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Should regulators have a problem with Sprint being owned by a Japanese cell phone provider?

Posted October 12th, 2012 in FCC, Government Regulation, spectrum, Sprint and tagged , , by Alton Drew

The New York Times yesterday reported that Japanese telecommunications company SoftBank is in merger talks with Sprint, possibly to invest up to $12.5 billion for a 70% stake in the company. On the surface, I don’t see a regulatory problem with such merger unless the Federal Communications Commission is ready to buck precedence on foreign companies owning U.S. operations.

The first issue will be whether Sprint will be directly or indirectly controlled by any other corporation of which more than one-fourth of the capital stock is owned of record or voted by aliens, their representatives, or by a foreign government or representative thereof, or by any corporation organized under the laws of a foreign country. If the answer to the first issue is yes, then the second issue will be whether the public interest will be served by the refusal or revocation of such license.

The Federal Communications Commission will make its determination based on the following criteria. First, the FCC will determine if the claimed benefits of the transaction are actually related to the transaction. There must be likelihood that the benefits result from the investment and the benefits would unlikely result from other means that entail less anti-competitive effects.

Second, the claimed benefits must be verifiable. The parties must be provide sufficient evidence supporting each claimed event so the FCC can verify the likelihood of the benefits and their magnitude.

Finally, where there are substantial and likely harms from the transaction, the parties must demonstrate that the benefits they claim will result from the transaction must reveal a higher degree of magnitude and likelihood.

Right now Sprint and SoftBank are just talking, according to the Times report. We should have some idea as to what they claim the transactions benefits will be over the next several days.

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Orange County hasn’t made its interference case against wireless carriers

Posted September 26th, 2012 in AT&T, Broadband, FCC, Government Regulation, spectrum, Sprint and tagged , , , , , by Alton Drew

The Orange County, California Sheriff’s Department would like the Federal Communications Commission to reconsider its order that provided spectrum management flexibility in the 800MHz band. Orange County argues that authorizing early testing and deployment of wideband CDMA in the non-reconfigured portion of the 800MHz band has caused interference with their public safety communications.

CDMA refers to Code Division Multiple Access, a mobile phone technology that uses code on the receiver’s end to separate out the calls. A newer version called wideband CDMA or 3G GSM requires wider channels and carries more data, and that is the policy dilemma.

The FCC’s intent behind its Report and Order in Docket Nos. 11-110 and 12-64 was to allow wireless carriers to introduce more advanced wideband technologies on their licensed spectrum where there was little risk to public safety operations. The FCC issued the order in expectation that licensees introduce CDMA and LTE technologies while incurring additional compliance costs.

The introduction and evident demand for the new iPhone serves to validate the FCC’s policy position. The demand for new, innovative technology continues to grow. Commercial carriers must continue to seek out additional spectrum to manage consumer needs. Allowing flexibility in channelization allows wireless carriers to meet that ongoing goal.

In addition to policy, Orange County did not explicit show where current rules on interference were violated. For example, FCC rule 90.672 spells out specific requirements for a showing of unacceptable interference in the 800MHz band. Orange County fails to assert that the requirements under Rule 90.672 were met.

Also FCC rule 90.673 spells out a wireless carrier’s obligation to abate interference. Orange County has not clearly asserted that AT&T failed to abate the interference in a timely and practicable manner, although it gives Sprint credit for doing so. How much of a difference Sprint’s CDMA vs. AT&T’s GSM configurations play in abatement efforts is not discussed in Orange County’s complaint.

From a policy perspective, reconsidering the Report and Order only sets back efforts to meet the increasing consumer demand for spectrum. The FCC should require both AT&T and Orange County to work through the FCC’s resolution procedures or otherwise negotiate some solution to the problem short of amending the order.

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Will the FCC have another mega merger to consider?

The Internet is blowing up not only with news of the sale of Apple’s iPhone 5, but also with the speculation that Sprint may be considering a little mischief in the mergers and acquisitions arena. One commentary on Seeking Alpha reports that Sprint CEO Dan Hesse may be considering buying a smaller carrier after the build-out of the company’s 4G LTE network.

Who might be the potential buys? They may include MetroPCS, Leap Wireless, or U.S. Cellular. Of course this is all speculation, but should Sprint make a move to purchase one of these carriers, I would hope that the Federal Communications Commission and the United States Department of Justice would have the good economic sense to let this merger go through.

