Telecommunications Reports - January 22, 2001

Bush Expected To Act Soon To Fill FCC Chair; Transition Team Discusses Agency
Changes
FCC Focuses on International Detariffing, Intercarrier Compensation in
Biennial Review
Furchtgott-Roth Says Departure Of Kennard Won't Bring Deadlock
Time Warner Telecom, Inc., intends to raise as much as $700 million...
UWB Operations Feasible In 3-6 GHz Band, NTIA Says
Angelos Amends Lawsuit Against Wireless Industry
NTIA Proposes Reimbursement Procedures For Relocated Government Spectrum Users
Antenna-Rule Violations Prompt Proposed Forfeitures of $327K
Fifth Circuit Joins Chorus On State Immunity Issue
AeA Seeking Federal Preemption Of Multiple State Privacy Laws
Libraries Mull Legal Challenge To New Internet-Filtering Law
Think Tank Slams City Telecom Efforts
Verizon Adds Data To Boost Massachusetts InterLATA Bid
Bureau Proposes SBC Pay $94K For Violating Collocation Rules
FCC Gets `Ahead of the Curve' With Inquiry on Interactive TV
Analysts See Shifting Alliance As BellSouth Sells Qwest Stock
Blaming Verizon for Bankruptcy, NorthPoint Plans Asset Auction
Qwest Touts Line-Sharing Pacts, Improved Service
WorldCom To Pay Users $88M To End Overcharging Lawsuit
Court Rejects AT&T's Appeal In Reseller Discrimination Case
One Step from Bankruptcy, Globalstar Stops Debt Payments
`Creative Financing' Seen As Asian Network Necessity
Three Carriers Join Forces On European Wireless Data
Portugal Telecom Eyes Brazil As Fertile Ground for Expansion
Intelsat Plans Technical, Regional `Flexibility'
WorldCom, Intermedia Need State OKs, Face Digex Lawsuit
Rhythms Trims Workforce, Operations To Reduce Losses
Level 3, SBC Reach Agreement On `Recip Comp' Rate Scheme
TMI, Motient To Unite Assets, Focus On Wholesale Services
New Entrants Will Prolong IXC Price Wars, Analysts Say
Report Offers Road Map To E-government Security
Motorola, Inc., says it will stop making mobile phones at its Harvard, Ill.,
facility...
FCC Suggests Streamlining Carrier-Change Process
Verizon Wireless Asks FCC To Delay 700 MHz Band Auction
Ex-RSA Cellular Licensee Meets Judicial Skepticism
The Broadband Wireless Internet Forum has released two technical papers...
Viatel To Cut Workforce, Phase Out Most Voice Service
CLECs Seek Cautious Approach to Regulating Their Access Fees; AT&T, WorldCom
Want Caps
U.S. Telecom Revenues
Proposal To Streamline Service-Quality Reporting Gets Booed from All Sides;
Some Question Timing
Time Warner Telecom, Inc., will be the first carrier...
NECA DSL Tariff
Rohde:  Spectrum Management Holds Key Challenge for Future
`Datacasting' License Caps To Be Imposed in Australia
Nigerian Sale Yields $855M For Three Cellular Licenses
BT To Prioritize Local Loop Unbundling in Top Exchanges
Court Allows Mobile Phone Lawsuit To Continue
Notes on the News. . .
Regulatory & Government Affairs
Industry News
FCC Reauction
Infostrada Acquisition
Interconnection Dispute
What's Ahead. . .
NTCA Makes Push for MAG Plan, Lifting Caps on Universal Service
Executive Briefings

Bush Expected To Act Soon To Fill FCC Chair; Transition Team Discusses Agency
Changes

With most of his decisions regarding top cabinet-level positions out of the
way, President Bush is expected to begin shifting his attention to selecting
lower-level political appointees, including the FCC chairman and the
administrator of the National Telecommunications and Information
Administration (NTIA).

Late last week speculation was rife that a decision on the FCC top spot was
imminent, with a handful of insiders even predicting that a new chairman
could be appointed over the inaugural weekend or at the beginning of this
week.

One factor that several GOP insiders say could spur quick action from the
White House is the prospect of having Democratic Commissioner Susan Ness
assume the chairman's duties.  As the most senior Commissioner at the FCC,
Ms. Ness would slide into that role absent an interim appointment by the
president, notes one longtime FCC observer.  "And that just doesn't sit too
well with a Republican administration," the source said.

Most Washington insiders expect Commissioner Michael K. Powell to be named
interim chairman, as no Senate confirmation is needed for a sitting
Commissioner to assume that post.  "Mr. Powell is viewed by many as someone
who can get the FCC up and running without a learning curve," an industry
source told TR.

But the question of who gets the permanent FCC job has been the topic du jour
for most telecom industry watchers.  Sources say Texas Public Utility
Commission Chairman Patrick H. Wood III has been positioning himself for that
role, but Mr. Powell also is considered a front-runner for the position if he
wants it.

Under one scenario floated by a GOP insider, President Bush would name Mr.
Powell interim chairman and then, later on, nominate Mr. Wood as permanent
chairman and a new Democrat to replace Ms. Ness.  Ms. Ness' term expired in
June 1999; she currently is serving under a recess appointment that
then-President Clinton made late last month (TR, Dec. 25, 2000).  She may
continue in her position until a replacement is nominated by President Bush
and confirmed by the Senate, or until the end of the current congressional
session.

L. Ari Fleischer, a Bush transition team spokesman who was slated to become
White House spokesman after the inauguration, gave few clues during a Jan. 19
press briefing about where the incoming administration stood on naming new
agency heads.  Asked by TR whether a timetable had been developed for
appointing a new FCC chairman, Mr. Fleischer replied,  "That will happen in
due order as those announcements are ready."

A spokesman at the Commerce Department's NTIA said former Administrator
Gregory L. Rohde hadn't made any decisions about his future plans.  As a
political appointee under former President Clinton, Mr. Rohde stepped down
from his post last Friday.

"The wireless community wanted him to stay on at NTIA to help oversee the `
3G' [third generation] initiative, but so far there's been no indication"
that President Bush plans to renominate Mr. Rohde to be NTIA administrator,
the NTIA spokesman told TR.

Mentioned as possible candidates to succeed Mr. Rohde at NTIA are Earl
Comstock, a partner at the Washington law firm of Sher & Blackwell and a
former aide to Sen. Ted Stevens (R., Alaska); James Derderian, former House
Commerce Committee staff director and a member of the NTIA transition team;
and Kevin Martin, who oversaw communications policy issues for the Bush
transition team.

FCC Transition Team Gathers

A Jan. 17 meeting of the Bush administration's FCC transition team may have
failed to produce a name and a timetable for replacing Mr. Kennard.  But
numerous industry participants described the meeting as a productive first
step in smoothing out some of the rough edges at the FCC-particularly the
pace at which the Commission makes decisions and its role in reviewing
mergers.

Participating in the Jan. 17 meeting, sources say, were nearly all of the FCC
"transition advisory team" members (TR, Jan. 15) and officials from the Bush
administration's "in-house" transition team:  Mr. Martin; former Rep. Bill
Paxon (R., N.Y.), who is chairman of the transition advisory committee; and
Rebecca Armendariz, project director-FCC transition team.

Speaking briefly with TR last week, Ms. Armendariz described the meeting as "
good" and "productive" and said it was the "first and last" time that the FCC
advisory team would meet with Bush transition officials.  Ms. Armendariz also
reported that the FCC advisory team had grown to a total of about 42 members,
which is "six to eight" more than was posted on the Bush-Cheney transition
Web site (http://www.bushcheneytransition.com) as of Jan. 19.

An advisory team member who didn't want to be identified said the meeting
lasted about one and a half hours and mostly focused on changes in general
FCC procedures.  "There wasn't much time for a lengthy discussion on specific
points, and they didn't mention any names" of potential chairman nominees,
the source said.  "But there was a sense that things need to be speeded up at
the FCC, and [that] there ought to be less FCC involvement in the
merger-review context," the source reported.

