
until their top priority sites become available, while others were concerned 
about collocation costs," it said.  

Court Allows Mobile Phone Lawsuit To Continue

A U.S. District Court judge in Louisiana is allowing a plaintiff to go 
forward with a lawsuit that says the wireless industry should be required to 
include headsets with mobile phones to protect against the risks of radio 
frequency (RF) exposure.

The wireless industry had asked the court to dismiss the litigation on the 
grounds that the Food and Drug Administration's authority to oversee mobile 
phone safety preempts court involvement.  But Judge Ivan L.R. Lemelle of the 
U.S. District Court in New Orleans rejected that argument last week and 
allowed the case (Garrett J. Naquin et al. v. Nokia Mobile Phones, Inc., et 
al. case no. 00-2023) to proceed.  A separate lawsuit against the industry 
has been in filed in Maryland (see separate story).

The lawsuit, which was filed last year, says the mobile phone industry has 
known of the potential health risks of the devices and should be required to 
reimburse consumers who already have purchased mobile phones without headsets 
and to provide headsets to those who buy phones in the future.  It also seeks 
unspecified monetary damages for anguish and medical monitoring.

The lawsuit originally was filed in state court in New Orleans but was moved 
to federal court at the request of the wireless industry.  

New Orleans attorney Michael Allweiss told TR he planned to amend the lawsuit 
to add at least one more plaintiff.  He is asking the court to certify the 
lawsuit as a class action.

Notes on the News. . .

At the House Energy and Commerce Committee, Jessica Wallace has been named 
telecom counsel, and Chairman W.J. (Billy) Tauzin has tapped Nydia Bonnin to 
be deputy staff director.  Ms. Wallace was telecom counsel in Rep. Tauzin's 
personal office before he became chairman.  Ms. Bonnin previously was a 
senior finance adviser to the National Republican Congressional Committee, 
where she managed the NRCC's major donors program and staff.  Before that Ms. 
Bonnin was director-federal relations for Atlantic Richfield Co.

Gov. Gray Davis (D.) has appointed Geoffrey Brown to a seat on the California 
Public Utilities Commission, subject to Senate confirmation.  He would 
succeed Josiah Neeper, whose term expired Dec. 31, 2000.  Earlier this month 
Gov. Davis appointed his lead energy adviser, John Stevens, to fill the seat 
on an interim basis (TR, Jan. 8, notes).  Mr. Brown is the public defender 
for the city and county of San Francisco, a four-year elective office he has 
won six times.

Wisconsin Gov. Tommy G. Thompson (R.) has appointed Robert Garvin to a seat 
on the Wisconsin Public Service Commission, effective March 1, subject to 
state Senate confirmation.  Mr. Garvin has been PSC Chairperson Ave M. Bie's 
executive assistant.  He previously held staff attorney and legislative 
liaison posts at the commission.  He would succeed Commissioner John H. 
Farrow, who recently asked the governor not to reappoint him when his term 
expires in March.  Mr. Farrow plans to return to his faculty position at the 
Milwaukee School of Engineering.

Stanley T. Sigman has been named president and chief executive officer of 
Southwestern Bell Telephone Co.  His most recent position at SWBT was senior 
executive vice president-services.  Mr. Sigman succeeds J. Cliff Eason, who 
has retired after 30 years with parent company SBC Communications, Inc. 

Kymata Ltd. has announced that Brendan Hyland will step down as chief 
executive officer of the Scottish optical telecom system manufacturer.  Chief 
Operating Officer Michael Hickey has been named interim CEO.  

Aquis Communications Group, Inc., a Parsippany, N.J.-based paging company, 
has named Keith J. Powell president.  He was general manager of Adelphia 
Business Solutions, Inc.

Duncan Lewis has been named president and chief operating officer of Global 
TeleSystems, Inc. (GTS), a London-based international carrier.  Mr. Lewis was 
managing director and chief corporate development officer for Equant NV.  He 
succeeds Robert J. Amman, who will remain GTS's chairman and chief executive 
officer.  But after GTS completes its proposed restructuring (TR, Nov. 20, 
2000), Mr. Amman will become non-executive chairman, and Mr. Lewis will be 
the CEO.

Pedro Padilla has been named chief operating officer at Grupo Salinas, a new 
Mexico City-based management group with various telecom, Internet, broadcast 
TV, and wireless messaging assets in Mexico.  He was chief executive officer 
at the company's Grupo Elektra affiliate. 

Albert Cohen is the new chief operating officer at Tachion Networks, Inc., a 
West Long Branch, N.J., communications network equipment manufacturer.  He 
had been chief executive officer at Siemens AG's packet switching unit.

Jeffrey D. Lin has been named chief financial officer at Zaffire, Inc., a 
California optical network developer.  He was director and 
manager-investments at Vulcan Ventures, the investment firm of Microsoft 
Corp. co-founder Paul G. Allen.

John W. Gamble Jr. has been named senior vice president and treasurer at 
Agere Systems, Inc., the microelectronics group spin-off of Lucent 
Technologies, Inc.  He was VP and chief financial officer at Honeywell 
International, Inc.'s industrial controls unit.  Kevin Pennington was named 
senior VP-human resources.  He was executive VP-administration at Excel 
Communications, Inc.

Somera Communications, Inc., has named Brandt A. Handley vice 
president-international sales.   He was VP-international sales at Walt Disney 
Co.  Somera is a Santa Barbara, Calif., telecom equipment manufacturer.

Stephen Cardwell has been named director-national accounts at Touch America, 
the broadband telecom subsidiary of the Montana Power Co.  He comes to Touch 
America from WorldCom, Inc.'s national account team.  Mark Tippett was named 
director-carrier accounts. He most recently led Pathnet, Inc.'s dark-fiber 
sales team. 

Murray Simser has been named vice president-business development at Wireless 
Services Corp., a Bellevue, Wash., wireless platform manufacturer.  He was 
senior VP-international operations and co-founder of eAssist Global 
Solutions, a communications software manufacturer.

Loren Stokes was named vice president-research and development at Cierra 
Photonics, Inc.,  a California fiber optics integration technology 
manufacturer.  He was director-R&D at Hewlett Packard Co. spin-off Agilent 
Technologies, Inc. 

Wireless infrastructure operator Crown Castle International, Inc., has named 
John Binkley vice president and general manager of its new Illinois regional 
unit.  He was VP/GM-Kentucky region.

Advanced Remote Communication Solutions, Inc., has named David A. Brooks 
director-government markets for its Innovative Communications Technologies, 
Inc., subsidiary.  Mr. Brooks previously was project director for British 
Telecom Aeronautical and Maritime.

