December 2012

In comments to the Federal Communications Commission, AT&T and Verizon Wireless argued against rules that would reduce how much spectrum carriers can hold in certain markets. Meanwhile, smaller carriers pushed for proposals that would limit the spectrum holdings of the nation's two largest carriers.

The FCC is considering changes to its so-called spectrum-screen, which it uses when reviewing spectrum transactions. If a carrier acquires too much spectrum and violates the screen, the deal is more closely scrutinized. Currently, the screen is different for each proposed transaction. The FCC voted in late September to open up a review of its rules.

• Verizon said in its comments that the FCC should build on the strengths of the current system by including a "safe harbor providing certainty for transactions that do not exceed the screen, while enabling more detailed review of markets triggered by the screen for potential competitive harm." Verizon said the FCC should reject a spectrum cap "which is an inherently inflexible tool ill-suited to the dynamic spectrum market, and which can block spectrum transactions that are clearly pro-consumer."
• AT&T said the FCC should update the screen "to include all of the available spectrum that is 'suitable' for mobile wireless services," and specifically include spectrum that Clearwire (NASDAQ:CLWR) controls when it makes that consideration. AT&T also wants the FCC to "reaffirm that the 'safe harbor' provided by the screen is truly safe," meaning that the FCC "will not entertain spectrum aggregation-related challenges to any proposed spectrum acquisition that does not exceed the safe harbor level." The FCC also needs to update its screen to reflect the realities of the market, and the screen should reflect that it is "simply not realistic to assume that any holding of more than a third of the available spectrum in any market may create a risk of market foreclosure."
• In contrast, Sprint said Verizon and AT&T have aggregated around 75 percent of the spectrum for wireless below 1 GHz, and that the FCC should treat this spectrum differently. Sprint said the FCC "should adopt a cap for spectrum below 1 GHz that would apply prospectively to both commission spectrum auctions and secondary market transactions, including the incentive auction the commission will be conducting for broadcast TV spectrum.

On November 30, the major TV broadcasters made their second attempt to shut down Aereo, the digital TV service that was funded in great part by Barry Diller and launched this past March.

Arguing before a 2nd Circuit Court of Appeals panel, the challenge for the broadcasters was clear: They needed to convince the judges that a technology that already has been judicially certified as likely to irreparably harm the broadcasters also ran afoul of copyright laws. To this end, attorneys for the broadcasters spoke of Congress' intent when lawmakers crafted the legal underpinnings of the modern television industry. They also attempted to distinguish Aereo's system from a judicially blessed technology that was reviewed four years ago by the same appellate circuit.

Federal Communications Commission Chairman Julius Genachowski said that his goal is still to vote the Dish item by the end of the year. That is the FCC decision to open up satellite spectrum -- including that held by Dish -- for terrestrial mobile broadband use, but with restrictions Dish says could "cripple" its business plans. Asked at a press conference about the Dish item, which the chairman has circulated for a vote by the other commissioners, Chairman Genachowski said that if he did succeed in getting it voted by then it would be "by far the fastest the commission has ever resolved a rulemaking like this," but added: "We are still committed to getting this done by the end of the year." According to reports, he has already voted to approve the item, along with fellow Commissioner Jessica Rosenworcel.

The Federal Trade Commission announced publication of an Interim Final Rule on identity theft “red flags” that narrows the circumstances under which creditors are covered by the Rule.

Congress directed the FTC, along with several banking agencies to develop regulations requiring “financial institutions” and “creditors” to develop and implement a written identity theft prevention program. By identifying “red flags” for identity theft in advance, businesses can be better equipped to spot suspicious patterns that may arise -- and take steps to prevent potential problems from escalating into a costly episode of identity theft. Under the Rule, Red Flag Programs must have four parts. First, the Program must include reasonable policies and procedures to identify signs – or “red flags” – of identity theft in the day-to-day operations of the business. Second, the Program must be designed to detect the red flags of identity theft identified by the business. Third, the Program must set out the actions the business will take upon detecting red flags. Finally, because identity theft is an ever-changing threat, a business must re-evaluate its Program periodically to reflect new risks from this crime. The agencies promulgated the Red Flags Rule in 2007. In December 2010, Congress enacted legislation narrowing the definition of “creditors” covered by the Rule. The amended Red Flags Rule now provides that a creditor is covered only if, in the ordinary course of business, it regularly:

• Obtains or uses consumer reports in connection with a credit transaction;
• Furnishes information to consumer reporting agencies in connection with a credit transaction; or
• Advances funds to or on behalf of a person, in certain cases.

The Commission is seeking comment on the Interim Final Rule for 60 days. After the expiration of the 60-day comment period and a review of the comments received, the Interim Final Rule will become final.