Meanwhile, documents circulated among the FCC advisory team members show the
Bush transition team sought feedback from the advisers on the following six
subjects:  (1) the top five issues facing the FCC; (2) what rules and/or
policies are in most need of reform; (3) what management, administrative or
procedural issues need to be addressed; (4) what can be done to expedite the
FCC's decision-making process; (5) what significant challenges will the new
administration and FCC face with respect to Congress, public perceptions, or
the press; and (6) what organizational changes should be considered early in
the new administration.

Participants in last week's meeting were given a chance to go over papers
containing their FCC "wish lists," sources report, and the Bush transition
team "seemed to be interested and listening."  Still, one source described
the meeting as "light on substance" and doubted whether "anyone had even read
our paper yet."

Jay Kitchen, an FCC advisory team member and president and chief executive
officer of the Personal Communications Industry Association, told TR he was
encouraged that finding more spectrum for third-generation (3G) technology "
was near the top of everybody's list."

PCIA's paper to the Bush team stressed the need to "speed up the tower-siting
process" and ensure that wireless carriers "receive all the interconnection
rights they are due under" the Telecommunications Act of 1996, Mr. Kitchen
said.

Progress & Freedom Foundation fellow Randolph J. May, also a member of the
FCC advisory team, called the Jan. 17 meeting "productive" and said it gave
the Bush transition team a "good chance to offer their views on what they
thought were the most important and pressing" issues at the FCC.  "At the top
of my list," Mr. May told TR, "was changing the strategic focus of the FCC
toward becoming a market deregulator."

SBC Communications, Inc., recently submitted a paper to the Bush team
recommending, among other things, "closing the reciprocal compensation
loophole" and "ensuring that the marketplace regulates broadband Internet
service," an SBC spokesman told TR.

SBC also proposed eliminating the "duplicative review of mergers" that
carriers face at the FCC and Department of Justice.  But SBC didn't specify
which review should be phased out.  "That's the policy question that needs to
be answered by the new administration," he said.

Even telecom interests that weren't represented on the FCC transition
advisory team have forwarded their telecom agendas to the Bush
administration.

In a letter sent to President-elect Bush on Jan. 18, the National Telephone
Cooperative Association advised him to appoint FCC commissioners who "
understand rural America" and give "considerable thought to rural
representation" at NTIA.

The Association for Local Telecommunications Services has submitted a paper
calling the "the failure" of incumbent local exchange carriers (ILECs) to
open their networks one of the "three greatest market failures that stymie
full, effective competition."

"According to the FCC, after almost five years, the ILECs have opened their
networks to competitors in only two states," ALTS wrote.  "As a result,
[competitive local exchange carriers] have great difficulty interconnecting
with the Bell company networks to provide advanced services."

The Cellular Telecommunications & Internet Association has had "extensive
conversations" with the Bush team about spectrum management issues, wireless
location privacy principles, repealing the 3% federal excise tax on telephone
bills, and moving from intercarrier compensation for wireless calls to a "
bill-and-keep" regime, a CTIA spokesman told TR last week.

-Ryan B. Oremland

FCC Focuses on International Detariffing, Intercarrier Compensation in
Biennial Review

The FCC has asked its staff to prepare proposals to eliminate or streamline a
broad range of Commission rules, including those governing intercarrier
compensation for terminating telecom traffic, wireless licensing terms and
renewals, and international service tariffs for nondominant interexchange
carriers.

The FCC issued its directives in a report released Jan. 17 in Common Carrier
docket 00-175.  The biennial regulatory review provisions of the
Communications Act of 1934 require the agency in even-numbered years to
decide whether given rules remain in the public interest, the FCC said.

The FCC doesn't have to take final action repealing or modifying the rules in
the even-numbered years, it said.

The latest FCC directives reflect staff recommendations outlined in a revised
version of the September 2000 staff report on the biennial regulatory review
(TR, Sept. 25, 2000).  The FCC wants the Common Carrier Bureau to prepare
rulemaking notices on the following:

   Identifying alternative approaches to inter-carrier compensation "that
are more consistent with the long-term development of competition";

   Excluding rural telcos from the requirements that independent incumbent
local exchange carriers provide interexchange service through separate
subsidiaries;

  Simplifying FCC review of the "average schedules" used in determining
certain telcos' costs and shares of the National Exchange Carrier
Association, Inc.'s revenue pools; and

  Changing the schedule for NECA board elections to reduce the
administrative costs of the association, which was created by FCC directive
to maintain access charge tariffs for many local exchange carriers.

The International Bureau will prepare rulemaking notices to initiate the
following streamlining efforts:

  Extending the detariffing regime adopted for domestic interexchange
services to the international services of nondominant interexchange carriers,
"including commercial mobile radio service providers and U.S. carriers
classified as dominant solely because of foreign affiliations";

 Further streamlining the earth station and space station licensing
processes;

 Requiring electronic filing of applications for earth station licenses, to
save processing time;

 Expanding the availability of pro forma transfers of control and
assignments of international facilities authorizations under section 214 of
the Communications Act of 1934; and

 Reducing the reporting burdens for international telecom carriers.

The FCC asked the Wireless Telecommunications Bureau to prepare rulemaking
notices to pursue the following streamlining goals:

 Considering whether to eliminate restrictions "on the aggregate amount of
broadband PCS (personal communications service), cellular, and specialized
mobile radio spectrum that an entity can hold in any market";

 Extending license terms beyond 10 years and implementing automatic or
default renewal procedures to avoid late-filing problems;

 Considering partially privatizing the site-by-site, frequency-by-frequency
licensing process for the private and common carrier microwave services;

 Bringing the technical and operational rules-including radiated power
restrictions-for cellular service, PCS, and general wireless communications
service into conformity with each other;

 Considering whether any of its part 22 (cellular) rules are obsolete as a
result of competitive or technological developments; and

 Bringing its radio frequency emission regulations into compliance with the
International Telecommunication Union's radio regulations.

And the Commission asked its Office of Engineering and Technology to prepare
rulemaking notices to address the following issues:

 Clarifying a variety of equipment authorization rules and eliminating
ambiguities in equipment test procedures, including authorization procedures
for transmitters that operate both in the U.S. and overseas; and

 Reviewing the emission limits on devices that operate in spectrum above 2
gigahertz.

The FCC also agreed with a staff recommendation that when it evaluates new
rules, it should use criteria similar to that used in the biennial review to
evaluate existing rules.  It stopped short, however, of adopting any criteria
in binding rules or procedures.

The FCC rejected a proposal the U.S. Telecom Association had offered in
comments on the September staff report (TR, Oct. 16, 2000).  USTA had asked
the FCC to set a firm time limit for acting to eliminate rules identified as
unnecessary during biennial reviews.

Citing the need to make the best use of its limited resources and to retain
flexibility, the FCC directed all bureaus and offices "to prioritize
rulemaking proceedings stemming from this biennial review on the basis of
various public policy considerations and a comprehensive evaluation of
comments received" in response to the planned rulemaking notices.

Issuing a separate statement, Commissioner Harold W. Furchtgott-Roth said the
FCC shouldn't view the biennial reviews as "a burden to be endured or a hoop
through which we must dutifully jump every other year."  He added, "As the
Commission moves forward, it is my sincere hope that we will devote
full-time, year-round staff to this endeavor.

Furchtgott-Roth Says Departure Of Kennard Won't Bring Deadlock

Although the departure of FCC Chairman William E. Kennard leaves the agency
temporarily with four members-two Republicans and two Democrats-Commissioner
Harold W. Furchtgott-Roth doesn't expect the agency to be deadlocked.

"A lot is made about the political divisions" at the FCC, he said Jan. 18
during his monthly briefing with reporters.  "But I really don't see it at
all."

About 90% of the FCC's votes over the past three years have been unanimous,
Mr. Furchtgott-Roth said.  Only about 2% or 3% have been 3-2 votes, he
estimated.  So it's unlikely that many votes will be deadlocked with the two
Republicans-Mr. Furchtgott-Roth and Michael Powell-voting against Democratic
Commissioners Susan Ness and Gloria Tristani, he said.

Mr. Furchtgott-Roth commended then-Chairman Kennard for not trying to push "
11th-hour" initiatives before leaving the agency.  "A lot of people were
worried that some things might be railroaded through," he said.  "Chairman
Kennard has been very principled about this, not trying to do a lot of
11th-hour rules."