Timothy Lewis has been picked to lead a new wireless asset-tracking team at 
QUALCOMM, Inc.  The unit will focus on providing wireless communications 
technology to construction industry fleet-management operations.  Mr. Lewis 
was vice president and general manager at Tracsat, Inc. 

Dorothy McCarthy is the new head of telecom real estate initiatives at Global 
Broadband, Inc., a New York City integrated communications provider.  She was 
managing director-national real estate at OnSite Access, Inc. 

Regina M. Keeney, former FCC International Bureau Chief, has become a partner 
at the Washington, D.C., law office of Lawler, Metzger & Milkman.  Her 
practice will focus on telecom legislative and regulatory matters.  She most 
recently was chief policy counsel at Dell Computer Corp. 

Lauren J. (Pete) Belvin and Barry P. Miller have become members of the law 
firm of Wilkinson Barker and Knauer LLP.  Ms. Belvin joined the firm in 
September 2000, leaving her previous post as senior majority counsel for the 
Senate Commerce Committee's communications subcommittee (TR, July 10, 2000, 
notes).  Mr. Miller will lead Wilkinson Barker's intellectual property and 
Internet practice group.  He had been with the suburban Washington law firm 
of Shulman, Rogers, Gandal, Pordy & Ecker.  Wilkinson Barker also has hired 
12 new associates, the firm announced.

Ten attorneys from the Washington, D.C., law firm Greenberg Traurig have left 
the firm to join Akin, Gump, Strauss, Hauer & Feld's telecom and information 
technology practice in McLean, Va.  Eric Cowan, Richard Rubin, and Marjorie 
Connor were named partners; Glynna Parde and Joseph Triano were named 
counsels; and Roger Cepeda, Brad Haque, Alex Konde, Jeffrey Neuman, and Fadi 
Samman were named associates.

A New York City telecom/real estate law firm has joined forces with the New 
York law office of Mintz Levin Cohn Ferris Glovsky and Popeo P.C.  Jeffrey A. 
Moerdler, who has moved his private law practice to Mintz Levin, has become a 
partner and head of the firm's  telecom and real estate sections.  He brings 
with him seven lawyers:  Stephen E. Friedberg and Pamela Caruso Yerman, who 
will be partners; and associates Helen Allison, Lorette H. Dundas, Carolyn C. 
Jones, Rhona J. Kisch, and C. Anthony Mulrain. 

Pace A. Duckenfield has been named associate counsel at the United Telecom 
Council, an association that represents the telecom and information 
technology interests of critical infrastructure utilities.  He was staff 
counsel at the Alliance for Public Technology. 

The National Telephone Cooperative Association has named Aaryn Slafky 
director-communications.  She was manager-public affairs and Web coordinator. 

The Wireless Communications Association International has named Joey R. 
Weedon communications director.  He was deputy communications director for 
the national Republican Governors Association.

Patricia Mathis has been elected to the board of COM DEV International Ltd., 
a Canadian wireless communications systems manufacturer.  She's chief 
executive officer of Webley Systems, Inc., and president of Mathis, a 
communications planning and marketing consulting firm.

The current issue of the KMB Video Journal is titled Perspectives on Telecom 
Policies for the New Century - What can A Bush Administration Consider?  The 
program guest is Albert Halprin, partner at Halprin, Temple, Goodman & 
Maher.  Contact Mike Beilis at KMB, 3882 Belle Vista Dr. E., St. Pete Beach, 
Fla. 33706 or by phone at 727/367-2444, or get more information at 
http://www.kmbvideojournal.com.

Regulatory & Government Affairs

The FCC has accepted the applications of three prospective bidders for its 
auction of eight licenses in the "guard bands" surrounding public safety 
spectrum in the 700 megahertz frequencies.  The sale is scheduled to begin 
Feb. 13.  The Form 175 applications of Nextel Spectrum Acquisition Corp., 
Harbor Wireless LLC, and Pegasus Guard Band LLC have been accepted.  The 
applications of Access Spectrum LLC and PTPMS II Communications LLC are 
incomplete because of invalid attachments, the agency said.  Those two 
applicants must correct the minor deficiencies and submit the require 
up-front payments by Jan. 26. in order to participate in the auction.  
Companies whose applications have been accepted also must submit up-front 
payments by that time.  The licenses involved went unsold at an auction in 
September 2000.

The Commercial Wireless Division of the FCC's Wireless Telecommunications 
Bureau has extended the time to comment on the Real Access Alliance's motion 
for a stay of certain rules on access to multitenant buildings (TR, Jan. 
15).  The division said comments now will be due Jan. 26 in Wireless 
Telecommunications docket 99-217 and Common Carrier dockets 96-98 and 88-57.  
The Wireless Communications Association International had requested the 
extension.

The FCC's Wireless Telecommunications Bureau is seeking comments on two 
requests for waivers of the Commission's construction rules governing 900 
megahertz band licensees.  The rules require major trading area (MTA) 
licensees to provide coverage to at least two-thirds of their population 
within five years of being granted a license.  Neoworld License Holdings, 
Inc., is seeking an extension of the five-year deadline from Aug. 12, 2001, 
to Dec. 31, 2002.  FCI 900, Inc., a subsidiary of Nextel Communications, 
Inc., is seeking an extension from Aug. 12, 2001, to Aug. 12, 2004.  Comments 
on the requests are due Feb. 1 and replies Feb. 8.  Comments on FCI 900's 
request should reference DA 01-121 and comments on Neoworld's request should 
reference DA 01-122.

The FCC's Wireless Telecommunications Bureau is seeking comments on 
applications to transfer wireless licenses from Price Communications Corp. to 
Cellco Partnership (d/b/a Verizon Wireless).  Comments are due Feb. 16 and 
replies Feb. 26 in Wireless Telecommunications docket 01-8.  Comments should 
reference DA 01-120.

The FCC's Wireless Telecommunications Bureau is seeking comments on 
applications to swap licenses filed by Cingular Wireless LLC and VoiceStream 
Wireless Corp. (TR, Nov. 6, 2000).  Under the proposed transaction, Cingular 
subsidiaries would give PCS (personal communications service) spectrum in the 
Los Angeles and San Francisco markets in exchange for VoiceStream-controlled 
PCS spectrum in New York City, St. Louis, and Detroit.  Comments are due Feb. 
20 and replies are due March 2.  They should reference Wireless 
Telecommunications docket 01-10 and DA 01-135.

