Senate Commerce Committee Draft Bill Sets April 7, 2009 as DTV Transition "Hard Date" to End Analog Broadcasting; House Energy & Commerce Committee Submits Staff Draft Bill for Overhauling Voice, Video and Internet Service Regulation
I. Senate Commerce Committee DTV Transition Draft Bill
A draft bill introduced by Senate Commerce Committee Chairman Ted Stevens (D. Alaska) sets April 7, 2009 as the so-called “hard date” to end analog television broadcasting in favor of digital broadcasting (“DTV”). The Communications Act (“Act”) currently sets the date at December 31, 2006 or such later date when at least 85% of the households in a market have a DTV receiver. No one expected the transition to occur by the end of 2006, with recent debate focusing on December 31, 2008 as the hard date for the transition. That date was pushed back to avoid interfering with football bowl games and the NCAA basketball tournament, which ends on April 6, 2009.
The relatively short (five-page) draft bill affirms the current Act’s requirement that part of the recovered analog spectrum be allotted for public safety services, with the remaining portion to be auctioned to the public for digital, wireless or other services, beginning as soon as January 28, 2008. Recovered analog spectrum auctions are expected to bring in billions of dollars in revenues. The draft bill provides that a portion of those auction proceeds are to be used for programs to: (1) assist consumers in the purchase of converter boxes that would convert DTV signals for reception on analog receivers; (2) convert low power television (“LPTV”) stations and translators from analog to digital; (3) facilitate emergency communications; (4) implement the ENHANCE 911 Act of 2004 (an essentially unfunded law that authorizes coordination of federal, state and local emergency 911 services); and (5) provide assistance to coastal states affected by hurricanes and other natural disasters. This bill was motivated in large part by Hurricane Katrina and the perceived need to better coordinate emergency communications to respond to natural disasters.
Although the Senate Commerce Committee is expected to discuss this bill as early as this week, it does not deal with many of the difficult issues concerning the DTV transition, such as the impact of multiple video streams on the cable “must carry” requirements or the so-called “broadcast flag.” Sen. Stevens is said to be planning to introduce a companion bill to address some of these issues, whic h may not be appropriate for inclusion in a budget reconciliation bill, such as this one. However, the omission of such provisions from this bill, and the House “Overhaul” draft bill discussed below, may make it more difficult for proponents of “multicasting” carriage requirements or the broadcast flag to obtain legislation on these issues.
II. Analysis of House Energy & Commerce Committee Staff “Overhaul” Draft Bill
On September 15, 2005, the staff of the House Energy & Commerce Committee released a draft rewrite of substantially all non-broadcast federal communications law. The so-called “Broadband Internet Transmission Service” or “BITS” draft shows a potential willingness to substantially deregulate most Internet Protocol services. Although the draft has not been introduced, it has already been critiqued by many in the affected industries and will surely undergo revision before it proceeds further in the Committee process. Nevertheless, this draft serves as an alert that the Committee may consider profound disruptions of many legacy regulatory structures. This analysis summarizes how some digital voice, video, and other broadband packet-switched services might be removed from most local, state and federal regulatory requirements and be subjected to streamlined federal registration requirements, while some similar services might continue to carry the burden of legacy regulations.
A. Executive Summary
- Broadband Internet Transmission Service (“BITS”)
The bill takes its name from the foundation concept of a Broadband Internet Transmission Service (“BITS”). BITS is two-way packet-switched internet protocol service that is intended to encompass pure transmission (like DSL) and well as integrated information services like cable modem service. BITS using TCP/IP or similar protocols would be exempt from all federal, state, and local regulation of entry, rates, terms and conditions of service, except for simple FCC registration. But the draft would impose: regulated interconnection in lieu of peering; “Net Neutrality;” new customer service standards issued by the FCC; local rights-of-way management; and local franchise fees. Telecommunications carriers who are also BITS providers would still be subject to UNE, co-location and special access tariffs. Details are in Part D of this analysis.