Meanwhile, Mr. Furchtgott-Roth said, the FCC had made "significant progress"
in its second "biennial review" of its regulations.  The Telecommunications
Act of 1996 directs the FCC to review its regulations every two years and to
eliminate or revise any rules that are no longer necessary or in the public
interest.

Last week, the FCC issued a report on what rule changes it would propose as a
result of its second biennial review (see separate story).

The report represents a "substantial improvement over the really pathetic
effort that was done two years ago" when the agency conducted its first
biennial review (TR, Jan. 4, 1999), Mr. Furchtgott-Roth said.

Mr. Furchtgott-Roth also reiterated his complaints about the FCC's
coordination with other agencies in reviewing mergers and related license
transfers.  Regarding the proposed Deutsche Telekom AG-VoiceStream Wireless
Corp. merger, Mr. Furchtgott-Roth disagreed with the FCC's decision to put
its review on hold while the U.S. Department of Justice and the Federal
Bureau of Investigation probe national security concerns (TR, Dec. 25,
2000).

He said it would be inappropriate for the FCC to impose conditions on the
merger that are requested by DoJ and FBI.  That, however, has been the FCC's
practice in past merger reviews, he said.

Time Warner Telecom, Inc., intends to raise as much as $700 million...

Time Warner Telecom, Inc., intends to raise as much as $700 million through
the sale of stock and debt securities to help pay for its acquisition of GST
Telecommunications, Inc.  Time Warner Telecom, of Littleton, Colo., revealed
its plan in a filing with the Securities and Exchange Commission.  The funds
would be used to repay an unsecured bridge loan that was used to pay for GST,
Time Warner Telecom said.  Further details of the fundraising effort will be
disclosed in future filings, it said.  Time Warner Telecom recently completed
the $690 million acquisition of GST, a competitive local exchange carrier
that was in bankruptcy (TR, Sept. 18, 2000).

UWB Operations Feasible In 3-6 GHz Band, NTIA Says

Ultrawideband (UWB) devices likely can operate in spectrum between 3 and 6
gigahertz without harming incumbent users, including fixed satellite service
(FSS) operators, according to test results released last week by the National
Telecommunications and Information Administration.  But NTIA said that steps
to mitigate interference probably would be necessary.

NTIA has been studying the interference potential of UWB devices since last
year as part of a rulemaking proceeding launched by the FCC to explore
allowing UWB devices to operate on an unlicensed basis under part 15 of its
rules (TR, Nov. 6, 2000).

Separate tests of UWB devices' effect on Global Positioning System (GPS)
receivers are expected to be released next month.  The test results released
last week involved only non-GPS operations.

Results Will Aid Decision Making

NTIA Administrator Gregory L. Rohde said at a Jan. 18 news conference that
the test results "will form the basis of negotiations between NTIA and the
FCC to develop a final rule that will permit the development and availability
of ultrawideband technologies."

UWB devices use precisely timed pulses of radio frequency (RF) energy spread
across a wide swath of spectrum at extremely low power.  Proponents of the
technology have hailed its potential in myriad applications, including law
enforcement, fire and rescue services, the military, medicine, education, and
home and office local area networks (TR, Sept 18, 2000).  They say it won't
interfere with existing systems.

But aviation groups, the GPS and satellite industries, and others have
expressed concern that the devices could interfere with existing systems.
They've asked the FCC to hold off approving their use until tests show they
won't cause such interference.

In its tests, NTIA assessed the interference potential of five UWB devices on
federal air-route surveillance radar, airport surveillance radar, and air
traffic control beacon systems.

Based on the results of those tests, NTIA engineers developed mathematical
models to analyze the impact of UWB devices on nine other systems, including
those operating between 3100 and 5650 megahertz, or 3.1 and 5.65 GHz.  The
tests indicated UWB devices could operate in that range, although limits
might need to be placed on power levels, distance, and pulse-repetition
frequency.  However, there's a question about whether UWB devices would have
a "big enough window" to operate if restrictions are imposed, Mr. Rohde said.

Among those operating in that spectrum are FSS users (3.7-4.2 GHz), microwave
landing services (5.03-5.091 GHz), and Doppler weather radar (5.6-5.65 GHz).
For FSS systems, "the worst-case situation" with regard to interference "
would occur for receivers located at ground level with a low antenna
elevation angle of 5 degrees,"  NTIA's report said.  There would be much less
interference potential for FSS systems on tops of buildings or with higher
elevation angles, it said.

"However, at this time uncertainty exists as to the effect of UWB signal duty
cycle on the performance of FSS earth stations which have digital signal
processing," the report said.  "This information would assist in establishing
the UWB signal peak power limit; NTIA study is continuing on this important
consideration."

Regarding microwave landing services, UWB operations at power limits
currently permitted for part 15 devices may exceed the receiver interference
protection standard.  More analysis of the effect on such systems is needed,
NTIA said.

Tests on systems operating between 900 and 1610 MHz and 1610-3100 MHz
suggested there could be significant interference problems with incumbent
systems, NTIA officials said at the news conference.

But NTIA's report indicated that UWB operations below 3.1 GHz were possible.
It said that while UWB operations in that spectrum "will be quite
challenging," mitigating factors "could relax restrictions" on UWB devices.

It also said that UWB emission levels would have to be significantly reduced
to guard against interference.  And it concluded that further studies are
needed to assess degradation of existing systems, as well as relative levels
of noise, interference, and "clutter signals."

Mr. Rohde said NTIA engineers used existing standards for determining the
potential interference of UWB devices.  "Obviously this is going to be an
area that'll be the subject of a lot of debate. . .as to what really is the
criteria that determines interference," he added.

Findings Draw Praise

NTIA's test results drew praise from the UWB industry.  Officials of Time
Domain Corp., a leading marketer of UWB technology, said they were still
reviewing NTIA's findings.  But they indicated they were happy the tests
showed the devices could share non-GPS spectrum.

"While we have questions regarding some of the conclusions made by NTIA, we
are pleased that the test results confirm that compatible operation of UWB
devices with government services is possible," said Jeffrey L. Ross, Time
Domain's vice president-corporate development and strategy.  "We have full
confidence that the FCC will impose appropriate regulations and power limits,
and look forward to the FCC's timely completion of its rulemaking," he added.

Last year, Time Domain questioned NTIA's testing methods, saying they must
reflect real-world conditions to be accurate (TR, Sept. 4, 2000).

Another developer of UWB devices, Fantasma Networks, Inc., also hailed the
test results.  "We are confident that our deployment of ultrawideband
[devices] does not pose a threat of harmful interference to public safety
agencies or to any other user of the radio spectrum," said Roberto Aiello,
Fantasma's chief technology officer.

Angelos Amends Lawsuit Against Wireless Industry

As expected, noted plaintiffs' attorney Peter G. Angelos has entered the
legal fray against the wireless industry over the safety of mobile phones.
Mr. Angelos has filed an amended lawsuit on behalf of a Maryland doctor who
claims that using a mobile phone caused his brain tumor (TR, Aug. 7 and Dec.
25, 2000).

The lawsuit, filed last week in the U.S. District Court in Maryland, seeks
$375 million in compensatory damages and $750 million in punitive damages.

The lawsuit says the industry failed to conduct adequate testing on the
health effects of mobile phones and warn consumers about known risks.  The
industry "manipulated the results of other testing, concealed evidence that
[mobile phone] radiation is harmful and suppressed scientific and medical
research," the lawsuit alleges.

According to the lawsuit, the medical and scientific communities have been
aware of the biological effects of radio frequency (RF) exposure since the
1920s.  The wireless industry was or should have been aware of evidence of
such health hazards, the lawsuit alleges.

Michael F. Altschul, vice president and general counsel of the Cellular
Telecommunications & Internet Association, which is named in the lawsuit,
said he hadn't seen the amended complaint.

"Regardless of who the lawyer is. . .the legal requirements remain the same,"
Mr. Altschul said.  The plaintiffs have to show a link between RF radiation
exposure and cancer, he said, and "that science just isn't there."  Spokesmen
for Motorola, Inc., and Verizon Communications, Inc., which also are named as
defendants, have made similar points.