The FCC has established a comment schedule for a rulemaking notice that seeks 
comments on technology standards for public safety channels in the 700 
megahertz band (TR, Jan. 15).  Comments are due 30 days after publication of 
the notice in the Federal Register and replies are due 15 days after that in 
Wireless Telecommunications docket 96-86.

The FCC has signed agreements with BoatU.S. and MariTEL to distribute 
maritime mobile service identities (MMSIs) to operators of ships that aren't 
required to obtain individual licenses from the Commission because they don't 
have to carry a radio.  The action came after the FCC and the U.S. Coast 
Guard developed a standard agreement to use with the private parties.  MMSIs 
are nine-digit numbers assigned to vessels participating in the Global 
Maritime Distress and Safety System.

The Satellite and Radiocommunications Division in the FCC's International 
Bureau has added the Brasilsat A2 satellite operated by Empresa Brasileira de 
Telecomicacoes SA to its "permitted space station list."  That list covers 
all satellites with which U.S. earth stations are allowed to communicate 
without receiving special Commission authorization.  The division said the 
Brasilsat satellite would be added to the list with conditions that include 
its compliance with operational requirements.  The satellite is not 
authorized for use to provide direct-to-home or direct broadcast satellite 
(DBS) services, the division said last week in file no. 
SAT-PDR-20000111-00047.  The authorization was granted under the framework 
established in International Bureau docket 96-111 for considering requests 
from non-U.S. satellite systems to serve the U.S. 

The Telecommunications Division of the FCC's International Bureau has added 
Time Warner Telecom of Hawaii LP as a party to a cable landing license held 
by GST Telecom Hawaii, Inc.  The addition was made as a result of Time Warner'
s purchase of 12 fibers on GST's "Interisland" fiber optic submarine cable 
system linking Hawaiian islands.  Under the Cable Landing License Act and 
executive order 10530, the Division also granted the companies' request to 
modify the license to reflect the way the cable system actually was 
constructed.  The requests were granted in file SCL-MOD-20001025-00036.

Then-FCC Chairman William E. Kennard last week released a report summarizing 
the agency's efforts to help bridge the "digital divide" in developing 
countries.  Connecting the Globe: Telecommunications Development 2000 
chronicles the meetings, agreements, and plans for partnerships that the FCC 
reached during its global initiative in 1999-2000.  During his tenure, Mr. 
Kennard spearheaded an effort to assist his regulatory counterparts in other 
countries in developing telecom markets.  The report is available online at 
http://www.fcc.gov/ib/developinitiative.

The FCC's Wireless Telecommunications Bureau has rejected allegations by 
Pegasus Broadband Corp. that Northpoint Technology Ltd. and its subsidiaries 
violated the Commission's ex parte rules when they lobbied the agency to use 
the Ku-band to operate a terrestrial wireless system.  The Commission 
approved Northpoint's request in December 2000 (TR, Dec. 4, 2000).  In a 
memorandum opinion and order released Jan. 17, the bureau said that while 
Northpoint representatives' meetings with FCC officials were permitted under 
the ex parte rules, the company should have filed copies of notices of those 
meetings in the files of the relevant proceedings.

The FCC's Wireless Telecommunications Bureau has denied Metrocall, Inc.'s 
petition asking it to reconsider the approval of Arch Communications Group, 
Inc.'s acquisition of Paging Network, Inc. (TR, May 1 and Sept. 18, 2000).  
Metrocall had contended that Arch abdicated an impermissible level of control 
to its lenders as part of the transaction.  In an order on reconsideration 
released Jan. 18 in Wireless Telecommunications docket 99-365, the bureau 
dismissed the petition as untimely filed.

Bartholdi Cable Co., Inc. (formerly Liberty Cable Co., Inc.) has asked the 
FCC to reconsider its order affirming an administrative law judge's 
decision.  The ALJ had denied the company's 15 applications for private 
operational fixed microwave service (OFS) facilities and impose a $1.425 
million forfeiture for the company's lack of candor in connection with the 
applications (TR, Dec. 18, 2000, notes).  Filing its petition in Wireless 
Telecommunications docket 96-41, Bartholdi said the ALJ's findings were 
tainted and that the FCC's actions were excessive.

The FCC has granted Mescalero Apache Telecom, Inc., a waiver of its rules 
that will enable the carrier to receive high-cost universal service support 
based on the average cost of the 950 access lines it has acquired from Valor 
Telecommunications of New Mexico, Inc.  Those access lines serve the 
Mescalero Apache reservation in New Mexico.  Without the waiver, Mescalero 
only would be eligible for per-line support at the level Valor received 
before the acquisition.  Section 54.305 of the Commissions's rules says that 
a carrier acquiring exchanges from another carrier shall receive the same 
levels of per-line support for which the acquired exchanges were eligible 
before the acquisition.  The FCC cited low subscribership rates on the 
reservation and a great disparity in the amount of support Mescalero would 
receive with and without the waiver.

The Competitive Pricing Division of the FCC's Common Carrier Bureau has 
suspended for a day and added to an ongoing investigation a tariff revision 
submitted by Citizens Telecommunications Co.  Citizens had proposed in tariff 
transmittal no. 93 to adjust its expanded interconnection service rates for 
cross-connects, "including the unbundling of the DS3-DS1 multiplexing 
function."  The division said last week that the revision "raises the same 
issues regarding rate levels, rate structures, and terms and conditions" as 
those tariff transmittals already under investigation in CC docket 97-240. 

The Commerce Department and several high-tech firms have formed the 
Information Technology Information Sharing and Analysis Center (IT-ISAC) to 
work on critical infrastructure issues.  In announcing the group's formation, 
Commerce Secretary Norman Mineta said Jan. 16 that IT-ISAC would "enable the 
high-tech industry to take the lead in spotting potential threats to the 
Internet and information infrastructures, sharing state-of-the-art Internet 
and information infrastructure security measures, and responding in a more 
coordinated way."  Listed among the group's 19 "founding members" are AT&T 
Corp., Cisco Systems, Inc., Nortel Networks Corp., and Microsoft Corp.

Illinois Commerce Commission Chairman Richard L. Mathias has asked colleagues 
on four other state utility commissions how to respond to recent remarks that 
SBC Communications, Inc., officials made to financial analysts.  Mr. Mathias 
says the remarks raise "legitimate questions" about information that company 
officials previously presented to regulators in the five-state territory of 
SBC subsidiary Ameritech Corp.  According to Mr. Mathias, SBC Chairman and 
Chief Executive Officer Edward E. Whitacre Jr. told analysts late last month 
that Ameritech's service-quality difficulties stemmed from "an outside plant 
problem," citing lack of network capacity.  During an October meeting with 
state regulators, Mr. Whitacre had blamed service-quality problems on a lack 
of qualified technicians (TR, Oct. 23, 2000).