- VOIP Service
Packet–switched voice service using TCP/IP or successor protocols and Internet delivery to NANP phone numbers would be exempt from all federal, state, and local regulation of entry, rates, and terms and conditions of service, except for simple FCC registration and required interconnection for voice traffic. E911, Relay, customer service and Universal Service requirements would be set in new rulemakings. Details are in Part C of this analysis.
- Broadband Video Service (“BVS”)
Providers of “integrated” packages of packetized, customizable IP-based video, voice and data and customizable Internet access, would be exempt from traditional local franchising but subject to franchise fees on all revenue and to a subset of operating rules similar to those applicable to cable operators, including PEG, must carry, program access, home wiring, and separable security. At first glance, the BITS bill seems to share the goal of the Ensign bill (see Update dated August 29, 2005) to allow rapid ILEC entry into video services. However, according to the drafters, the technology that defines “BVS” is not one utilized by Verizon, SBC, or any other entity, but is a new integrated architecture designated by the government. Just as it is unclear which technologies and packages would actually be subject to such streamlining, it is unclear how current cable operators could opt into such deregulatory structures, whether or not they offer similar packetized triple-play services. Details are in Part B of this analysis.
B. Broadband Video Services
BVS Defined. Broadband Video Service is a two-way interactive service that includes a video programming package integrated with voice, data and customizable Internet access services. The definition is not a model of clarity. According to the drafters, the technology that defines “BVS” is not one currently utilized by any provider. But as written, it suggests that packets must be delivered to the subscriber premises, rather than converted to RF at a network hub. The definition seems to demand integrated packages, but leaves vague what authority is required to sell customers less than the full package. It suggests technological neutrality, but appears focused on televisions while indifferent to personal computers and over-the-top providers. It envisions leaving incumbent cable operators with legacy cable franchising and potentially streamlining regulation for one governmentally-picked IP architecture.
BVS Deregulated. Although the FCC would retain general and exclusive jurisdiction over BVS providers, neither the FCC nor any State or local government would be permitted to regulate BVS rates, terms or conditions, including market entry. Instead, BVS providers would register with the FCC (copies to any local franchising authority and state PSC). Registration would become effective in 30 days (in the existing style of Open Video Systems) unless the application is incomplete, the applicant has violated federal or state law or FCC rules; or the FCC determines the applicant’s offering would “harm consumers,” a standard left undefined. Registration would replace local franchising generally, including any current local franchise. But local franchising is not quite dead, even for BVS. Authority to operate starts 15 days after the local franchising authority (“LFA”) receives not only FCC notice that the registration is effective and designation of a local BVS agent, but a local franchise bond payment and BVS agreement to ill-defined local PEG requirements. The FCC would set uniform terms of duration for BVS franchises, plus renewal, termination and transfer procedures.
Redlining. The draft prohibits BVS redlining, but leaves “to be determined” any affirmative requirements for build out of a franchise area.
Franchise Fees. LFAs would be permitted to assess a 5% franchise fee not only on BVS video revenues but on integrated voice, data and Internet services. There are the usual exclusions (e.g., bad debt, rebates) but other accounting issues are murky. Franchise fees could be disclosed on subscriber bills.
ROW Management. LFAs would be permitted to impose reasonable time, place and manner restrictions on BVS providers’ construction and maintenance of facilities. Disputes would be resolved at the FCC.
Bonds and Other Security. To ensure compliance, LFAs could require bonds, security funds, letters of credit, insurance, indemnification, and penalties or liquidated damages, subject to FCC rule and dispute resolution.
PEG Access Channel Capacity. Upon LFA request, BVS providers must designate “capacity” on the system for public, educational and governmental (“PEG”) use in the local franchising area, so long as the use is comparable to the obligations the LFA imposes on any cable operator or other BVS provider. While channel capacity is addressed, there is no similar provision for capital expenditures or other PEG support, nor explicit sunset of PEG support by incumbents in current cable franchises.
Institutional Networks. LFAs may require institutional channels on BVS systems for nonresidential connections, but may not require BVS providers to construct I-Nets. By contrast, the draft perpetuates cable operator obligations for existing I-Nets even if the cable operator later converts to BVS. Thus, the bill sweeps aside the objections that many cable operators have about the legality of I-Net demands under current law, and aggravates a competitive disparity.
