Current TelecomDevelopments

August 28, 2015

FCC Officials Provide Details on Actions Leading to Upcoming Incentive Auction

Following on the recent adoption of the FCC’s incentive auction procedures notice, the chairman and vice chairman of the FCC Incentive Auction Task Force provided additional details on various events and procedures leading up to the planned incentive auction of broadcast TV spectrum. Task force chairman Gary Esptein joined task force vice chairman Howard Symons in a blog post last Thursday affirming the FCC’s intention to issue an application procedures notice this fall. That document “will describe the nuts and bolts of the auction application process and post-auction procedures, including the opening dates for the application filing windows, the filing deadline, the schedule for mock auctions and the information required on the auction application forms.” While specific dates were not revealed, Esptein and Symons said filing windows for applicants in the broadcast “reverse” and wireless “forward” auctions will close by the end of this year. No later than the auction start date of March 29, 2016, participating broadcasters will be required to announce preferred initial bid options that will obligate each broadcaster “to [relinquish] its spectrum usage rights at the opening price applicable to its preferred option.” If, during the auction, bid prices drop below the preferred level designated by a particular broadcaster, Esptein and Symons stressed that the affected broadcaster will “no longer bound to relinquish the spectrum unless it elects to remain in the auction at the lower price.”

Once initial opening bid commitments are received by the FCC, Esptein and Symons explained that the auction system “will determine the initial clearing target and associated band plan.” Reverse auction bidders will be given the opportunity to participate in mock auctions, soon after which “reverse auction bidding rounds will begin.” With respect to the forward auction, Epstein and Symons stated that the FCC will release the final table of bidding units for each partial economic area (PEA) this fall to enable forward auction participants to plan their upfront payments. Prospective forward auction bidders will then be required to submit upfront payments after the establishment of the initial clearing target and band plan. Esptein and Symons said forward auction bidders “will also have an opportunity to participate in a mock auction,” adding that the first forward

In This Issue:

FCC Officials Provide Details on Actions Leading to Upcoming Incentive Auction more

Video Competition Comments Spotlight Program Costs, Need for Retransmission Consent Reform more

T-Mobile Advocates Technology-Neutral Approach to Usage of Unlicensed Frequency Bands more

Comcast Plans 1 Gbps Broadband Service by 2018 more

Netflix, Amazon to Expand Video Streaming Services to Japan more

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auction round will begin “no sooner than 15 business days after we release the list of qualified forward auction bidders.”

To prepare prospective bidders for this first-of-a-kind auction process, Esptein and Symons specified that FCC staff members will conduct workshops, webinars and “an interactive on-line tutorial” before application filing windows are opened. As wireless association CTIA applauded the FCC’s “release of an updated roadmap on next steps in the development of the 600 MHz incentive auction,” National Association of Broadcasters executive vice president Dennis Wharton advised FCC officials to “not lose sight of the important changes still necessary to ensure a successful auction,” reiterating that his group “still has serious reservations about some critical decisions” outlined in the August 6 auction procedures notice.

Video Competition Comments Spotlight Program Costs, Need for Retransmission Consent Reform

Commenters responding to an FCC public notice on the status of competition in the U.S. video market cited rising program costs in urging the FCC to promote competition through reform of the retransmission consent regime. Filed with the FCC last Friday, the comments will form the basis of the FCC’s upcoming seventeenth report to Congress on video competition. Declaring that the goal of the report is “to enhance our analysis of competitive conditions, better understand the implications for the American consumer, and provide a solid foundation for Commission policy,” the FCC said it would utilize an analytical framework that examines online video distributors (OVDs) alongside broadcast television stations and multichannel video program distributors (MVPDs), which include cable companies and providers of direct broadcast satellite services.

