WASHINGTON-Wireless carriers are renewing their fight for relief from new regulations and taxes levied by cities and states, while manufacturers find themselves caught in the crosshairs of a dispute headed for Capitol Hill between the mobile-phone industry and public-safety community over the latter’s efforts to secure a block of highly valuable spectrum otherwise slated for auction by early 2008.
Off to a good start
The cellphone sector got off to fast start on the tax front, with Sens. John McCain (R-Ariz.) and Jim DeMint (R-S.C.) introducing legislation on the first day of the 110th Congress that would mandate a three-year moratorium on new discriminatory wireless taxes by states.
“Today, the average wireless user in America pays more than 14 percent of his or her monthly bill in taxes and fees. This is an indefensible level of taxation for most any product, let alone one that allows more than 225 million Americans to constantly stay connected and in touch with the world around them,” said Steve Largent, president of cellphone industry association CTIA.
While the McCain-DeMint bill is apt to attract strong opposition from state and municipal lobbyists, the measure could gain traction in a new, Democratic-led Congress that must score points with the middle class-a key contingent of the cellphone-equipped country-the next two years to retain power. Likewise, McCain and Sens. Ron Wyden (D-Ore.) and John Sununu (R-N.H.) proposed legislation to make permanent a ban on multiple and discriminatory taxation on Internet access and online sales.
Pre-emption battles
At the same time, wireless operators likely face an uphill battle trying to persuade Congress to expand federal pre-emption of states in a way that essentially establishes for the first time a national regulatory framework for the cellular industry. A provision doing just that was included in the GOP-crafted telecom bill that died in the last session of Congress.
While federal pre-emption inherently tends to be controversial, a bigger challenge could be simply getting any telecom reform legislation through Congress. Net neutrality, ground zero for telecom reform debate last year, will be even more combustible in the new Congress owing to key Democratic support for what critics say is unnecessary regulation of the Internet.
With Internet access increasingly migrating from desktop computers to wireless devices, the cellular industry does not want to be hit with new net-neutrality regulations and plans to fight attempts to make it a mainstay of telecom legislation this year. While it fends off net-neutrality backers, industry will attempt to shape efforts in Congress and the Federal Communications Commission to shape universal service and inter-carrier compensation reform.
Universal service
Congress began to move on revamping the universal service fund last week, led by a Republican lawmaker who led the Senate Commerce Committee in recent years. Sen. Ted Stevens (R-Alaska), vice chairman of the panel now headed by Sen. Daniel Inouye (D-Hawaii), introduced a bill that would roll all communications technologies into the universal service program. The move is directed at protecting rural states, major beneficiaries of the universal service fund subsidies.
“Through the years our nation’s universal service program has ensured that rural Americans, including residents of Alaska, have access to basic telephone and cellphone service,” said Stevens. “The universal service program is essential to bringing broadband, distance learning, and telemedicine to rural Alaska, as well as the rest of our nation. The bill will ensure that schools, libraries and health clinics in rural Alaska and the rest of the nation continue to receive universal service funds on a timely basis.”
Stevens also introduced legislation to expedite the availability of previously authorized $43 million in funding for new 911 technological upgrades.
While the stakes are high in Congress, they are arguably higher at the FCC and in the courts. In some instances, the workings of the legislative, regulatory and judicial branches will intersect-and most likely clash.
The FCC and the courts
Late last month, FCC Chairman Kevin Martin-poised to face greater congressional scrutiny-said he wanted to move forward on various wireless issues such as industry’s call to ban state regulation of early termination fees; rules for the auction of 60 megahertz of spectrum in the 700 MHz band; and safeguards to prevent unauthorized access to consumers’ phone records by third parties fronting as phone subscribers. The FCC is believed to be close to issuing new regulations requiring wireless and wireline carriers to better protect proprietary subscriber information.
Wireless carriers have been hit with lawsuits and incurred the wrath of states over early termination fees, charges of several hundred dollars imposed by operators on subscribers who break their service contracts. The industry maintains ETFs fall within the rate regime. A 1993 law forbids states from tampering with wireless rates or market entry, but reserves to states oversight of “other terms and conditions” of commercial wireless service.
“We believe [ETFs] isn’t an issue that concerns consumers,” said Christopher Guttman-McCabe, vice president of regulatory affairs at CTIA.
With a federal appeals court repealing the FCC’s pre-emption of state regulation of line-items on wireless bills, it is unclear how the agency will proceed. Industry is taking the case to the Supreme Court next month.
CTIA strategy
Guttman-McCabe said industry will be working with the FCC on advanced wireless services licensing-specifically the relocation of licensees from recently auctioned advanced wireless services spectrum to new frequencies-and on getting service rules in place prior to the auction of 60 megahertz of spectrum in the 700 MHz band. Congress mandates that auction be conducted by Jan 28, 2008. The relocation process is also crucial to wireless broadband operators, some of whom are being forced to move to new radio channels.
But there are obstacles. A small business lawsuit is pending in federal appeals court that could overturn the results of the AWS auction, a potentially huge risk for No. 4 cellphone operator and top bidder T-Mobile USA Inc. Moreover, the public-safety community plans to aggressively lobby Congress in hopes of securing half of the 700 MHz spectrum headed for auction. Public safety already has 24 megahertz in the 700 MHz band coming its way, but first responders say they need additional frequencies to support broadband applications.
The public-safety spectrum fight represents a quandary for telecom vendors that sell to cellphone carriers as well as to local and state governments. “We walk a very fine line,” said Danielle Jafari, general counsel and chief of government affairs at the Telecommunications Industry Association. But when push comes to shove, TIA opposes any changes to the 700 MHz law. Jafari said TIA will be pressing for policies to accelerate broadband deployment throughout the country and encourage federal funding of more telecom research and development.