Rate Deregulation. There would be no rate regulation applied to BVS providers.
Ownership. BVS would be subject to the (already-suspect) laws imposing “horizontal” limits on ownership of cable systems (subscriber count) and the “vertical” requirements that limit the number of affiliated channels that a cable operator may carry. BVS providers would not be subject to the provisions restricting cable operator acquisition of SMATV systems, or to the law that allows state and local government to consider the effect of the sale of a BVS system on local competition.
Signal Carriage. Retransmission consent, must-carry, network non-duplication, and syndicated exclusivity rules would all apply to BVS providers as they do to cable operators. The basic tier of BVS programming would be required to include broadcast signals and any PEG access channels.
Content of Programming. BVS providers would be required to provide political candidates with equal opportunities and lowest unit rates, honor V-chip, and identify sponsors.
Blocking and Scrambling of Channels. BVS providers must block channels upon request, and scramble the audio and visual of any subscription programming.
Emergency Alert Services. EAS requirements applied to cable operators and broadcasters would apply to BVS.
Home Wiring. The laws governing the disposition of home wiring and wiring inside of apartments would apply to BVS.
Consumer Electronics Compatibility & Navigation Devices. BVS providers must meet the old analog rules imposing consumer electronics “compatibility” requirements on set-tops and remotes, and the newer digital consumer electronics rules requiring separated security (e.g., CableCARDs) in set-tops and other navigation devices. BVS would also face a new rule for “navigational device neutrality,” and could not omit any broadcaster or unaffiliated programmer from menus or guides.
EEO. The FCC’s cable system Equal Employment Opportunity requirements would apply to BVS.
Customer Service. The draft would require the FCC to create national customer service requirements for BVS (as well as VoIP and BITS) including: notice of changes of services and rates; billing clarity, late fees, negative options; service termination procedures and termination penalties; standards for appointments and outages; subscriber records and complaints; and dispute resolution. These requirements would be enforceable (but could not be changed) by the states. Cable operators would continue to be subject to widely different customer service standards set by LFAs, including requirements governing telephone answering, local offices, and many others.
Program Access. BVS would be subject to the existing program access rules that limit exclusivity and require non-discrimination among MVPDs, and extend the rules to prohibit BVS providers from acquiring exclusive or more favorable programming rights from affiliated programmers, similar to the restrictions on cable operators. DBS would still be the beneficiary of MVPD protections but would have none of the limits on exclusivity. The FCC is instructed to establish a new BVS rule, similar to cable, that prevent demands for equity, coercion and discrimination against non-affiliated programmers.
C. Broadband Internet Transmission Service
Definitions. BITS is defined as a two-way packet-switched service (including TCP/IP and successor protocols but excluding TDMA). It does not include video programming packages (see BVS, above). BITS is not tied to a particular technology platform, capacity or speed but would include DSL and cable modem service. Although the bill distinguishes between “BIT” and “BIT” service, the distinction is not the same as the current distinction between “telecommunications” and “telecommunications service.” Under the BITS bill, an information service int egrated with telecommunications would be BITS, and subject to a suite of rules that would not be imposed on cable modem service or DSL today.
BITS Subject to Net Neutrality. The draft imposes a “Net Neutrality” regime on BITS. As in the “Net Neutrality” statement from the FCC (see Update dated August 12, 2005), subscribers would have access to lawful content, applications and service provided over the Internet, along with the right to connect devices of their choosing. This would be subject to the explicit right of BITS providers to manage their networks, provide premium services, limit customers to particular service offerings, block spam, offer parental controls, and prevent theft. The bill is not clear on the implied right of network operators to enforce terms of service and enforce equipment certification regimes (e.g., for DOCSIS modems). As with all incarnations of network neutrality, the bill does not identify any actual problem that needs to be addressed by the proposed statute.
