7/25. The Federal Communications Commission (FCC) issued a short release on Friday night, July 25, 2008, announcing the FCC's "approval of the XM-Sirius Merger this evening by a 3-2 vote".

The FCC did not release its order approving the merger. These orders are typically long and detailed documents that approve transactions, but impose numerous restrictions upon the parties to the transaction. For example, the AT&T-BellSouth merger order was 181 pages.

XM and Sirius announced their merger plans on February 19, 2007. See, story titled "XM and Sirius Announce Plans to Merge" in TLJ Daily E-Mail Alert No. 1,540, February 20, 2007. They formally submitted the application to the FCC on March 20, 2007.

On March 24, 2008, the Department of Justice's (DOJ) Antitrust Division announced that it will not challenge the merger of XM and Sirius. It imposed no conditions. See, story titled "DOJ Won't Challenge XM Sirius Merger" in TLJ Daily E-Mail Alert No. 1,736, March 25, 2008.

The leading opponents of the XM Sirius merger were the National Association of Broadcasters (NAB), and terrestrial radio broadcasters, who are facing increasing competition in music and other audio entertainment delivery, and seek to limit that competition. A single satellite broadcaster might be a financial viable competitor.

The NAB has argued that the relevant market is not audio entertainment (including terrestrial radio, internet radio, satellite radio, iTunes and other download services, and CDs), but rather satellite radio. The DOJ rejected the NAB's antitrust analysis.

The NAB's Dennis Wharton stated in a release late on July 25 that "Today's vote certainly comes as a disappointment to NAB. We continue to believe that consumers are best served by competition rather than monopolies."

FCC Chairman Kevin Martin (at right) stated in the FCC's release that "The merger is in the public interest and will provide consumers with greater flexibility and choices. Consumers will enjoy a variety of programming at reduced prices and more diversified programming choices. It will also spur innovation and advance the development and use of interoperable radios, bringing more flexible programming options to all subscribers."

The FCC's release does not state that the three members voting for approval, subject to conditions, were Martin, Robert McDowell, and Deborah Tate, while the two voting against approval were Michael Copps and Jonathan Adelstein.

This FCC proceeding is MB Docket No. 07-57. See also, the FCC's web page for this merger. XM is represented by the law firm of Wiley Rein. Sirius is represented by the law firm of Latham & Watkins and others.

Conditions Imposed Upon the Merged Entity. The FCC has not released its order. It has not even released a brief summary of the order. It has not disclosed the conditions to be imposed upon the merged entity.

However, XM and Sirius sent a letter [PDF] to the FCC on June 13, 2008 (and following it up with ex parte communications) in which it listed the "voluntary commitments" that should be imposed upon it.

These include offering customers certain a la carte programming options, offering the ability to receive the best of both Sirius and XM programming, offering the options of selecting either mostly music, news, sports, or talk programming, and offering discounted family friendly programming.

The proposed "voluntary commitments" also include setting aside "four percent of the full-time audio channels on the Sirius platform and on the XM platform, respectively, which currently represents six channels on the Sirius platform and six channels on the XM platform, for noncommercial, educational and informational programming".

The proposed "voluntary commitments" also include this open equipment commitment: "The merged company will permit any device manufacturer to develop equipment that can deliver the company’s satellite radio service. Device manufacturers will also be permitted to incorporate in satellite radio receivers any other technology that would not result in harmful interference with the merged company's network, including hybrid digital (HD) radio technology, iPod ports, internet connectivity, or other technology."

The proposed "voluntary commitments" also include this interoperabilty commitment: "Within one year of the consummation of the merger, the combined company will offer for sale an interoperable receiver in the retail after-market."

The proposed "voluntary commitments" also include pricing commitments.

Gigi Sohn, head of the Public Knowledge, stated in a release that "It appears as if the Commission has adopted in some form all four of the conditions we have been seeking for the XM-Sirius merger. We had originally said that there should be some form of a la carte choice in programming, a three-year price freeze, a set-aside for non-commercial programming and an open-device requirement so that any manufacturer could build a device to receive programming from the combined company."