Last week's amended lawsuit, Christopher J. Newman et al. v. Motorola, Inc.,
et al. (case no. CCB-00-2609) was filed after U.S. District Judge Catherine
C. Blake last month dismissed a number of the counts in the original filing
but gave the plaintiffs permission to amend their complaint.  The wireless
industry had succeeded in moving the case from Baltimore City Circuit Court
to federal court.

Mr. Angelos, owner of the Baltimore Orioles, has won major cases against the
asbestos industry and represented Maryland in litigation against the tobacco
industry.  John A. Pica, a lawyer in Mr. Angelos' Baltimore firm, has been
quoted saying Mr. Angelos plans to file 10 lawsuits this year against the
wireless industry.  Messrs. Angelos and Pica could not be reached for comment.

Bob Gordon, a consultant to Baltimore attorney Joanne Lynch Suder, who filed
the original lawsuit on behalf of the Maryland doctor, said Mr. Angelos
agreed to be the co-counsel in a number of cases that Ms. Suder planned to
file against the phone industry.  Lawyers around the country also are working
on the planned litigation, he said.

Meanwhile last week, German researchers said there could be a link between
the use of mobile phones and cancer of the inner eye.  The results were
published in the January issue of the research journal Epidemiology.

But the researchers, who interviewed 118 subjects with eye cancer and a
control group of 475 people, said their findings were inconclusive because of
the study's limitations.  In a statement, CTIA cited those limitations and
the small size of the study group.

NTIA Proposes Reimbursement Procedures For Relocated Government Spectrum Users

The National Telecommunications and Information Administration is proposing
procedures for relocating federal government spectrum incumbents to other
bands to make way for commercial users.  Among the issues to be decided are
the circumstances under which incumbents will be required to relocate and
which relocation costs will be eligible for reimbursement.

NTIA Administrator Gregory L. Rohde said the rules could bolster a high-level
effort to identify and allocate spectrum for third-generation (3G) wireless
services.  Then-President Clinton launched the initiative by executive
memorandum in October 2000 (TR, Oct. 16, Nov. 6, and Nov. 20, 2000; and Jan.
8).

As part of that effort, NTIA is studying the possible use of the 1755-1850
megahertz band, which is used heavily by the Defense Department.  The FCC is
analyzing use of the 2500-2690 MHz band, which is used mostly by multichannel
multipoint distribution service and instructional television fixed service
operators.

NTIA's proposed rules would cover such future reallocations, Mr. Rohde said
at an industry-government meeting on the 3G plan last week.  He said he hoped
the final rules would be released this summer.

The National Defense Authorization Act for fiscal year 1999 required private
entities to reimburse federal spectrum users for the cost of relocating or
modifying their systems because of reallocation.  The notice of proposed
rulemaking NTIA released Jan. 17 suggests ways to implement that mandate.
Comments are due March 19 with replies due April 18 in docket no.
001206341-0341-01.

In its rulemaking notice, NTIA seeks comments on whether federal government
spectrum incumbents should be required to relocate if sharing is technically
possible in their present bands.

If the incumbents are not required to relocate, under what conditions should
they be permitted to remain in their current bands and who would pay for any
system modifications that would improve spectrum sharing? NTIA asks.  For
example, it asks, should the federal incumbent be allowed to stay in the band
on a noninterference basis with 3G systems?

NTIA suggests that federal incumbents not be forced to relocate until a "
comparable facility" is available for a reasonable period of time.  It
defines comparable facility as one that has the same or superior operational
capabilities as the original spectrum.  NTIA suggests using four factors to
determine comparability:  (1) communications throughput, (2) system
reliability, (3) operating costs, and (4) operational capability.  It seeks
comments on its definition and whether the four factors are sufficient.

NTIA outlines which relocation costs should be eligible for reimbursement.
It also suggests a process for resolving differences over those costs,
including a mandatory negotiation period, third-party mediation, and
nonbinding arbitration.

NTIA seeks comments on what type of cost-sharing plan to adopt and asks
whether a "band manager" or some other entity should serve as a clearinghouse
to administer the plan.  And it wants input on whether it should "sunset" a
cost-sharing plan five years after any auction of former government
spectrum.  The rulemaking notice also seeks comment on how to treat spectrum
with classified frequency assignments.

At the direction of the Omnibus Budget Reconciliation Act of 1993 and the
Balanced Budget Act of 1997, NTIA identified 255 MHz of spectrum that can be
reallocated from federal government to private use.  The bands identified for
which federal incumbents would qualify for reimbursement are 216-220 MHz,
1432-1435 MHz, 1710-1755 MHz, and 2385-2390 MHz.

The FCC has proposed allocating the 1710-1755 MHz band for 3G services.  In
addition, Mr. Rohde said the reimbursement rules would apply to the 1755-1850
MHz band if federal incumbents there are relocated under the 3G initiative.

Rohde Uncertain of Effort's Future

At last week's 3G meeting, Mr. Rohde said he didn't know if the Bush
administration would make any changes to the 3G effort, which is operating on
a tight schedule that calls for the FCC to issue licenses for 3G spectrum by
Sept. 30, 2002.  But he said he had stressed its importance in his dealings
with Bush transition team staff members.  "I can't predict what's going to
happen" beyond Inauguration Day, Mr. Rohde told reporters.

The Bush transition team staff member responsible for NTIA, James Derderian,
a former Republican staff director of the House Commerce Committee, couldn't
be reached for comment.  But at his confirmation hearing for Commerce
secretary earlier this month, Donald L. Evans said the Bush administration
was committed to finding 3G spectrum (TR, Jan. 8).

Industry Expresses Frustration

At last week's meeting, several industry representatives expressed
frustration that they didn't have access to data they said they needed to
make recommendations on use of the 1755-1850 MHz and 2500-2690 MHz bands in
time for NTIA and the FCC to consider.  Industry representatives in
NTIA-established working groups are reviewing the bands.

The 3G initiative calls for final reports on the two bands to be released in
March, with the FCC issuing an order allocating the selected spectrum in July.

Rick Kemper, director-wireless technology and security for the Cellular
Telecommunications & Internet Association, said determining the cost of
relocating incumbents or whether band sharing or segmentation was feasible
requires information on how many systems operate in the frequencies and how
they are being used.  But he said that data wasn't available.

Donald Brittingham, director-wireless policy for Verizon Wireless, said he
was concerned that the final band studies wouldn't reflect all the industry's
input.  He urged the regulators to delay releasing the reports.

"One concern is we're going to do a lot of work and in the end it will be too
late to be included in your final report," added Joanne C. Wilson,
director-global public affairs for Lucent Technologies, Inc.

Frederick R. Wentland, NTIA's director-spectrum plans and policies, said some
information wouldn't  be available until the final band studies were
released.  "Unfortunately, time happens to be our enemy here," Mr. Wentland
added.

But he urged industry officials to continue participating in the process,
including filing comments in response to the FCC's recent notice of proposed
rulemaking on 3G spectrum (TR, Jan. 8).

Diane J. Cornell, associate chief of the FCC's Wireless Telecommunications
Bureau, said the current process was designed "to crystalize the issues," and
she urged industry engineers to focus on technical issues concerning band
sharing and segmentation.

Ms. Cornell also said industry should submit comments in response to NTIA's
notice and an FCC rulemaking notice released in November 2000 suggesting
allocations for 27 MHz of spectrum transferred from government to private use
(TR, Nov. 27, 2000).

After the final band studies are released in March, she said, "I expect there
will be differences of perspectives."  She said industry officials would get
another chance to submit comments after that.

Antenna-Rule Violations Prompt Proposed Forfeitures of $327K

The FCC and its Enforcement Bureau have proposed that two wireless carriers
and two tower companies pay $327,000 for violations of its antenna rules.

The largest proposed forfeiture was against American Tower Corp. for 36
violations in 14 states and Washington, D.C.  The FCC has ordered the
Enforcement Bureau to conduct a more thorough investigation of American Tower'
s compliance with its rules.

Separately, the Enforcement Bureau proposed an $80,000 forfeiture against
Telecorp Communications, Inc.; an $18,000 forfeiture against AT&T Wireless
Services, Inc.; and an $17,000 forfeiture against SpectraSite Corp.

In a notice of apparent liability for forfeiture, the FCC said American Tower
failed to (1) properly light an antenna during construction, (2) register two
existing antennas, (3) notify the agency of ownership changes involving 24
antennas, and (4) post registration numbers on nine antennas.