Legislators in Indiana, Maine, Virginia, Minnesota, and Arkansas are among 
the latest to introduce bills that would restrict the use of mobile phones 
while driving (TR, Jan. 15).  In addition, a Mississippi measure would make 
causing a traffic accident while using a wireless phone a misdemeanor subject 
to a fine of up to $1,000.

Ireland's Office of the Director of Telecommunications Regulation says that 
eircom plc has agreed to modify its definition of "available" collocation 
space.  The Irish carrier will take that definition into account "when 
planning development of space in its exchanges."  Eircom also has agreed to 
expand its list of equipment that competitors can deploy in its collocation 
spaces.  Finally, eircom agreed to permit sharing of collocation space by 
potential competitors.  The regulator requires eircom to make these changes 
in its Reference Access Offer document by Jan. 31.

The South Korean Ministry of Information and Communications has granted an 
international private leased circuit license (IPLC) to Korea Thrunet Co. 
Ltd.,  a Seoul-based broadband service provider.  Korea Thrunet plans 
initially to use the license for internal purposes.  Next year it will offer 
IPLC services via satellite and submarine cable to domestic and global 
customers. 

The United Kingdom's Office of Telecommunications has announced that four of 
the U.K.'s largest mobile network operators on the average complete 95% of 
calls placed on their networks.  Six-month surveys, which were carried out in 
consultation with Oftel and consumer groups, were performed by BT CellNet, 
One2One, Orange plc, and Vodafone Group plc.

Industry News

Level 3 Communications, Inc., intends to raise as much as $3 billion through 
the sale of common stock, preferred stock, debt securities, warrants, stock 
purchase agreements, or depositary shares.  The Broomfield, Colo.-based "
carrier's carrier" revealed its plan in a "shelf registration statement" 
filed with the Securities and Exchange Commission.  Further details will be 
disclosed in future filings.  Level 3 will use the funds for network 
construction, acquisitions, and other corporate expenses.

Sprint Corp.'s funding arm, Sprint Capital Corp. is preparing to raise $2 
billion through the sale of senior unsecured debt securities.  The proceeds 
will be used to refinance short-term debts.  The company did not give a date 
for the sale.

CIENA Corp. intends to raise $1.5 billion through the sale of stock, bonds, 
or other securities, the company said in a "shelf registration statement" 
filed with the Securities and Exchange Commission.  The Linthicum, Md., 
telecom equipment maker will use the funds for capital expenditures, 
acquisitions, and other corporate expenses.

American Tower Corp. says it is seeking to raise about $350 million through 
an institutional private placement of senior notes.  It expects to complete 
the offering later this month, subject to market conditions.  It says 
proceeds from the offering will be used to finance the construction of new 
towers, fund acquisitions, and for "general corporate purposes."

Genuity, Inc., is postponing plans to raise funds through the sale of debt 
securities while it assesses "the current slowdown in economic activity" and 
information technology spending, the company said.  Instead, it will fund its 
operations with money from cash reserves, bank loans, and its parent company, 
Verizon Communications, Inc.

Net2000 Communications, Inc., a competitive local exchange carrier based in 
Herndon, Va., plans to trim its workforce by 10% and delay some expansion 
plans to save money.  The expected savings of $80 million in 2001 will enable 
the company to operate into the third quarter of 2002 without additional 
financing, Net2000 said.

TruePosition, Inc., has filed a lawsuit alleging that SigmaOne Communications 
Corp. is infringing on three patents related to TruePosition's network-based 
wireless location systems.  The lawsuit, filed in the U.S. District Court in 
Delaware, seeks damages and an injunction prohibiting SigmaOne's further 
infringement of the patents.  SigmaOne officials could not be reached for 
comment.

InvestAmerica, Inc. (d/b/a Optica Communications, Inc.) has signed a 
nonbinding letter of intent to buy optical networking equipment valued at 
$675 million from Nortel Networks Corp.  The Utah-based start-up said it will 
deploy a 20,000-mile North American network during first quarter 2002.  It 
plans to expand globally.

Oy Nokia and America Online, Inc., have entered into a licensing agreement 
enabling AOL to develop and market Nokia's WAP (wireless application 
protocol) microbrowser "with AOL enhanced features."  The companies said they 
expected the Netscape-branded microbrowser to be used in a "wide variety" of 
mobile devices.

British Telecommunications plc has raised $9.1 billion through the sale of 
bonds in Europe, generating cash to repay short-term borrowings.  The bonds 
were sold in four tranches with terms ranging from three to 15 years.

Qwest Communications International, Inc., has signed a contract to provide 
network capacity in the U.S. to Cable & Wireless plc, a London-based global 
telecom carrier.  Qwest, which said it sold about $90 million worth of 
capacity to C&W last year, placed a $100 million value on the new contract.

Nippon Telegraph & Telephone Corp. subsidiary NTT Com has agreed to form a 
data center joint venture with Shin Corporations Public Co. Ltd., a Thai 
telecom conglomerate.  Each partner will hold a 47.5% stake, and Saha Pathana 
Inter-Holding Public Co. Ltd. will have 5%.  The venture will be capitalized 
at 1.72 billion yen (US$14.5 million). 

Lucent Technologies, Inc., is selling portions of its manufacturing assets in 
Poland to APW Ltd., a Wisconsin electronics infrastructure manufacturer.  APW 
will acquire 215,000 square feet of Lucent's global provisioning center in 
Bydgoszcz, Poland, for an undisclosed sum.  APW agreed to offer jobs to all 
300 of Lucent's employees at the site. 

A group of multichannel multipoint distribution service (MMDS) operators in 
Latin America are creating an alliance to promote the industry.  The founding 
members of Latin American Networking serve more than 40.9 million households, 
or 36% of households in the region.

Pangea Ltd. says it will lease a 1,250-mile "dark" (unpowered) fiber link to 
Arrowhead AB, a Swedish broadband communications provider.  The Bermuda-based 
"carriers' carrier" will provide Arrowhead an "end-to-end link between 
Copenhagen [Denmark] and Stockholm [Sweden]."  Arrowhead will use the fiber 
capacity to expand its reach throughout Scandinavian markets.

Global One has signed an interconnection agreement with Latinet, a broadband 
and Internet service provider.  The pact will enable Global One to provide 
frame relay service in Ecuador and Panama.  