See also, Sohn's notice [PDF] of three ex parte telephone communications on July 23 with FCC Chairman Kevin Martin's office. And see, notice of ex parte communication [2 pages in PDF] by Sohn and representatives of the Media Access Project (MAP) with Commissioner Jonathan Adelstein's office regarding open device requirements, enforcement issues and the non-commercial set-aside.

Recent Filings with the FCC. Sen. Ted Stevens (R-AK) sent a letter, FCC receipt stamped July 23, urging the FCC to impose as a condition of approval a mandate that all satellite radio receivers also include HD radio reception capability.

On July 14, David Rehr (NAB) sent a comment to the FCC, received on July 21.

On July 18, Lawrence Sidman and James Holden of Paul Hastings submitted a comment [PDF] for Clearchannel Communications regarding conditions to be imposed on the merger, and enforcement of those conditions.

On July 22, Paul Sinderbrand of Wilkinson Barker Knauer submitted a comment [8 pages in PDF] for the Wireless Communications Service (WCS) Coalition regarding proposed rules for governing WCS and Satellite Digital Audio Radio Service (SDARS) coexistence.

He wrote that "the WCS Coalition wants to assure both that the final rules adopted in the above-referenced rulemaking proceedings permit that viable operation of WCS-based mobile broadband systems, and that no action is taken in connection with the merger, or any associated enforcement proceeding, that inadvertently permits the operation of terrestrial SDARS repeaters in a manner that causes undue interference to WCS."

The FCC adopted and released two notice of proposed rulemakings (NPRMs) in December of 2007 regarding service rules for the WCS and for terrestrial repeaters used in conjunction with the SDARS. These items are FCC 07-215 in WT Docket No. 07-293 and IB Docket No. 95-91. See, notice in the Federal Register, January 15, 2008, Vol. 73, No. 10, at Pages 2437-2440.

TLJ Comment on Merger Review Process. This outcome was to be expected. The FCC does not issue orders denying major merger requests. Instead, it has a long record of delaying consummation of transactions while it extracts concessions from the parties.

Even in the Echostar Directv 2001-2002 transaction review, the FCC did not issue an order denying the application. Rather, it issued an order [134 pages in PDF] designating the application for hearing -- a further dilatory tactic. (That order was FCC 02-284 in Docket No. 01-348.) And, leading consumer advocacy groups condemned that disposition. See, story titled "FCC Declines to Approve EchoStar DirectTV Merger" in TLJ Daily E-Mail Alert No. 528, October 11, 2002.

The FCC's investigations and analyses in merger reviews are essentially in the nature of antitrust merger reviews. The FCC lacks statutory authority to conduct these reviews. Rather, federal statutes commit these functions to the Department of Justice's (DOJ) Antitrust Division and the Federal Trade Commission (FTC). The FCC does have authority to approve applications to transfer communications licenses. Shortly after passage of the Telecommunications Act of 1996, the FCC began treating certain license transfer applications as if they were antitrust proceedings. The mimicking of DOJ/FTC antitrust proceedings provided the FCC a reason for demanding large amounts of documents and information, and to delay. The FCC took over sixteen months between the filing of XM's and Sirius' application, and the just announced approval.

For large companies seeking to merge, time is of the essence. The FCC can delay with little consequence for its policy goals, while delay is damaging to the merging parties. Hence, the FCC's power derives from its leveraging of its license transfer authority to conduct antitrust merger proceedings, combined with the participants' need to consummate their mergers. The FCC's power also derives in part from the fact that it has considerable authority over regulated entities that are repeat players before the FCC. The FCC does not treat license transfer applications of non-repeat players as antitrust proceedings.

Hypothetically, were the FCC to issue an order denying an application, that would be a final order of the FCC subject to judicial review. Merging parties cannot seek judicial review of a dilatory federal agency. Nor can they seek judicial review of FCC approval orders, because the FCC first extracts consents.