"We are concerned that ATC continues to violate our rules despite both oral
and written warnings regarding the Commission's antenna structure
requirements," the FCC said in its Jan. 16 forfeiture notice.  It said more
than half of American Tower's 36 violations were uncovered after a July 2000
meeting between FCC field agents and American Tower officials.

In separate notices released the same day, the Enforcement Bureau found that
Telecorp failed to light antennas properly on four occasions and that AT&T
Wireless failed to post antenna registration numbers on nine occasions.  It
also found that SpectraSite failed to post antenna registration numbers on
four occasions and failed to notify the FCC of ownership changes on three
occasions.  The violations were discovered by FCC field agents during routine
investigations and inspections.

Russell Wilkerson, director-corporate affairs for TeleCorp PCS, Inc., told TR
, "We're talking to our folks in the field. . .to compare the cases by the
FCC and some of their findings and then we will respond to them."  He added, "
We make it a practice to follow the FCC rules and regulations."  Spokesman
for the three other companies could not be reached for comment.

Fifth Circuit Joins Chorus On State Immunity Issue

The U.S. Court of Appeals for the Fifth Circuit (New Orleans), echoing three
other appellate circuits, has ruled that the U.S. Constitution doesn't
protect state utility commissions from federal judicial review of their
decisions regarding carrier interconnection agreements.

In a two-to-one decision issued Jan. 16, the Fifth Circuit rejected 11th
Amendment immunity claims raised by the Louisiana Public Service Commission
during proceedings stemming from a lawsuit filed by AT&T Corp.  AT&T was
challenging the PSC's 1997 arbitration decision regarding its interconnection
agreement with BellSouth Telecommunications, Inc.

Section 252 of the Telecommunications Act of 1996 directed state commissions
to review, approve, and, when necessary, arbitrate carrier interconnection
agreements.  The Act also says that parties aggrieved by state commission
determinations in carrier interconnection proceedings can ask the appropriate
federal district court to the review the carrier agreement.

In AT&T Communications v. BellSouth Telecommunications, Inc., et al. (case
no. 99-30421), the Fifth Circuit reversed a ruling by the U.S. District Court
in Baton Rouge.  The lower court had held that the 11th Amendment to the U.S.
Constitution prohibited such lawsuits against state agencies or employees.
(AT&T had named the PSC and its individual commissioners in the lawsuit).

The 11th Amendment grants states immunity from being sued in federal courts.
But states may lose that immunity under an exception carved out by the U.S.
Supreme Court in its 1908 decision in Ex parte Young.  The Ex parte Young
doctrine allows lawsuits against state employees in order to prevent ongoing
violations of federal law.

The Fifth Circuit found that the PSC and the commissioners had waived their
constitutional sovereign immunity rights by agreeing to arbitrate the
interconnection dispute under the provisions of the 1996 Act.  The court also
ruled that the Ex parte Young doctrine applied to AT&T's request for
prospective injunctive relief from PSC arbitration rulings that AT&T had
argued contravened the interconnection requirements of sections 251 and 252
of the Act.

The appeals court reversed the district court's ruling and remanded the case
for further proceedings.  Circuit Judge James L. Dennis wrote the opinion and
was joined by Judge Henry A. Politz.  Judge Jerry E. Smith dissented from the
majority's opinion.

Finding Echoes Other Circuits

Appeals courts in the Sixth, Seventh, and 10th Circuits already have held
that the Ex parte Young exception applies to federal court challenges to
state commission decisions affecting carrier interconnection agreements (TR,
April 5 and Oct. 25, 1999; and Jan. 24, June 26, and July 31, 2000).  Last
fall, the U.S. Supreme Court refused to review the issue in a case arising in
the Sixth Circuit (TR, Oct. 9, 2000).

In his dissent, Judge Smith cited the U.S. Supreme Court's 1996 decision in
Seminole Tribe v. Florida.  Under that ruling, he said, Congress' referral of
disputes surrounding state commission-arbitrated interconnection agreements "
supplants" a party's ability to sue the state commission under the 1908
Supreme Court decision in Ex parte Young.  But, he added, Congress' referral
of such disputes to the federal courts violates the 11th Amendment to the
Constitution.

The Chicago-based Seventh Circuit rejected a similar argument last year in
which state utility commissioners had invoked Seminole Tribe (TR, July 31,
2000).

AeA Seeking Federal Preemption Of Multiple State Privacy Laws

Lawmakers in the 107th Congress should make federal preemption of multiple
state privacy laws "one of the top legislative concerns" for the coming
session, according to AeA, formerly the American Electronics Association.
Federal privacy legislation "should play a crucial role" in maintaining
consistency and certainty" in the marketplace, said William T. Archer, AeA's
president and chief executive officer.

Mr. Archer warned, however, that "poorly crafted legislation" could have the
unintended effect of "imposing burdensome, impractical new requirements" on
e-commerce and Internet businesses.  "Only the federal government is in a
position to create uniform U.S. privacy standards and work for international
harmonization," he said.  "Otherwise, online business could face 50
conflicting sets of privacy rules.  Consumers and businesses alike would
lose."

AeA urged lawmakers Jan. 18 to consider its "privacy principles" in drafting
federal preemption legislation.  The principles recommend creating uniform,
technology-neutral national standards to protect privacy.

AeA wants standards to require merchants to notify consumers of
information-collection practices, while allowing them to "opt out of the use
or disclosure" of information if it's unrelated to the initial transactions
between consumers and merchants.

The AeA principles also urge lawmakers to build on private-sector privacy
seal programs and privacy codes while relying on the Federal Trade Commission'
s existing authority to enforce data-collection notice requirements.

Libraries Mull Legal Challenge To New Internet-Filtering Law

The American Library Association (ALA) has been given the green light from
its executive board to launch a court challenge of the Children's Internet
Protection Act (CIPA)  The law passed last year (TR, June 12, 2000) requires
schools and libraries to install Internet- filtering software if they use
federal funds-such as universal service "E-rate" support-to purchase
computers or connect to the Internet.

ALA said its executive board had authorized the legal action "after more than
a week of intense discussions among leaders and members during the
association's annual midwinter meeting."

ALA announced Jan. 18 that it was "researching and exploring its options in
preparation for litigation," as it believes the law infringes on freedoms
guaranteed by the First Amendment to the U.S. Constitution.

The First Amendment protects free exercise of religion, free speech, freedom
of the press, freedom to assemble, and freedom to petition the government for
redress of grievances.

The Internet-filtering requirements would affect three federal funding
streams that libraries frequently use to purchase computer equipment or
connect to the Internet, ALA said.  They are the Elementary and Secondary
Education Act, the Library Services and Technology Act, and the E-rate
program.

"All three programs help ensure schools and libraries provide access to the
resources communities need to thrive in the Information Age," ALA said.  "
CIPA runs counter to these federal efforts to close the digital divide for
all Americans."

Think Tank Slams City Telecom Efforts

Through government-owned telecom networks, some states and cities are trying
to make sure their constituents don't have to wait for advanced telecom
services.  But such efforts are counterproductive, according to a paper
released by the Progress & Freedom Foundation, a Washington, D.C., think tank.

"Governments that have entered the telecom-munications business have been
saddled with financial losses and obsolete, legacy technologies.
Furthermore, government entry in the marketplace distorts incentives and
slows the development of private-sector competition," writes PFF President
Jeffrey A. Eisenach, author of Does Government Belong in the Telecom Business?

He views the pace of state and local government entry into telecom and
Internet service businesses as "rapid and increasing," citing efforts by
municipally owned utilities on Long Island, N.Y.; in Los Angeles; and in
Chicago.  The paper lists 233 municipal utilities that were providing one or
more of the following services in 1998:

 Cable TV,

 Internet access,

 High-speed data,

 Broadband data resale,

 Local telephony,

 Long distance services,

 Leased fiber, and

 Municipal data network services.

Of these services, the most commonly offered by municipalities is cable TV
service, according to the PFF findings.  Eighty-seven cities offered cable TV
service, compared with 73 cities that run data networks and 61 that provide
Internet access.  Only 18 cities were found to be offering local telephony,
and 10 cities offered long distance service.