360networks, a British Columbia-based global network operator, has acquired "
dark" (unpowered) fiber in Berlin and Munich, Germany, and Zurich, 
Switzerland, from Carrier1 International S.A.  The purchase is part of a $175 
million contract signed last year in which the companies agreed to sell fiber 
and capacity to one another between North America and Europe.

Advanced Radio Telecom Corp. of Bellevue, Wash., says that its ART Nordic AB 
subsidiary will team up with a Swedish broadband communications company to 
provide IP (Internet protocol) service in Norway.  ART Nordic will make 
available its fixed wireless IP network  to Utfors Bredband AB of Stockholm, 
which will use the system with its fiber optic infrastructure. 

FCC Reauction

Net bids in the FCC's ongoing reauction of 422 "C" and "F" block PCS 
(personal communications service) licenses hit $16.8 billion at the end of 
bidding Friday, Jan. 19 (TR, Jan. 15).  The action continued to slow down, 
with only 27 new bids submitted in the 73rd round.

Verizon Wireless still led all bidders, offering $8.8 billion. It was 
followed by Alaska Native Wireless LLC, which is partly owned by AT&T 
Wireless Services, Inc., which bid $2.8 billion.  Salmon PCS LLC-partly owned 
by Cingular Wireless LLC-bid $2.3 billion.

The highest bids continued to be for licenses in the largest market, New York 
City, with Verizon Wireless the high bidder on two licenses there and Alaska 
Native Wireless the top bidder on a third.

Thirty-seven bidders remained eligible after bidding was completed Jan. 19.  
The reauction has moved into a phase that requires bidders to be more active 
in each round to retain their bidding eligibility.

In a related development, the FCC affirmed its decision last year to modify 
its rules for C and F block auctions (TR, Aug. 28, 2000).

In an order on reconsideration released in Wireless Telecommunications docket 
97-82, the Commission denied five petitions for reconsideration of the rules 
changes, which allow large entities to bid on some licenses while reserving 
others for small businesses known as "designated entities" (DEs).  The FCC 
said the changes balanced the needs of both large and small carriers.

Infostrada Acquisition

The European Commission has approved Enel Holding SpA's acquisition of 
Infostrada SpA from Vodafone Group plc.  It said Jan. 19 that the transaction 
wouldn't harm competition in the telecom and Internet markets.  

Enel, an Italian telecom and electricity provider, intends to merge 
Infostrada into Wind Telecomunicazioni SpA, an Italian telecom joint venture 
of Enel and France Telecom.  The commission acknowledged that the merger 
would create overlaps in the fixed telecom and Internet service markets in 
Italy, but said "the overlaps are not such as to lead to any creation or 
strengthening of a dominant position." 

Interconnection Dispute

The FCC has agreed to preempt the Virginia Corporation Commission in a 
dispute over an interconnection agreement between WorldCom, Inc., and Verizon 
Virginia, Inc. (TR, Oct. 30, 2000 p.37).  WorldCom had asked the FCC to act 
on the matter after the Virginia commission refused to arbitrate the terms of 
the parties' interconnection agreement.  

The state commission had cited uncertainty over whether the immunity from 
federal court review granted by the 11th Amendment to the U.S. Constitution 
applies to such proceedings. 

The Virginia commission had said it was concerned that arbitrating the 
dispute would be deemed a waiver of its immunity under the 11th amendment.  
The FCC released its decision late Jan. 19 in Common Carrier docket 00-218.  

Meanwhile, in a separate, undocketed order, the FCC also granted additional 
discretion to its own arbitrator when it has preempted a state commission's 
authority over an interconnection dispute, as it did in the Virginia case. 

What's Ahead. . .

JANUARY

23-Comments are due to the FCC's Wireless Telecommunications Bureau on a 
draft programmatic agreement that aims to streamline the review of antenna 
collocations under the National Historic Preservation Act (TR, 1/8/01 p.21).  
Filings should reference DA 00-2907.  The FCC may take action on the final 
agreement around Jan. 29.

23-The FCC's Wireless Telecommunications Bureau holds a bidding seminar to go 
over bidding procedures for the March 6 auction of licenses in the 700 
megahertz band.  The bureau plans to hold a test of the package bidding 
system Jan. 24-26 (TR, 1/8/01 p.25).

24-Comments are due to the FCC on two requests for waivers of its "study 
area" definitions (TR, 1/8/01 p.21).  Replies are due Feb. 5, and filings 
should refer to Common Carrier docket 96-45.

26-Comments are due to the Office of the U.S. Trade Representative on the 
effectiveness of several international telecom trade agreements (TR, 1/15/01 
p.32).  The USTR expects to complete its assessment of telecom trade accords 
by March 31.  For more information, call 202/395-9620.

26-PENNSYLVANIA:  Administrative law judge's decision is expected in a 
proceeding to implement structural separation of Verizon Pennsylvania, Inc.'s 
wholesale and retail operations (TR, 12/11/00 p.25).

28-31-The Association for Communications Enterprises holds its winter carrier 
forum in Palm Desert, Calif.  For more information, go to 
http://www.ascent.org.

29-New deadline for Verizon Communications, Inc., to submit to the FCC a 
report on its compliance with a condition placed on the merger that created 
the company (Bell Atlantic Corp. and GTE Corp.)  The original deadline was 
Dec. 27, 2000.  The report must address Verizon's compliance with a condition 
governing its provision of unbundled network elements and line-sharing 
agreements (TR, 12/25/00 p.35).

29-Feb. 1-The annual ComNet conference and expo is held in Washington.  For 
more information, go to http://www.comnetexpo.com.

30-The Federal Trade Commission and the Electronic Retailing Association hold 
a seminar in Tysons Corner, Va., to go over FTC rules regarding Internet 
marketing.  For more information, call Eric London at the FTC at 202/326-2180.

30-The Broadband Wireless Internet Forum holds a meeting in London.  For more 
information, go to http://www.bwif.org.

30-The initial meeting of the FCC's advisory committee on the 2003 World 
Radiocommunication Conference is held in the Commission's meeting room.

FEBRUARY

2-The National Telecommunications and Information Administration holds a 
workshop in Washington to discuss the 2001 Technology Opportunities Program.  
It will hold a similar workshop in Denver on Feb. 6, and in St. Louis on Feb. 
8.  Registration information can be found on NTIA's Web site:  
http://www.ntia. doc.gov.

5-The U.S. Court of Appeals in Washington will hear oral arguments in 
National Exchange Carrier Association, Inc., v. FCC (case no. 00-1055).  NECA 
is challenging the FCC's December 1999 decision rejecting NECA's proposed 
modifications to the 1999 "average-schedule" Universal Service Fund formula 
(TR, 10/9/00 p.36).