If the FCC were to issue an order denying a merger application, it might be challenged, and a Court of Appeals might overturn that order. The legal basis might be that the FCC lacks antitrust merger review authority. This could deprive the FCC of a major source of regulatory power. This is an outcome that the FCC seeks to avoid.

It should be noted too that the FCC has yet to adopt either substantive or procedure rules governing its merger reviews. Were it to do so, there would be final orders subject to judicial review.

7/25. The Federal Communications Commission (FCC) has scheduled an event for 10:00 AM on Friday, August 1, 2008, titled "Open Commission Meeting".

The FCC's agenda [pages in PDF] states that it will "consider a Memorandum Opinion and Order addressing a complaint and other filings concerning Comcast’s network management practices."

The word "consider" is not descriptive of the FCC's meeting procedure. The Commissioners formally vote on items to which a majority has already agreed. The Commission does not bring up items only to reject them. Although, items are frequently withdrawn from the published agenda prior to the meeting. Moreover, at these events the Commissioners do not debate, revise or amend. They read prepared statements.

On July 25, 2008, Gigi Sohn, head of the Public Knowledge, and one of the complainants who initiated this proceeding, stated in a release that the FCC "has apparently voted to punish Comcast for violating the Commission's open Internet principles. This is good news for consumers and Internet users. Comcast knowingly blocked lawful Internet use and denied it."

She added that "The fact that the Commission is willing to stand up for its principles and for Internet users is a good sign that the concept of Net Neutrality is alive and well in Washington."

Randolph May, head of the Free State Foundation (FSF), stated in a release that "The reports that an FCC majority may be about to sanction Comcast for last November's BitTorrent incident are very disturbing. This would mean the agency is embarking on a course likely leading to more intrusive regulation of broadband Internet services."

He continued that "It may be at the end of the day the FCC does, in fact, have so-called ``ancillary´´ authority to regulate some practices of Internet service providers. But whatever authority the FCC possesses is much better left untested in this particular instance in light of the changed circumstances since the complaint was filed. Comcast immediately changed its network management disclosure practices after the controversy arose, even though it had not violated any existing FCC precedent or rule. And, collaborating with BitTorrent and many other industry players, Comcast is moving towards a protocol-agnostic network management regime by the end of this year. So, this is not a good case for the FCC to go out on a limb and test its legal authority to regulate the Internet."

On November 1, 2007, the Public Knowledge and Free Press (FP) filed with the FCC a document [48 pages in PDF] captioned "Formal Complaint of Free Press and Public Knowledge Against Comcast Corporation For Secretly Degrading Peer-to-Peer Applications".

See, story titled "Free Press Files Complaint with FCC Alleging that Comcast Is Violating 2005 Policy Statement" in TLJ Daily E-Mail Alert No. 1,669, November 5, 2007.

That complaint alleged that Comcast interferes with its subscribers use of applications like BitTorrent. However, Comcast reached an agreement with BitTorrent in March. Both companies also agreed that there is no need for government intervention.

See, story titled "Comcast and BitTorrent Reach Accord on Network Management Practices" in TLJ Daily E-Mail Alert No. 1,738, March 27, 2008. See also, story titled "Comcast and Pando Networks to Create P2P Bill of Rights and Responsibilities" in TLJ Daily E-Mail Alert No. 1,747, April 15, 2008.

The FCC, which eschews transparency, has announced no decision in this proceeding.

The Senate will meet at 9:00 AM. It will resume consideration of HR 3221, [LOC | WW], the "Housing and Economic Recovery Act of 2008".

The House will meet at 11:00 AM in pro forma session only. See, Rep. Hoyer's schedule for the week of July 28.