Pointing to the growth of online video services, which “has spawned a huge and ever-expanding array of new entrants into the video marketplace,” the National Cable & Telecommunications Association (NCTA) told the FCC that “competition . . . is more vibrant than ever.” NCTA also argued that “the amount, quality and diversity of programming available to consumers—and the diverse ways in which MVPDs, program networks and others are making such programming available to consumers—is greater than ever.” The American Cable Association (ACA) lamented that increased program costs and other factors “are contributing to small cable operators closing systems and departing from markets” as evidenced by FCC figures which show a decline in the number of U.S. cable operators between the 15th and 16th annual competition reports. Echoing concerns raised by the ACA, rural broadband association NTCA called on the FCC to rein in program costs by (1) prohibiting program vendors “from requiring rural MVPDs to pay for undesired programming to gain access to desired programming,” (2) allowing small and mid-size MVPDs “to request the same prices and conditions from any of the other existing retransmission consent agreements that a broadcast station has entered into with other MPVDs,” and (3) bar mandatory broadband tying “where rural MVPDs must pay per-subscriber fees for non-video broadband customers.”

NTCA further urged the FCC to “monitor the market for ‘over the top’ web-based video services to ensure that exclusive arrangements do not prevent rural MVPDs and broadband providers from gaining access to certain web-based video content.” Verizon added that the FCC “should ensure that its program access rules remain available and useful” as

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“competitive video providers, including over the top video distributors, need reasonable access to must-have programming to field meaningful alternatives for consumers.” Citing the ability of consumers to watch broadcast, MVPD, and online video programs “over a broad range of devices,” Verizon also told the FCC that “technology mandates . . . are simply no longer needed.” The National Association of Broadcasters, meanwhile, advised the agency to “take immediate steps to update its ownership and attribution rules and permit broadcasters to realize economies of scale and scope,” given that “broadcasters compete head-to-head with the increasingly consolidated pay TV industry and growing numbers of [OVDs] for viewers, advertising dollars and investment capital.”

T-Mobile Advocates Technology-Neutral Approach to Usage of Unlicensed Frequency Bands

In a written submission describing a meeting with FCC officials, T-Mobile US urged the FCC to maintain a “technology-neutral approach” to usage of unlicensed spectrum bands. The carrier also voiced its “strong commitment to ensuring that Wi-Fi remains robust and is not adversely impacted” by the proposed deployment of LTE-U technology in unlicensed bands that support Wi-Fi. T-Mobile and Verizon Wireless are looking toward LTE-U as a means of delivering improved connectivity to subscribers and relieving network congestion through the offloading of data traffic onto unlicensed bands currently used by Wi-Fi networks. Both carriers are expected to start LTE-U technology trials next year. A modified version of the fourth-generation wireless standard that routes voice and data traffic through cellular networks, LTE-U checks for open channels, but may send cellular network traffic onto the least congested available channel. Julius Knapp, head of the FCC’s Office of Engineering and Technology, has questioned backers regarding LTE-U’s ability to transmit on an occupied channel. Although cable companies and other Wi-Fi network operators warn that LTE-U has the potential to interfere with unlicensed Wi-Fi users, T-Mobile told the FCC last Thursday that “claims by LTE-U opponents . . . that the technology will adversely impact Wi-Fi operations are based on testing with parameters set at extremes that do not represent realistic deployments or do not reflect actual LTE-U specifications.” Maintaining that “LTE-U has less of an impact on Wi-Fi operations than would occur by adding an additional Wi-Fi access point,” T-Mobile further explained: “if multiple operations deploy LTE-U in an area, the access points treat each other as another user and take those operations into account just as they would additional Wi-Fi access points.” As such, T-Mobile argued there is no reason for the FCC to “deviate” from its current technology-neutral approach to use of the unlicensed bands, as “LTE-U meets all Part 15 requirements and includes strong coexistence mechanisms.”