6-New deadline for the Universal Service Administrative Co. to file at the 
FCC its financial projections for the second quarter of 2001.  Original 
deadline was Jan. 30 (TR, 1/15/01 p.39).

7-Comments are due to the United Kingdom's Office of Telecommunications on 
whether to impose additional conditions on Cable & Wireless plc's operator 
license for certain international routes (TR, 1/15/01 p.32).

7-Deadline for Telenor AS to exercise its option to sell its 49.5% stake in 
Esat Digifone to British Telecommunications plc for a 33% stake in Esat 
Telecom Group plc (TR, 12/11/00 p.35).  Telenor and BT agreed to extend the 
deadline from Dec. 7, 2000.

8-The FCC holds a meeting.

8-Section 275 of Telecommunications Act prohibits Bell operating companies 
from providing alarm monitoring services until this date (TR, 11/17/97 p.7). 
The Act grand-fathered alarm monitoring operations existing as of Nov. 30, 
1995.

8-FCC begins phasing in rate increases under a two-step methodology for 
setting pole attachment rates based on "usable" and "unusable" space (TR, 
2/2/98 p.33).

13-The FCC's Wireless Telecommunications Bureau holds an auction of eight 
700-megahertz band licenses that weren't bought at the "guard-band" auction 
(TR, 10/16/00 p.38).

NTCA Makes Push for MAG Plan, Lifting Caps on Universal Service

Policy-makers need to realize that even though rural telcos serve only a 
small percentage of the telecom market, their operations cover nearly 40% of 
the nation's land and, in many cases, they're entering multiple lines of 
business.  That's the message the National Telephone Cooperative Association 
is carrying to the FCC and Congress as it seeks to garner more federal 
support for some of its pet projects.

On Capitol Hill, NTCA plans to revive its legislative push to eliminate caps 
on the amount that individual carriers are eligible to receive in universal 
service support, says Chief Executive Officer Michael Brunner.  The 
association is considering broadening that proposal to include a broadband 
tax credit plan, he says.

At the FCC, the group's most pressing concern is getting quick adoption of 
the multiassociation group (MAG) plan for overhauling the interstate access 
charge system for telcos operating under rate-of-return regulation, Mr. 
Brunner tells TR.  An edited transcript of our conversation follows.

TR:  What are NTCA's top priorities for the 107th Congress?  Should we expect 
to see your proposal from the last Congress to lift the universal service cap?

Brunner:  The answer is yes.  As you know, we were instrumental in working 
with [Sen. Conrad] Burns [R., Mont.] in getting that bill introduced in the 
last session.  Obviously that's a priority again, as the Rural Task Force has 
sort of come up with half a loaf in recommending an index cap.

We see the Rural Task Force plan as better obviously than the current 
situation, but we see it causing a problem down the road.  For example, if a 
lot of acquisitions occur-and I think they will-then there's going to be a 
need to upgrade all those lines.  

The current cap won't be adequate to do that, and we hope the Commission, 
under any circumstances, wouldn't go below what the Rural Task Force is 
recommending.

TR:  That effort garnered bipartisan backing from key U.S. senators last 
session.  What's your strategy for expanding congressional support for it in 
the 107th Congress?

Brunner:  One way to do that might be to go back to the drafting of the 
Telecommunications Act of 1996, when Congress really understood that we have 
to give equal weight to the twin goals of competition and universal service.  
Our feeling is that this Commission and the past Commissions, perhaps, may 
have given more weight to competition and less to universal service.

It's real clear in the statute that Congress thinks those issues are equally 
weighted, and whether or not people like it, things cost more in rural 
America.  If we really want to bring broadband services to all Americans, we 
can't do it without some kind of support.  

And if Congress is saying on the one hand, "Deploy advanced services," it 
seems odd to say on the other hand, "We're going to limit this cap, limit the 
support."

Rep. Nathan Deal [R., Ga.] was our key guy in the House on this last year, 
and Sen. Burns in the Senate.  We're working with a lot of other people, too, 
to see if we can't be more comprehensive this time around.

For example, another key component of our plan could be some kind of tax 
credit or a low-interest [Rural Utilities Service] loan.  And rather than 
have one bill address this part and one for that part, we may have all of 
those wind up in one comprehensive package.

On the broadband tax credit plan, the idea is to develop. . .a bill that 
would enable carriers to claim a fairly substantial credit for deploying 
broadband services to rural areas.  We don't want it to be technology- 
specific, where you end up with something that seems to favor one technology 
over the other.

I don't want to be too specific because we're still working with a number of 
our own members to work out the details.  We don't have a perfect package 
yet. . .and I don't think it would be hugely expensive.  We realize no one's 
going to go for a big spending bill, especially with the economy sort of 
turning right now, or potentially turning.

But we're still moving forward on this.  Our annual meeting will be held the 
first week in February, and that's when we're really going to start hashing 
out some of these things and talking about some overall policy resolutions.

TR:  One thing you haven't mentioned is a deregulatory approach to broadband 
service deployment.  Why?

Brunner:  We really haven't been drawn to that approach for a lot of reasons, 
one being that we think a broadband tax credit bill is a more targeted 
approach that really gets at the issue.  If the policy-makers really want to 
deploy broadband services nationwide, and they say they do, this is the way 
to help us to do it.

TR:  Staying on the congressional front, what's NTCA's reaction to Fred Upton 
[R., Mich.], who has limited telecom experience, being named chairman of the 
House Energy and Commerce Committee's telecommunications subcommittee?

Brunner:  We're excited about Fred Upton being in that role.  He does have 
some rural parts to his district; in fact, some of our own commercial telco 
members are up there-Bloomingdale Telephone Co. of Bloomingdale, Mich., and 
Climax Telephone Co., of Climax, Mich.

Also, the ratio now in the House is about 14 urban members to one rural 
member.  So whenever you get a person with some rural territory in a key 
telecom policy-making slot, NTCA is thrilled.  We think that Mr. Upton will 
do a good job and hope he'll be sensitive to NTCA's issues.

TR:  I understand that you've been consulting with members of Congress about 
the MAG plan and that some senators have asked the FCC to put it on the front 
burner.  What kind of time line do you have in mind for action on the MAG 
plan?

Brunner:  We want to move it quickly.  We've spent a lot of time, as have 
other trade associations, getting our members on board.  It was a grueling 
process, and I think the product's pretty good.  So our feeling, at this 
point, is that we really want the whole thing adopted as is.

We're not comfortable backing off any part of it.  If the Commission does 
back off or review it, then we reserve the right to say, "Stop, and let's 
look at it again."