12:00 - 2:00 PM. The DC Bar Association will host a panel discussion titled "MySpace, Facebook, and the Workplace". The speakers will be Micah Salb (Lippman Semsker & Salb), Michael Songer (Crowell & Moring), Lily Garcia (Washington Post columnist), and Anne Donohue (SRA International, Inc.). The price to attend ranges from $20 to $30. For more information, contact 202-626-3463. See, notice. Location: DC Bar Conference Center, B-1 Level, 1250 H St., NW.

The House will meet at 10:30 AM for morning hour, and at 12:00 PM for legislative business. Votes will be postponed until 6:30 PM. The House may consider numerous items under suspension of the rules, including HR 5170 [LOC | WW], the "Department of Homeland Security Component Privacy Officer Act of 2008", HR 5983 [LOC | WW], the "Homeland Security Network Defense and Accountability Act of 2008", and S 3295 [LOC | WW], an untitled bill to provide that the Secretary of Commerce, in consultation with the Director of the U.S. Patent and Trademark Office (USPTO), shall appoint administrative patent judges and administrative trademark judges, See, Rep. Hoyer's schedule for the week of July 28.

10:00 AM. The Senate Finance Committee (SFC) will hold a hearing titled "The Future of U.S. Trade Policy: Perspectives from Former U.S. Trade Representatives". See, notice. Location: Room 215, Dirksen Building.

10:00 AM. The Senate Judiciary Committee (SJC) will hold a hearing titled "Music and Radio in the 21st Century: Assuring Fair Rates and Rules across Platforms". The witnesses will be John Simson (SoundExchange), John Ondrasik (singer & songwriter), and Jeffrey Harleston (Geffen Records). Sen. Dianne Feinstein (D-CA) will preside. She is the sponsor of S 256 [LOC | WW], the "Platform Equality and Remedies for Rights Holders in Music Act of 2007". See, notice. Location: Room 226, Dirksen Building.

11:00 AM. The Center for Democracy & Technology (CDT) and Ernst & Young will hold a news conference to release a study titled "The State of Telecommuting: Privacy and Security". For more information, call Brock Meeks (CDT) at 202-6377-9800 x114. To participate by phone, call 866-247-4356. Location: CDT, Suite 1100, 1634 Eye St., NW.

The U.S. International Trade Commission's (USITC) is scheduled to transmit its report for the House Ways and Means Committee regarding government policies affecting trade with the People's Republic of China (PRC). The USITC is examining, among other sectors, semiconductors and telecommunications. See, notice in the Federal Register, July 31, 2007, Vol. 72, No. 146, at Pages 41773-41774, and USITC release. This proceeding is titled "China: Government Policies Affecting U.S. Trade in Selected Sectors" and numbered Inv. No. 332-491.

RESCHEDULED TO AUGUST 13. The Federal Communications Commission (FCC) will commence Auction 78, the AWS-1 and Broadband PCS auction. See, Public Notice (DA 08-1090) and notice in the Federal Register, May 29, 2008, Vol. 73, No. 104, at Pages 30919-30938.

The House will meet at 10:00 AM for legislative business. See, Rep. Hoyer's schedule for the week of July 28.

TIME CHANGE. 10:00 AM. 9:00 AM. The Senate Judiciary Committee (SJC) will hold a hearing titled "Politicized Hiring at the Department of Justice". See, notice. Location: Room 226, Dirksen Building.

10:00 AM. The Senate Commerce Committee (SCC) will hold a hearing titled "Improving Consumer Protection in the Prepaid Calling Card Market". This hearing will also address S 2998 [LOC | WW], the "Prepaid Calling Card Consumer Protection Act of 2008", sponsored by Sen. Bill Nelson (D-FL). Sen. Nelson will preside. The witnesses will be Rep. Eliot Engel (D-NY), William Kovacic (FTC Chairman), Sally Greenberg, (National Consumers League), Gus West (Hispanic Institute), and Barry Smitherman (Chairman, Texas Public Utility Commission). See, notice. Location: Room 253, Russell Building.