Seven states had 11 or more cities offering telecom services:  22 cities in
Iowa, including Cedar Falls; 16 cities in Minnesota; 12 cities in Georgia; 12
cities in Missouri, including Columbia and Springfield; 11 cities in Florida,
including Gainesville and Tallahassee; 11 cities in Massachusetts; and 11
cities in Texas, including Brownsville and College Station.

Verizon Adds Data To Boost Massachusetts InterLATA Bid

Officials at Verizon New England are counting on new data to satisfy
regulators' concerns about its application to provide interLATA (local access
and transport area) services in Massachusetts.  Early last week, Verizon
again asked the FCC to allow it to enter that market; late last month, the
company withdrew a similar pending application it had filed last fall.

The officials are hoping the new data will answer questions regulators raised
about last fall's application, including whether the telco provides
nondiscriminatory access to DSL (digital subscriber line)- capable loops (TR,
Dec. 25, 2000).

Under section 271 of the Telecommunications Act of 1996, a Bell company must
obtain FCC approval before providing in-region interLATA services.  The FCC
must determine whether the company has met a 14-point "competitive checklist"
of market-opening mandates laid out in the Act.

Thomas J. Tauke, Verizon's senior vice president-external affairs and public
policy, said that the new filing "demonstrates that we provide
nondiscriminatory access to lines other DSL providers lease from us, as well
as parity of service for installation and repair."

FCC Chairman William E. Kennard had focused on Verizon's provisioning of
DSL-capable loops when the company withdrew its original Massachusetts
application.  He cautioned Verizon that it should include in a new
application "verified data reflecting acceptable levels of performance,
including an independent showing for loops used to provide advanced services."

But competitors aren't so sure that the new application addresses those
concerns-and other concerns raised in comments to the FCC.  Verizon "still
didn't get it right," AT&T Corp. Vice President-federal government affairs
Len Cali said, adding that the "refiled application has failed to adequately
address the shortcomings of the original application."  AT&T particularly
objected to Verizon's prices for unbundled network elements, saying they
still weren't cost-based, as required by the Act.

Verizon included in its application last week new rates for switched services
provided to competitors in Massachusetts.  It had informed the FCC of the new
rates in ex parte filings regarding the earlier application.  Competitors had
complained that the FCC shouldn't consider those rates in reviewing the
earlier application because they were submitted after comment deadlines in
the proceeding.  "Refiling puts to rest any concerns that interested parties
did not have the opportunity to comment on all the issues," Mr. Tauke said.

The FCC now has 90 days to consider the new application.  Under section 271,
it must consult with Massachusetts regulators and the Department of Justice
before issuing a decision.  Justice had given Verizon's original application
a thumbs-down (TR, Oct. 30, 2000).  The Massachusetts Department of
Telecommunications and Energy had recommended that the FCC approve it (TR,
Oct. 23, 2000).

The DTE's recommendation to the FCC is due Feb. 6; Justice must submit its
recommendation by Feb. 21.  Comments and replies are due to the FCC by Jan.
30 and Feb. 28, respectively.  Parties also are invited to meet with Common
Carrier Bureau staff for ex parte discussions about the proceeding between
Jan. 30 and Feb. 23.

Bureau Proposes SBC Pay $94K For Violating Collocation Rules

The FCC's Enforcement Bureau has found SBC Communications, Inc., apparently
liable for violating Commission rules regarding competitors' collocation of
equipment in incumbents' central offices.  Specifically, the bureau says SBC
failed to update its Web site to identify facilities that have run out of
physical collocation space.

In a Jan. 18 notice of apparent liability (file EB-00-IH-0326a), the bureau
proposed that SBC forfeit $94,500 for the alleged infraction, which the
bureau uncovered during an "independent audit."  The FCC made the audit a
condition of its approval of license transfers related to the merger of SBC
Communications, Inc., and Ameritech Corp. (TR, Oct. 11, 1999).

The FCC's "posting rule" requires incumbent local exchange carriers to update
their Web sites to list premises that run out of space for competitors to
install facilities.  They must provide those updates within 10 days of using
up the space.  But information provided by SBC to the bureau indicates that
in "numerous instances" SBC failed to provide timely updates to its Web site.

SBC has 30 days to pay the $94,500 or file a written statement showing why
the proposed forfeiture should be eliminated or reduced.

FCC Gets `Ahead of the Curve' With Inquiry on Interactive TV

Although the market for high-speed interactive TV (ITV) services is in the
early stages of development, the FCC hopes to get "ahead of the curve" by
collecting information on the status of the ITV market and whether it should
regulate it.

The FCC issued the notice of inquiry in Cable Services docket 01-7 because
comments in its recently completed proceeding on the America Online, Inc.-
Time Warner, Inc., merger (TR, Jan. 15) "raised the possibility" that a
vertically integrated cable TV and ITV service provider could discriminate
against alternative ITV service providers.  It asked for comments in the
docket 01-7 proceeding by March 19 and replies by April 20.

The inquiry seeks comment on what services constitute ITV services, how they
will be delivered, and other questions about the status of the ITV market.
The FCC acknowledged that it was "difficult to specify a definition" for ITV
services because of the technological and business changes in the new
industry.  It sought comment on its initial characterization of ITV as a "
service that supports subscriber-initiated choices or actions that are
related to one or more video programming streams.."

The FCC asked about the technical resources or "building blocks" a
distribution system would require to support ITV.  The FCC said it saw three
major building blocks:  (1) a video stream, (2) a two-way high-speed Internet
protocol connection, and (3) specialized customer premises equipment.

"To assess the possibilities for discriminatory behavior and what enforcement
procedures might be effective for any rules that might be proposed in the
future, it is important to understand clearly how ITV providers will deliver
their services to consumers, including what type of contractual arrangements
will govern," the FCC said.

It also asked whether cable TV providers would have the "superior platform"
for distribution of high-speed ITV service and sought comment on the ITV
capabilities of direct broadcast satellite providers and digital subscriber
line service providers.  The FCC also sought comment on the legal
classifications of ITV services, what public and statutory objectives ITV
rules would promote, and what authority the FCC has over such services.

The notice states that the Cable Television Consumer Protection and
Competition Act of 1992 directed the FCC to adopt rules "limiting the share
of cable capacity that could be used for commonly owned content and requiring
vertically integrated cable programmers to provide their content to rival
distribution platforms on nondiscriminatory terms."  The FCC added that if
the "same factual predicates that Congress cited in the 1992 Cable Act were
to apply to a distribution platform delivering ITV services, then some
regulation of those distribution facilities might be warranted."

The notice also asks for comment on how the FCC could implement rules to bar
providers of multichannel video programming from discriminating against
unaffiliated ITV providers.  It asked for comment on how nondiscrimination
rules should be enforced.  It suggested that ITV providers and cable TV
operators "rely on private enforcement arrangements" or that aggrieved
parties use the FCC's complaint procedures.

Kennard Warns against Discrimination

Then-FCC Chairman William E. Kennard acknow-ledged that ITV services were in
the "early stages of development" but said the FCC would "do well to get
ahead of the curve."  He said it was "clear" that cable TV would be an "
important platform for delivery of ITV services, at least in the near term,
and I am concerned that a vertically integrated ITV service provider might
have the incentive and ability to discriminate against unaffiliated ITV
service providers."

Commissioner Gloria Tristani supported the inquiry but "regretted" that the
FCC issued an inquiry rather than a notice of proposed rulemaking.  "This
Commission must move promptly to ascertain the public interest in nascent
industries to ensure appropriate measures are timely vetted and resolved,"
she said.

Commissioner Harold W. Furchtgott-Roth dissented from the FCC's decision,
saying it was "premature" to address the issue of cable interactive TV
services.  "While the item is framed as a notice of inquiry, it is no less
damaging to raise the specter of government regulation. . .for services that
are still in their gestational period."  He said he had "serious
reservations" about the FCC's legal authority to address ITV issues.

Robert Sachs, president and chief executive officer of the National Cable
Television Association, was "pleased" that the FCC was launching an inquiry
rather than a "rulemaking which presumes a regulatory outcome."  But he added
that "asking dozens of hypothetical questions about regulating a business
which has yet to take form still puts the cart before the horse, in
regulatory terms. . .There is no evidence to suggest that government
regulation is called for here."