Registration. Although the FCC would retain general and exclusive jurisdiction over BITS providers, neither the FCC nor any State or local government would be permitted to regulate BITS rates, terms or conditions, including market entry. Instead, all BITS Providers would be required to register with the FCC (and send copies to state PSCs). Registration is effective in 30 days and service may commence as soon as effective. Existing BITS providers would have a temporary waiver to continue operating for the period required for registration. Registration could be denied by the FCC only if an application is incomplete; the applicant has violated federal or state law or FCC rules; or the FCC determines the applicant’s offering would “harm consumers.” New FCC rules setting uniform terms of duration for BVS franchises (plus renewal, termination and transfer procedures) would impact BITS provided by BVS providers.
Rights-of-Way. Rights-of-way management is different for BITS and BVS. BVS ROW management is limited to time, place and manner. BITS ROW management is identical to Section 253(c) allowing state and local governments to charge “fair and reasonable compensation” in a competitively neutral and non-discriminatory public manner for “nondiscriminatory access” to the rights-of-way There is no indication that the “compensation” would be equivalent to the 5% franchise fees on BVS providers’ Internet revenues, thus setting a disparity between franchise fees paid by integrated BVS providers and ROW management fees paid by stand-alone BITS providers.
Interconnection. Each BITS provider would have the right and duty to interconnect and exchange all “traffic” with other BITS providers and telecommunications carriers, imposing a statute on an area handled today by peering agreements. (By contrast, VOIP would have only voice interconnection rights—apparently even if the call is enhanced with video). BITS providers that are also telecommunications carriers would have the right to access UNEs and collocation and would qualify for special access tariffs (like current ISPs and ESPs). The draft is silent on the issue of reciprocal compensation or bill-and-keep for BITS traffic. The FCC would establish procedures for oversight of coordinated network planning by BITS providers and end- user device interconnectivity.
D. VOIP Services
Federal Registration Preempts State Regulation. VOIP services under the bill appear to be a subset of BITS, are subject to state laws of general applicability (including state taxes), but otherwise are subject exclusively to federal jurisdiction. Neither the FCC nor any State or political subdivision would be permitted to regulate VOIP entry, rates, or terms or conditions. VOIP Providers would be required to register with the FCC, including current VOIP Providers. VOIP registration (including information to be developed by the FCC) would also be filed with a state commission but would become effective 30 days after public notice by the FCC with no action possible by a state commission. VOIP registration could be denied only if the applicant fails to submit required information; if the applicant has violated FCC rules or federal or state law; or the FCC determines the applicant’s offering would harm consumers.
Exchange of Traffic. The draft establishes that VOIP Providers no longer have to obtain CLEC certification to negotiate with ILECs to exchange traffic. However, the bill does not extend full interconnection rights (e.g., single point of interconnection, unbundled network elements, resale, wholesale discounts, opt in rights) to VOIP Providers. Instead the bill addresses mutual traffic exchange for voice traffic only. Each VOIP Provider would have the right and an affirmative duty to exchange voice traffic with other VOIP Providers and telecommunications carriers, on either a reciprocal compensation or bill and keep basis. The reciprocal compensation rate for VOIP traffic would be determined by the FCC.
VOIP Providers and telecommunications carriers would have a duty to negotiate in good faith toward a traffic exchange agreement and could not refuse to negotiate. The FCC (for interstate traffic) or a state commission (for intrastate traffic) would mediate after a 30-day negotiating window, and compulsorily arbitrate after a 90-day negotiating window. Compulsory arbitration would be limited to traffic exchange issues. The FCC or appropriate state commission would have 90 days to render a decision. The FCC draft permits appeals of state commission decisions to the FCC. Under the draft, VOIP services and prospective subscribers would be accorded number portability in accordance with new FCC regulations.
E911. Under the draft, the FCC would develop national standards for 911 and E911 service, taking into account technical and operational feasibility. Each VOIP Provider would have a duty to ensure its subscribers have access to 911 and E911 in accordance with FCC regulations. Portable (or “nomadic”) VOIP services the FCC finds not to be technologically capable of providing 911 or E911 service would disclose same via clear and conspicuous notice at time of contract. The FCC would have to complete within 9 months of enactment a proceeding concerning technical and operational feasibility of 911 and E911 for portable VOIP services. States could impose VOIP fees but only if such a charge is obligated for 911 or E911 service or enhancements.