12:00 NOON - 1:30 PM. The Alliance for Public Technology (APT) host a panel discussion titled "Broadband in Low-income Communities: From Access to Adoption". The speakers will be Rep. Edolphus Towns (D-NY), Joy Howell (APT), Austin Bonner (One Economy Corporation), and Alec Ross (OEC). A box lunch will be served. Location: Room HC-6, Capitol Building.

The House will meet at 10:00 AM for legislative business. See, Rep. Hoyer's schedule for the week of July 28.

9:00 AM - 4:30 PM. Day one of a two day meeting of the Department of Homeland Security's (DHS) Homeland Security Information Network Advisory Committee. See, notice in the Federal Register, July 2, 2008, Vol. 73, No. 128, at Page 37975-37976. Location: Bolger Center, 9600 Newbridge Drive, Potomac, MD.

9:30 AM. The Senate Homeland Security and Governmental Affairs Committee's (SHSGAC) Subcommittee on Federal Financial Management, Government Information, Federal Services, and International Security will hold a hearing titled "Offline and Off-budget: The Dismal State of Information Technology Planning in the Federal Government". See, notice. Location: Room 342, Dirksen Building.

10:00 AM. The Senate Commerce Committee (SCC) will meet to mark up several bills, including S 3274 [LOC | WW], the "National Nanotechnology Initiative Amendments Act of 2008". See, notice. Location: Room 253, Russell Building.

10:00 AM. The Senate Judiciary Committee (SJC) may hold an executive business meeting. The agenda once again includes consideration of S 2746 [LOC | WW], the "OPEN FOIA Act of 2008". The SJC rarely follows its published agendas. Location: Room 226, Dirksen Building.

10:00 AM - 12:00 NOON. The House Science Committee (HSC) will hold a hearing titled "Oversight of the Federal Networking and Information Technology Research and Development (NITRD) Program". The witnesses will be Chris Greer (NITRD), Daniel Reed (Microsoft), Craig Stewart (Indiana University), and Don Winter (Boeing Company). Location: Room 2318, Rayburn Building.

10:00 AM. The House Small Business Committee (HSBC) will hold a hearing titled "Cost and Confidentiality: The Unforeseen Challenges of Electronic Health Records in Small Specialty Practices". Location: Room 1539, Longworth Building.

10:30 AM. The House Judiciary Committee's (HJC) Subcommittee on Commercial and Administrative Law will hold a hearing on HR 5884 [LOC | WW], the "Sunshine in Litigation Act of 2008", a bill to amend 28 U.S.C. § 111 to limit the use of protective orders and the sealing of cases and settlements. The HJC will webcast this hearing. Location: Room 2141, Rayburn Building.

12:30 PM. The House Judiciary Committee's (HJC) Subcommittee on the Constitution will hold a hearing on HR 5607 [LOC | WW], the "State Secrets Protection Act of 2008". The HJC will webcast this hearing. Location: Room 2141, Rayburn Building.

Extended deadline to submit initial comments to the Copyright Office (CO) in response to its proposed rule changes regarding retransmission of digital television broadcast signals by cable operators pursuant to 17 U.S.C. § 111. See, notice of extension in the Federal Register, July 14, 2008, Vol. 73, No. 135, at Page 40203, and original notice in the Federal Register, June 2, 2008, Vol. 73, No. 106, at Pages 31399-31415.

The House will meet at 9:00 AM for legislative business. See, Rep. Hoyer's schedule for the week of July 28.

8:30 AM - 4:30 PM. Day two of a two day meeting of the Department of Homeland Security's (DHS) Homeland Security Information Network Advisory Committee. See, notice in the Federal Register, July 2, 2008, Vol. 73, No. 128, at Page 37975-37976. Location: Bolger Center, 9600 Newbridge Drive, Potomac, MD.

10:00 AM. The Federal Communications Commission (FCC) may hold an event titled "Open Commission Meeting". See, FCC agenda and story titled "FCC Announces Tentative Agenda for August 1 Meeting" in TLJ Daily E-Mail Alert No. 1,795, July 18, 2008. Location: FCC, Commission Meeting Room, 445 12th St., SW.