Analysts See Shifting Alliance As BellSouth Sells Qwest Stock

It was the rumor du jour 21 months ago:  BellSouth Corp.'s purchase of a 10%
stake in Qwest Communications International, Inc., meant the companies might
merge.  Times have changed, however, and BellSouth now is cashing in much of
its Qwest investment to raise $1 billion for other projects.

"The transaction underscores a change in the direction of the relationship
between Qwest and BellSouth," said Marion Boucher Soper, a Bear, Stearns &
Co. analyst, in a Jan. 16 report.  "While both appear to be interested in
strategic expansion, other opportunities are likely to be higher on the
priority list."

BellSouth's 10% stake already has been diluted to about 5% by Qwest's
acquisition of U S WEST, Inc., Merrill Lynch & Co. analyst Adam Quinton
noted.  "The gradual dilution and now sell down of the BellSouth stake speaks
to the changing nature of the relationship between the two," Mr. Quinton said
in a report also issued Jan. 16.

"BellSouth seems to be indicating it has other strategic priorities and that
securing a strong relationship with a leading `next-gen' long distance
provider can be done via commercial relationships, which do not need the
backing of any equity position," Mr. Quinton said.

"Realistically, BellSouth's investment in Qwest is not strategic to its
long-term growth strategy, and the $1 billion in proceeds will give it cash
on hand," said Goldman, Sachs & Co. analysts Kathryn D. Willing and Frank J.
Governali.

"We were a very different company two years ago when they invested in us,"
said Joseph P. Nacchio, Qwest's chairman and chief executive officer.  If
BellSouth now needs cash instead of Qwest stock, Mr. Nacchio said, "I'm glad
to be strong enough now to be able to help out."

The transaction satisfies both companies' needs, analysts said.  It gives
BellSouth a cash infusion to spend on deployment of digital subscriber line
service and on its wireless initiatives in the U.S. and Latin America.

Qwest, on the other hand, gains the opportunity to boost its stock value, Mr.
Quinton said.  "Qwest's management is clearly sending a signal to the market
that the company's stock is undervalued at current levels," he said.

The sale of 22.22 million Qwest shares back to Qwest will leave BellSouth
with 52 million shares, or a 3% stake in Qwest.  BellSouth agreed to hold
those shares until Jan. 16, 2002, except for 11 million shares it can sell
after Feb. 16, 2001.

Qwest probably will not be the buyer if BellSouth decides to sell those 11
million shares, Mr. Nacchio said during a Jan. 16 conference call.  Qwest may
help BellSouth sell the shares to Qwest's independent pension fund, but Qwest
can't buy any more shares without running the risk of hurting its credit
rating, Mr. Nacchio suggested.

Qwest management consulted credit-rating agencies and decided $1 billion "was
a good number we could handle.  It wasn't going to put any burden on us," Mr.
Nacchio said.

Two credit-rating agencies agreed.  Qwest intends to fund the purchase by
issuing commercial paper, a short-term funding solution.  "The company has
adequate balance-sheet flexibility to absorb the additional debt," Standard &
Poor's said.  Moody's Investors Service said it was "comfortable that Qwest's
actions. . .are sensitive to the overall credit implications."

Despite the stock buyback, the relationship between the companies will
increase.  In addition to continuing its co-marketing agreement with Qwest
and using Qwest for long-haul transport, BellSouth will buy $250 million
worth of services from Qwest, paying   with Qwest shares.

Blaming Verizon for Bankruptcy, NorthPoint Plans Asset Auction

NorthPoint Communications Group, Inc., doesn't expect to emerge from
bankruptcy as an independent entity but has asked a bankruptcy court to allow
a "structured sale" of its assets.

"The purpose of our filing is to use the breathing room Chapter 11 provides
to sign an agreement with a financially sound strategic partner who is
interested in our world-class network," said Elizabeth A. Fetter, NorthPoint'
s president and chief executive officer, in a conference call with financial
analysts.

NorthPoint filed for protection under Chapter 11 of the U.S. bankruptcy code
Jan. 16 in U.S. Bankruptcy Court for the Northern District of California.
The filing follows a financial slide for which NorthPoint largely blames
Verizon Communications, Inc.  In November 2000, Verizon canceled plans to
acquire 55% of NorthPoint and provide $350 million in financing (TR, Dec. 4,
2000).

NorthPoint has laid off workers, scaled back operations, and sold stakes in
joint ventures in Europe and Canada, but those moves apparently weren't
enough to keep the company solvent.  In conjunction with its bankruptcy
filing, the company obtained agreements for as much as $38 million in "
debtor-in-possession" financing to continue operations.

"The company's available cash only funds its operations for a few weeks,"
said Kenneth Hoexter, an analyst with Merrill Lynch & Co.  "Even with the
nearly $12 million in cash received through recent divestitures, we believe
that the company has virtually run out of additional funds to keep operations
running."

"The only surprise for most investors in this bankruptcy filing was that it
wasn't announced sooner given the critical funding situation at NorthPoint,"
Credit Suisse First Boston Corp. analyst Mark Kastan said in a Jan. 17 report.

"With NorthPoint's assets now officially on the block, look for a number of
telecom companies to express an interest," Mr. Kastan said.  Potential
bidders include McLeodUSA, Inc., XO Communications, Inc., and any
interexchange carrier that needs more local broadband infrastructure, Mr.
Kastan said.

NorthPoint's condition has raised new doubts about the other major "data
CLECs" (competitive local exchange carriers)-Rhythms NetConnections, Inc.,
and Covad Communications Group, Inc.-whose business models depend largely on
deployment of DSL (digital subscriber line) service.

"Although both Rhythms NetConnections and Covad Communications have enough
cash to last for several more quarters, we believe it will be extremely
difficult for either of these companies to obtain additional financing," Mr.
Kastan said.  "We expect significant scale-back initiatives-in addition to
those already announced-from both of them."  Covad already has taken steps to
conserve cash, and Rhythms announced similar steps last week (see separate
story).

Credit Suisse First Boston analyst Daniel P. Reingold noted that the downfall
of the data CLECs had left Bell companies and independent incumbent telcos
well positioned to attack the market for high-speed Internet access.

"A year ago investors had genuine fear that DSL CLECs, using the FCC's highly
discounted UNE [unbundled network elements] and line-sharing rates, would be
able to profitably take significant share" from Bell companies and
independent incumbent local exchange carriers, Mr. Reingold said in a Jan. 17
report.

"Now with NorthPoint in bankruptcy, Covad and Rhythms cutting back coverage
dramatically, AT&T [Corp.] and WorldCom [Inc.] nowhere in DSL, and Bell
companies ramping [up] DSL install rates, it is apparent the consumer
high-speed access market will be left to the cable [TV] and incumbent
telephone companies, and the small-business market to the latter," he said.

Qwest Touts Line-Sharing Pacts, Improved Service

Qwest Communications, Inc., has said it improved its service to end-user
customers and other carriers in 2000 in key areas-including those that have
come under fire from consumers and state regulators.

Qwest filled almost 98% of it service orders for 2000 on time, Afshin
Mohebbi, Qwest's president-worldwide operations, told reporters during a Jan.
15 conference call.  Ninety-five percent of local service repairs were
completed on time, Qwest's best performance in this category since 1996, he
said.  He also cited reductions in the percentage of customers whose service
was out for more than 24 hours and a decrease in "held or delayed" orders.

Last week, Qwest also unveiled permanent line-sharing agreements with
MULTIBAND Communications, Inc., New Edge Networks, NorthPoint Communications,
Inc., and Contact Communications.  Line-sharing agreements enable competitors
to use the high-frequency portion of the loop for data transmission while
Qwest continues to provide voice service over the low-frequency portion.
Permanent line-sharing agreements now are available to all wholesale
customers, Mr. Mohebbi said.

In other long-term plans, Qwest will seek the FCC's approval to offer
interLATA (local access and transport area) services in at least one state by
year-end; it plans to initiate state-level proceedings in several others, Mr.
Mohebbi said.  He said Qwest hoped to obtain approval in all the states in
its service area by the end of next year.