Relay Services. The draft requires that the FCC ensure that 24-hour relay services are available to VOIP service subscribers who have hearing or speech disabilities to the extent possible, after a rulemaking to be concluded within 6 months of enactment. VOIP Providers would have to provide relay services throughout its entire service area within 18 months of enactment, either individually or in concert with other VOIP Providers. Current State-operated relay programs could continue.
Universal Service. Within one month of enactment the FCC would be required to initiate an inquiry to determine if VOIP Providers should be included in the contribution base for USF. The FCC would have 6 months to complete its inquiry, and if the FCC concluded VOIP Providers should be subject to USF assessments, the agency would have to conduct a rulemaking to govern VOIP USF assessments, to be concluded within 6 months of the end of its initial inquiry.
E. Pole Attachments
The draft would grant BITS providers access to utility poles, ducts, conduits and rights-ofway, subject to the right of electric utilities to deny access for capacity and safety reasons. BITS providers that own poles, ducts, conduits and rights-of-way and who also allow any third party attachments must also provide other BITS providers, BVS providers, cable operators, and telecommunications carriers non-discriminatory access to those facilities. The bill does not clearly apply limits on the rates, terms and conditions of attachment.
F. Municipally-Owned BITS, VOIP and BVS T
The draft would invite municipal entry to broadband by preempting state statutes, the socalled “Dillon’s Rule” (limiting local governments in 35 states to powers enumerated in state statute) and court decisions that prohibit or have the effect of prohibiting “public providers” from offering BITS, VOIP and BVS. The bill would also subject public providers to all laws or regulations that apply to private BITS, VOIP or BVS Providers. The draft also includes a level playing field requirement for public providers relating to ROW use, permitting, performance bonding and reporting. But it punts on any federal rule against cross-subsidization, leaving the provision “to be determined”. The draft defines public provider very broadly, and appears to include private entities so long as they are “affiliated” with a state or political subdivision.
G. General Provisions
Customer service / consumer protection. The FCC would be required to issue new rules establishing national consumer protection standards with respect to BITS, VOIP and BVS. These standards would cover disclosure of rates, terms and conditions for service and equipment; limit early termination penalties; specific time appointments for installation and service interruptions; complaint recordkeeping; subscriber dispute mechanisms; SPAM; VOIP solicitations; obscenity and indecency. Current telephone harassment law (47 U.S.C. § 227) would continue in force, except that current penalties would not apply to BITS, VOIP or BVS providers. State commissions may enforce the FCC’s rules but could not set any new standard or expand any FCC standard.
Privacy. The draft adopts most of the current provisions relating to cable privacy (Section 631, 47 U.S.C. § 551) with some additions and inconsistencies. “Personally identifiable information” is expressly defined for the first time to include not only name and address but a host of other identifiers. The draft omits some Patriot Act amendments, so it is not clear if governmental subpoenas would be effective for BITS and VOIP providers’ subscribers’ personally identifiable information and account records. The bill also adopts the current statutory regime requiring telecommunications carriers to protect customer proprietary network information “CPNI” (47 U.S.C. § 222) with some modifications. The draft expands the definition of CPNI beyond telecommunications service to include BIT, BITS, VOIP, and BVS, so all providers would have to protect the confidentiality of information relating to the type, quantity, configuration, destination, location and amount of use of such services. The draft would also specifically authorize VOIP service providers to use CPNI to provide location information for “portable” VOIP users and require the disclosure of subscriber list information to emergency service providers and directory publishers (with subscriber permission). Video subscriber mailing lists would be subject to opt-in rules, while VOIP listings must be disclosed. A VOIP provider may create a public directory with permission from each subscriber to be included and must provide unlisted service. Aggregate CPNI would be disclosable under the draft.
ADA Compliance. BITS, VOIP and BVS equipment and service must be ADA-compliant, but the draft changes the standard from “readily achievable” to the more stringent “undue burden” test for accessibility. The FCC would be required to adopt rules governing compliance within one year of enactment.
If you have any questions or would like to further discuss the implications of either the draft DTV Transition or draft House Energy and Commerce Committee legislation, please contact us.