The main thing is keeping the process moving.  It's easy for things to get 
bogged down in the regulatory or congressional processes.  We have many 
friends on Capitol Hill, mainly in the Senate, where so many members have key 
rural areas in their state.  The main message right now is, "Let's keep the 
MAG plan moving."

Most people think it'll probably take six months to a year to get the whole 
thing through.  The other wild card, to some extent, is the Rural Task Force 
report, which is moving along on a fast track.  There's some commonality 
between those two.  Our dream-although we thought it probably wasn't super 
likely-was that the Commission would just simply adopt the MAG plan as is.

TR:  What about the expected turnover at the FCC?  How do you see that 
affecting the Com-mission's consideration of the MAG plan?

Brunner:  It could go a bunch of different ways.  You could get someone 
coming in who says, "A lot of real smart people spent a lot of time on this, 
and rather than reinvent the wheel, I'm more inclined to support it."

Or you could get someone else who says, "I don't understand all this, and I 
want to start from square one and take my time."  We just don't know who the 
players are going to be.  I expect some of the current Commissioners still 
will be there.

TR:  Most believe Commissioner Michael K. Powell will be tapped to fill the 
vacant chairman seat, at least initially.  Have you gotten any feedback from 
his office about his position on the MAG plan?

Brunner:  Not really.  We've visited the staffs of all the Commissioners, and 
most of them weren't real specific on [the plan].  So we certainly want to 
give him and others the benefit of the doubt.  We hope they would view it 
favorably.  I think everyone will respect the work that went into it, even if 
they don't agree with it.

TR:  Let's talk about your recent white paper recommending that universal 
service "high-cost" support be "nonportable" [TR, Jan. 15].  How did you come 
to this conclusion, and where do you go with it?

Brunner:  What we've got there is a study with some actual data.  It shows 
that introducing competition in rural areas is ultimately going to lead to 
less broadband technology deployment.  

Our next step is to try to convince regulators that artificial competition 
doesn't work.  If there's an actual market for more than one carrier, then 
indeed consumers might benefit.  But there aren't great public benefits, as 
we see it, to artificially creating competition where markets don't 
ordinarily permit competition as a matter of course.

Our point is that sometimes the regulators try to take an urban solution and 
inject it into rural America.  It makes sense to induce competition in 
downtown areas like Los Angeles or Chicago, where the average Bell company 
has anywhere from 130 to 150 customers per mile.  But we only have four or 
five or six per mile-very small numbers.

We would argue that it's hard for one carrier to really make it in these 
markets.  And if they force a second one or a third one in, it splits up the 
business even more, and no one's going to have the wherewithal to deliver 
broadband services.

One of our main themes on Capitol Hill and at the Commission is that 
policy-makers need to appreciate the fact that rural areas are different.  
Most policy-makers, as you might imagine, have an urban background. . .Our 
job is to continue to try to educate people about the differences between 
urban and rural areas.

We've done that with some success.  For example, we've had several of the 
Commissioners come out and speak at our meetings, spend time with our 
members, talk with them one-on-one.  [Commissioner Harold W.] 
Furchtgott-Roth, for example, came out and visited a small telco with us.  We 
really look for opportunities to give them a greater appreciation of these 
kinds of things.

Going back to Congress, we also want to really caution people not to reopen 
up the Telecommunications Act or to pass a new Act until some of the key 
rural issues are resolved.  We're now going on five years since passage of 
the Telecommunications Act, and some of our members still can't plan because 
they don't know about [the outcome of] access charge reform.  As you know, 
our members get better than 50% of their revenues from access charges.

The biggest decisions for the new Commission will be on high-cost support and 
access charge reform.  Both the MAG and the Rural Task Force plans have 
touched on that.

TR:  Switching gears to the incoming Bush administration, how do you foresee 
the Department of Agriculture's Rural Utilities Service [RUS] developing over 
the next few years?  Will there be major changes?

Brunner:  Actually, to be honest, no one knows.  My sense is that the RUS no 
longer is the political issue it used to be because when people look at it, 
they're seeing that the cost of that program is so minute.  It's somewhere 
around $6 million or $7 million in interest subsidies for about $600 million 
in loans.

And everyone thinks it does work well; there's never been a default.  So I 
don't sense we're going to have an effort, as was made in the Reagan 
administration, to really cut back on some of these things.  I could be 
totally wrong, but my sense is it has enough respect and support on both 
sides of the aisle.

Plus, the lending no longer is simply for the same "plain old telephone 
service"; it's now for some new things.

TR:  Let's talk about NTCA's membership.  What kind of efforts are under way 
to accommodate some of your members' non-ILEC [incumbent local exchange 
carrier] operations?

Brunner:  Many years ago there were questions about how our members would 
adapt to change in competition.  My sense is that they're adapting quite 
well, as almost all of them are in multiple lines of business.  They're 
becoming Internet service providers, many of them are in the cable TV 
business, most of them have wireless or broadcast satellite operations, some 
are resellers, and many are becoming CLECs [competitive local exchange 
carriers].

They've gotten into multiple lines of business, so they are becoming, in a 
lot of ways, more than ILECs.  We've broadened our approach to assist them in 
some other areas.  So it's a very active membership, some more than others.

We have a new initiative called C3A.  It's really an effort to get members 
who are thinking more competitively to get together and perhaps aggregate 
their businesses with things like volume discounts.  

I've been very pleased with our membership's willingness to grow and change.  
For a while I thought they just might want to keep doing things the same old 
way that has always worked for them.  But they really are changing.

We're not the biggest player.  We're only about 5% of the industry, but it 
really is a critical 5%.  We represent roughly 40% of the land in this 
country, but it's a unique and critical part.

We would just really hope that the policy-makers would make it a priority to 
understand that the 5% we serve is as important as the whole.  That's 
something that some people miss.