A spokesman for AT&T, which operates an extensive network of Wi-Fi hotspots but has not announced LTE-U deployment plans, remarked that his company is “supportive of LTE use of unlicensed bands as long as it can properly coexist with Wi-Fi.” At the same time, an official of Qualcomm, which is working alongside Verizon, Alcatel-Lucent, Ericsson, and Samsung in a forum to develop global standards for usage of LTE-U technology, stressed: “we are going way, way, way beyond what anyone could require in rules to make sure [LTE-U] will work well.”

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Comcast Plans 1 Gbps Broadband Service by 2018

The movement toward gigabits-per-second speed broadband services gained momentum this week as executives of Comcast, the nation’s top cable operator by subscribers, confirmed the company’s plan to deploy broadband network speeds in excess of 1Gbps nationwide by 2018.

While AT&T and other providers already offer fiber-optic Gbps-speed broadband to customers in a limited number of markets, the strategy, if successful, would make Comcast the nation’s top provider of 1 Gbps broadband and one of the first U.S. cable companies to deploy such a service. Comcast’s plan is premised on deployment of the “DOCSIS 3.1” standard for cable modems, which was ratified two years ago and—with proper equipment and under optimal network conditions—is considered capable of supporting download speeds as high as 10 Gbps. By contrast, cable modems built on the current generation DOCSIS 3.0 standard deliver transmission speeds no higher than 700 Mbps downstream/180 Mbps upstream. Affirming Comcast’s plan to test DOCSIS 3.1 on the company’s existing Hybrid Fiber Coaxial network in selected markets, Comcast Vice President Robert Howard told reporters last Friday that “our intent is to scale it through our footprint through 2016” and to expand nationwide within two to three years. In remarks last month, Comcast CEO Brian Roberts observed that the move to DOCSIS 3.1 “will provide significant added capacity and lay the groundwork for future speed increases for our broadband customers.” Comcast’s transition to 1 Gbps network speeds through DOCSIS 3.1 is unrelated to the company’s separate and previously-announced plan to deploy fiber optic network infrastructure in Florida, Indiana, Michigan, California and other states that would deliver broadband speeds of up to 2 Gbps for a monthly fee of $300. Anticipated pricing for the new DOCSIS 3.1 service, which would require customers to purchase or rent a DOCSIS 3.1 modem, was not disclosed.

Netflix, Amazon to Expand Video Streaming Services to Japan

Japanese customers will soon be able to take advantage of video streaming services offered by Netflix and Amazon as a result of market entry initiatives announced by both companies this week. The week started with Netflix’s announcement on Monday that it will launch service throughout Japan on September 2 through a partnership with Softbank Group, which has agreed to market Netflix through its retail outlets and to allow Softbank customers to pay Netflix subscription fees through their Softbank broadband or cell phone bills. Netflix’s debut in Japan, which boasts more than 36 million broadband homes, completes another step in the company’s planned global deployment, which is slated for completion by the end of next year. Customers will be given a choice of three service tiers with monthly rates that range from U.S. $5.40 for a single standard definition stream to $11.99 for up to four streams of high definition video. Although Netflix and Softbank declined comment on the details of their financial relationship, the companies are expected to cooperate in developing original content. Customers will also be able to subscribe to the service online. On the heels of Monday’s announcement, Amazon said yesterday that it will also market its Prime Instant Video service next week in Japan where it will offer “thousands of popular Japanese and U.S. movies and TV shows, anime series, music concerts and variety shows, plus Amazon’s own award-winning originals and new Japanese originals.” Amazon and Netflix, meanwhile, would compete against existing streaming services offered in Japan by Hulu (which recently sold its Japanese business to Nippon Television Network Corp) and by NTT Docomo. Although Softbank also provides video streaming services under the “Uula” name, Softbank President Ken Miyauchi said his company would continue to offer

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Uula but would focus more on marketing the Netflix service.

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For information about any of these matters, please contact Patrick S. Campbell (e-mail: pcampbell@paulweiss.com) in the Paul, Weiss Washington office. To request e-mail delivery of this newsletter, please send your name and e-mail address to telecom@paulweiss.com.