First, such a move would satisfy the FCC’s alleged preference for competition and the benefits it brings to the consumer. An enlarged Sprint could reach more consumers and with the increased economies of scale, they would be able to serve those consumers at lower costs than with its current network.

Second, with a company like Leap Wireless in its portfolio, Sprint can not only continue providing unlimited data plans to consumers, but has another brand that can extend wireless broadband services into lower income markets. These would mean more consumers adopting wireless broadband and enjoying its benefits of connectivity.

Third, the FCC need not worry about a duopoly remaining in the wireless market after the transaction is completed. Sprint may end up a stronger third alternative to AT&T and Verizon.

But hey; what about T-Mobile? T-Mobile may be out of play simply because T-Mobile runs on a GSM network while Sprint CDMA network. Why incur the additional expense converting T-Mobile over to Sprint’s network when U.S. Cellular, MetroPCS, and Leap Wireless run on CDMA.

Finally, there is no reason for government interference in the making of a market in such an instance. Wireless carriers have naturally been expressing demand for spectrum especially since the introduction of the iPhone In 2007 began the onslaught on spectrum we see today.

Oh well, we’ll stay tuned.

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FTC Cramming Down Hard on Cramming

Posted July 24th, 2012 in cramming and tagged , , , , , by Alton Drew

The Federal Trade Commission yesterday issued comments to the Federal Communications Commission on the issue of cramming on wireless services. Cramming refers to charges on a wireless service customer accounts that come from a party other than the carrier itself.

According to the FTC, in 2011, the agency received approximately 1800 complaints about cramming. The FTC would like to see legally mandated measures that would allow consumers to block charges from up on their accounts and inform consumers on how to block these charges.

Cramming has historically been a problem with wireline services and it appears it is becoming an increasing problem with wireline.

A legal mandate would of course add to a carrier’s cost of providing service. A mandate, as opposed to industry-preferred voluntary monitoring, may have a negative impact on relationships between wireless carriers and third-party vendors. Otherwise, I don’t see a negative impact on the quality of service carriers would provide if they also had to abide by additional consumer protection requirements.

After reviewing AT&T, Verizon, and Sprint’s 8-Ks, 10-Qs, and 10-Ks, I couldn’t conclude that the carriers were concerned about any specific cost increases that would result from this proposal being implemented.

Far be it from me to like regulation, but the only positive I see is that consumers may feel a little more comfortable adopting mobile broadband if wireless carriers allowed consumers to block third-party charges.

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Sprint Encourages Incorporation of H-Block Frequencies Into Current Operations

On July 2, 2012, Sprint Nextel argued to the Federal Communications Commission that the company needs to incorporate frequencies from the PCS H-Block into the company’s current operations. Sprint argued that the wireless broadband company could provide additional capacity and higher peak speeds if this were done.

Back in 2004, the FCC auctioned off the band of frequencies 1915-1920 MHz and paired it with the band of frequencies 1995-2000 MHz to create the PCS H Block. The block was to be used for 3G services.

According to Sprint, the PCS H Block contains near term deployable spectrum. Sprint may need to deploy as soon as possible if it is to keep up in the modern day armed race that is deployment of 4G services. It has already lost opportunities to purchase carriers MetroPCS and T-Mobile. What they have may not be enough, according to telecom analyst Roger Entner. The company has about half of the spectrum AT&T and Verizon have available for their 4G LTE networks.

Not a good position to be in if the number three wireless carrier in the country wants to maintain that spot much less keep its investors happy. The company is bumping up against the FCC’s potential delay in getting rules written that would administer the auction of these frequencies. Add the competition from Verizon and AT&T for these frequencies and you get a much sharper picture of Sprint’s political and legal moves last year to stop AT&T from acquiring T-Mobile.

Should the FCC acquiesce to Sprint’s hard court lobbying to have rules promulgated that swing in the company’s favor? No it should not. Sprint and the FCC always cry about competition and robust markets, and transparency. This is the time for the FCC to show that it actually believes in competition. Any rules promulgated to auction of the PCS H Block should allow all wireless carriers the opportunity to compete for the spectrum. Let airwave access move to the carrier that can extract the most value for the most consumers.