Executive Briefings

The New FCC? - Speculation is rife that a decision on the FCC top spot is 
imminent, as FCC transition team advisers meet to discuss potential changes 
at the agency.  (Page 3)

Biennial Regulatory Review - The FCC asks its staff to prepare proposals to 
eliminate or streamline a broad range of rules, including those governing 
intercarrier compensation for terminating telecom traffic, wireless licensing 
terms and renewals, and international service tariffs for nondominant 
interexchange carriers.  (Page 5)

FCC Gridlock? - Although the departure of FCC Chairman Kennard leaves the 
agency temporarily with four members-two Republicans and two Democrats-
Commissioner Furchtgott-Roth doesn't expect the agency to be deadlocked.  
(Page 6)

Ultrawideband Technology Testing - Ultrawideband devices can likely operate 
in spectrum between 3 and 6 GHz without harming incumbent users, including 
fixed satellite service operators, according to NTIA test results.  But NTIA 
says that steps to mitigate interference would probably be necessary.  (Page 
7)

Mobile Phone Litigation - Noted attorney Peter G. Angelos enters the legal 
fray against the wireless industry over the safety of mobile phones.  Mr. 
Angelos files an amended lawsuit on behalf of a Maryland doctor who claims 
that using a mobile phone caused his brain tumor.  (Page 8)

Spectrum Relocation Reimbursement - NTIA proposes procedures under which 
federal government spectrum incumbents would be reimbursed if they relocate 
to other bands to make way for commercial users.  NTIA Administrator Greg 
Rohde says the rules could bolster efforts to identify and allocate spectrum 
for "3G" services.  (Page 9)

State Immunity - The Fifth Circuit joins a chorus of appeals courts in ruling 
that the U.S. Constitution doesn't protect state utility commissions from 
federal judicial review of their decisions regarding carrier interconnection 
agreements.  (Page 11)

InterLATA Bid Redux - Verizon officials are counting on new data to satisfy 
regulators' concerns about its application to provide interLATA services in 
Massachusetts.  Verizon again asks the FCC to allow it to enter that market; 
it withdrew its earlier application last month.  (Page 13)

Interactive TV Inquiry - Although the market for high-speed interactive TV 
services is in the early stages of development, the FCC hopes to stay "ahead 
of the curve" by collecting information on the status of the ITV market and 
whether it should regulate it.  (Page 14)

Qwest-BellSouth Alliance - It was the rumor du jour 21 months ago:  BellSouth'
s purchase of a 10% stake in Qwest meant the companies might merge.  Times 
have changed, however, and BellSouth now is cashing in much of its Qwest 
investment to raise $1 billion for other projects.  (Page 15)

Qwest Performance Data - Qwest says it has improved its service to end-user 
customers and other carriers in key areas-including those that have come 
under fire from consumers and regulators.  The company cites new data and 
announces four permanent line-sharing pacts.  (Page 15)

NorthPoint Bankruptcy - NorthPoint Communications doesn't expect to emerge 
from bankruptcy as an independent entity but has asked a bankruptcy court to 
allow a "structured sale" of its assets.  One analyst expects bids from 
McLeodUSA, XO Communications, and interexchange carriers seeking local 
broadband infrastructure.  (Page 16)

Reseller Discrimination Case - A federal appeals court upholds a lower court 
decision directing AT&T to pay $2.1 million for discriminating against a 
reseller in favor of its own retail customers.  (Page 17)

WorldCom Customer Settlement - WorldCom agrees to pay $88 million to 
customers who claim they were overcharged by being billed nonsubscriber 
rates.  (Page 17)

Globalstar Trouble - A skeptical teleconference audience confronts Globalstar 
Chairman and CEO Bernard Schwartz as he announces the company's plan to 
suspend payment on its debts.  Investors demand to know why they shouldn't 
force the company into bankruptcy.  (Page 18)

Asian Networks - A Washington, D.C.-based international telecom lawyer says 
that "creative financing" is necessary to get capital for telecom 
infrastructure projects in Asia.  He unveils a white paper recommending 
combinations of funding methods such as vendor financing and export credit 
agency support.  (Page 18)

Brazilian Wireless Merger - Portugal Telecom plans to expand its Brazilian 
presence by acquiring wireless operator Global Telecom, which operates 
networks in the Parana and Santa Catarina states.  Those states are neighbors 
to Sao Paulo, where Portugal Telecom already offers wireless service through 
its Brazilian subsidiary, Telesp Celular Participacoes.  (Page 19)

Intelsat Privatization - Intelsat CEO Conny Kullman says the group is gearing 
up for privatization by building technological and regional flexibility into 
its business plans.  (Page 19)

WorldCom-Intermedia Merger - The transaction clears its final federal 
regulatory hurtle as three FCC bureaus approve license transfers related to 
the proposed transaction.  It still needs additional state regulatory 
approvals, and WorldCom is facing a lawsuit from Digex minority shareholders 
seeking to block the transaction.  (Page 20)

Rhythms Cutbacks - Rhythms NetConnect-ions intends to reduce its expected 
losses this year by 15%, to $395 million, by cutting 450 employees-or 23% of 
its workforce-and by suspending operations in about 20 of its smaller 
markets. (Page 20)

Reciprocal Compensation - Level 3 and SBC agree on a two-tiered reciprocal 
compensation rate scheme designed to resolve disputes about payments for 
terminating dial-up calls to Internet service providers.  (Page 21)

More Trouble for IXCs? - The financial future of interexchange carriers 
continues to be clouded by downward pressure on rates for voice long distance 
service, analysts say.  That pressure will intensify-and will begin to affect 
data service, too-as new entrants like Global Crossing and Level 3 
Communications finish building new networks.  (Page 22)

700 MHz Band Auction - Citing a host of concerns, Verizon Wireless asks the 
FCC to delay until September the auction of spectrum in the 700 MHz band.  
The auction currently is scheduled to begin March 6.  The FCC sets a Jan. 24 
deadline for comments on the request.  (Page 24)

Cellular License Revocation - Judges on a federal appellate panel express 
skepticism at a former cellular licensee's argument that the FCC wrongly 
revoked its license for falsely maintaining that all its partners were U.S. 
citizens.  (Page 25)

CLEC Access Charges - Many CLECs seem resigned to the FCC's adoption of a "
benchmark" rate essentially capping the access charges they can levy on 
interexchange carriers.  But they hope the FCC will take a cautious approach, 
recognizing that they often have higher costs than ILECs, particularly if 
they serve rural areas.  (Page 26)

Service-Quality Reports - The FCC's proposal to reduce service-quality 
reporting by ILECs gets a resounding thumbs-down as state regulators, 
end-user interests, and competitive carriers argue the need for the data.  
Even the ILECs-which likely would benefit from the reductions-object to 
portions of the plan.  (Page 28)

NTIA's Assessment -  Spectrum management, including identifying and 
allocating services for 3G services, is one of the key issues facing federal 
regulators in the coming year, says NTIA Administrator Greg Rohde.  (Page 32)

NTCA's Agenda - CEO Michael Brunner says NTCA will make a big push to get 
more members of Congress on board with its plan to repeal caps on universal 
service support and to approve a broadband tax credit bill.  At the FCC, he 
says NTCA's main concern is adoption of the MAG access charge plan.  (Page  
41)
Copyright 2001, Telecommunications Reports International, Inc. All rights 
reserved.