Deadline to submit reply comments regarding broadband availability mapping (BAM) to the Federal Communications Commission (FCC) in response to its Further Notice of Proposed Rulemaking (FNPRM) regarding BAM and modifications to the FCC Form 477 data collection. The FCC adopted this FNPRM on March 19, 2008, but did not release the text [81 pages in PDF] until June 12, 2008. It is FCC 08-89 in WC Docket No. 07-38.See, notice in the Federal Register, July 2, 2008, Vol. 73, No. 128, at Pages 37911-37922. See also, story titled "FCC Adopts Order Regarding Broadband Data Collection" in TLJ Daily E-Mail Alert No. 1,734, March 20, 2008.

Deadline to submit initial comments regarding issues other than broadband availability mapping (BAM) to the Federal Communications Commission (FCC) in response to its Further Notice of Proposed Rulemaking (FNPRM) regarding BAM and modifications to the FCC Form 477 data collection. The FCC adopted this FNPRM on March 19, 2008, but did not release the text [81 pages in PDF] until June 12, 2008. It is FCC 08-89 in WC Docket No. 07-38.See, notice in the Federal Register, July 2, 2008, Vol. 73, No. 128, at Pages 37911-37922. See also, story titled "FCC Adopts Order Regarding Broadband Data Collection" in TLJ Daily E-Mail Alert No. 1,734, March 20, 2008.

7/25. The Federal Communications Commission (FCC) adopted and released a Memorandum Opinion and Order (MOO) [39 pages in PDF] in which its denied four petitions for forbearance submitted by Qwest Communications.

Qwest requested that the FCC forbear from applying its loop and transport unbundling rules, promulgated pursuant to 47 U.S.C. § 251(c) and 47 U.S.C. § 271(c)(2)(B)(ii), in Denver, Colorado, Minneapolis St. Paul, Minnesota, Phoenix, Arizona, and Seattle, Washington.

Section 10(c) of the Communications Act, which is codified at 47 U.S.C. § 160(c), provides, in part, that "Any telecommunications carrier, or class of telecommunications carriers, may submit a petition to the Commission requesting that the Commission exercise the authority granted under this section with respect to that carrier or those carriers, or any service offered by that carrier or carriers. ... The Commission may grant or deny a petition in whole or in part and shall explain its decision in writing."

Section 160(a) provides that the FCC "shall forbear from applying any regulation or any provision of this chapter to a telecommunications carrier or telecommunications service, or class of telecommunications carriers or telecommunications services, in any or some of its or their geographic markets, if the Commission determines that --- (1) enforcement of such regulation or provision is not necessary to ensure that the charges, practices, classifications, or regulations by, for, or in connection with that telecommunications carrier or telecommunications service are just and reasonable and are not unjustly or unreasonably discriminatory; (2) enforcement of such regulation or provision is not necessary for the protection of consumers; and (3) forbearance from applying such provision or regulation is consistent with the public interest."

The FCC concluded that "the record evidence does not satisfy the section 10 forbearance standard with respect to any of the forbearance Qwest seeks".

FCC Chairman Kevin Martin wrote in his accompanying statement that "As competition in these markets continues to develop, I am happy to reevaluate these markets based on updated market facts."

FCC Commissioner Michael Copps (at right) wrote in his concurring statement that these denials "should hopefully send a signal to those considering similar requests that the Commission is cautious, even skeptical, of granting this kind of hurried and ill-considered relief. I support the denial of these petitions because to do otherwise would result in less competition and higher prices -- to the clear detriment of consumers".

This MOO is FCC 08-174 in WC Docket No. 07-97.

See also, story titled "House Subcommittee Holds Hearing on FCC Forbearance Procedures" in TLJ Daily E-Mail Alert No. 1,799, July 24, 2008.

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