Under section 271 of the Telecommunications Act of 1996, a Bell company must
obtain FCC permission before providing in-region interLATA services.  The FCC
must consult with the relevant state commissions as well as the Justice
Department to ensure that the Bell company has opened its markets to
competition sufficiently.

WorldCom To Pay Users $88M To End Overcharging Lawsuit

WorldCom Corp. has agreed to pay $88 million to customers who claim they were
overcharged for direct-dialed calls.  The proposed settlement would end a
class action lawsuit brought by subscribers who complained that MCI WorldCom,
Inc. (now WorldCom) misled them about the conditions under which it would
charge higher nonsubscriber rates for domestic and international calls.

While the company admits no wrongdoing, it has agreed to compensate customers
for the higher charges on calls placed between Feb. 5, 1996, and Oct. 15,
2000.  Under the terms of the settlement, WorldCom also agreed not to raise "
casual calling" rates for nonsubscribers this year.  Daniel Girard, an
attorney who represents the subscribers, said a letter regarding the
settlement would be sent to 5 million people who might be eligible for
reimbursement.

The U.S. District Court for the southern district of Illinois will decide at
a March 29 hearing whether to approve the terms of the settlement in the case
In re MCI Nonsubscriber Telephone Rates Litigation (docket no. 1275).

In the lawsuit, the subscribers claimed that MCI didn't provide sufficiently
clear tariff information describing when it would charge them the higher
nonsubscriber rates and surcharges for placing direct-dialed calls.  The
tariff stated that customers who remain "presubscribed to MCI after [their]
account(s) are removed from MCI's billing system" would be charged
nonsubscriber rates.

In 1998, the FCC found that the tariff was "too confusing" (TR, Nov. 19,
1998).  The FCC's decision "opened the door" for the lawsuit and resulting
settlement, Mr. Girard said.

Court Rejects AT&T's Appeal In Reseller Discrimination Case

A federal appeals court has upheld a lower court's decision directing AT&T
Corp. to pay $2.1 million in damages for discriminating against a reseller in
favor of its own retail customers.

The U.S. Court of Appeals for the Second Circuit (New York) last week said
there was enough evidence to support a Manhattan federal district jury's
finding that AT&T had favored its own end-user customers in providing
software-defined network (SDN) services to reseller National Communications
Association.

The appeals court rejected AT&T's claim that the district judge should have
dismissed the case and set a new trial, adding that the lower court had "
acted within its discretion" by denying AT&T's requests.  A three-judge panel
of the Second Circuit held that there was sufficient evidence to support the
jury's finding of discriminatory service under section 202(a) of the
Communications Act.

The appeals court also rejected AT&T's argument that the district court judge
erred in instructing the jury that AT&T bore the burden of proving that its
different treatment of NCA and its own end-user SDN customers wasn't
unreasonable and unjust under section 202(a).

In its original claim, NCA charged that AT&T delayed resale orders for up to
nine months in an effort to "intentionally discriminate against the
resellers."  Citing the nondiscrimination clause of the Act, U.S. District
Judge Loretta A. Preska in February 1998 directed AT&T to pay $1.8 million in
damages.  In June 1999, the district court augmented NCA's damages award to
$2.1 million in damages and prejudgment interest.

The Jan. 12 appeals court ruling in National Communications Association,
Inc., v. AT&T Corp. (consolidated cases beginning at no. 98-9673) was written
by Chief Judge John M. Walker Jr.  He was joined by Circuit Judges Thomas A.
Meskill and Sonia Sotomayor.

In their opinion, the judges said there was "sufficient evidence on the basis
of which a jury could reasonably have found that AT&T's discrimination was
willful."

One Step from Bankruptcy, Globalstar Stops Debt Payments

A skeptical audience confronted Bernard Schwartz as he announced Globalstar
Telecommunications Ltd.'s plan to suspend payment on its debts.  As Mr.
Schwartz, Globalstar's chairman and chief executive officer, hosted a
conference call unveiling the plan, he was confronted by investors who
demanded to know why they shouldn't force the company into bankruptcy.

"A premature action to cause bankruptcy. . .would be damaging to the
prospects of all" Globalstar investors, Mr. Schwartz argued during the Jan.
16 call.  "We're buying time to add the kinds of resources we think are
necessary to turn the situation around."

But some analysts don't give the company much hope.  Globalstar is about as
close to bankruptcy as a company can come, analysts say.  It would take only
three disgruntled bondholders to initiate an involuntary bankruptcy action
against the company now that it has stopped its debt payments, Mr. Schwartz
acknowledged.

Even before Globalstar's announcement last week, Credit Suisse First Boston
Corp. analyst Cynthia M. Motz urged clients to sell the company's shares.  In
an October report, she declared, "There is a decent probability the company
will be shut down over the next 12 months."

"We are not surprised that Globalstar has decided to stop making payments on
its debt," she said in a report last week.  "At this point, we remain
unconvinced that there will be sufficient market demand to sustain Globalstar'
s operations in their current form."

But Mr. Schwartz urged investors to be patient and to wait for a report from
The Blackstone Group, which Globalstar hired to devise a new plan to fund and
operate the business.

Like its predecessors in the global mobile arena-Iridium LLC and ICO Global
Communications Ltd.-Globalstar appears to be falling prey to the ability of
terrestrial wireless service providers to offer comparable, worldwide service
at lower prices and with smaller handsets.  Iridium and ICO both ended up in
bankruptcy.

With only 31,200 subscribers for its global mobile telephone service,
Globalstar must do more to recruit customers, must make its handsets and
service more affordable, and must deploy new services, Mr. Schwartz said.
Globalstar's decision to suspend payments on its credit facility, vendor
financing agreements, senior notes, and preferred stock dividends will give
the company time to retool, he said.

Suspension of debt payments will save the company $400 million this year,
enabling it to continue operations into next year, Mr. Schwartz said.
Globalstar's main creditors and investors, including QUALCOMM, Inc., and
Loral Space & Communications Ltd., said they supported Globalstar's move.
But Standard & Poor's and Moody's Investors Service lowered Globalstar's
credit ratings.

The new ratings "reflect the very limited prospects for recovery for
Globalstar's creditors in a restructuring given the company's very low
subscriber levels and very modest growth," Moody's said.

`Creative Financing' Seen As Asian Network Necessity

Future telecom infrastructure projects in Asia will require "creative
financing solutions" if development is to keep pace with demand, a
Washington, D.C.-based international telecom lawyer says.  The greatest
obstacle to meeting Asia's demand for Internet and other telecom networks is "
meeting the communications sector's demand for capital," according to Glenn
S. Gerstell, a Milbank, Tweed, Hadley & McCloy LLP partner.

Speaking Jan. 15 at the Pacific Telecommunications Council's conference in
Hawaii, Mr. Gerstell presented a white paper describing the benefits and
drawbacks of various financing methods-and how a combination of approaches
can secure needed financing in spite of the reluctance of financial
institutions to take risks in less-developed nations.

Techniques for Financing Telecoms and Internet Infrastructure Buildout in
Asia, which was co-authored by Milbank, Tweed Senior Associate Alisa Fiddes,
focuses on projects and companies in "start-up  mode," rather than on more "
mature" businesses.

Vendor financing historically has provided limited options to purchasers.
Continued telecom industry privatization, combined with a "proliferation of
start-up companies," has further limited this option, according to the
paper.  However, national export credit agencies (ECAs) often are eager to
finance and participate in projects involving sales of domestic high-tech
goods.

Combining vendor financing with ECA or multilateral credit agency funding
could help overcome weaknesses in either financing method, the paper says.
Likewise, reaching out to a combination of commercial bank markets and
capital markets or entering into strategic partnerships "can reduce project
risks by bringing together partners with different resources and expertise,"
it adds.

Three Carriers Join Forces On European Wireless Data

An agreement to form a joint venture to deploy wireless data services
throughout Europe has been unveiled by KPN Mobile NV, NTT DoCoMo, Inc., and
Telecom Italia Mobile SpA.  The venture will attempt to extend to the
European market NTT DoCoMo's experience in providing its "i-mode" service in
Japan.

The companies aim to deploy mobile data services-including games, e-mail,
messaging, and Internet access-in the second half of this year in Belgium,
Germany, Italy, and the Netherlands.

Separately, NTT DoCoMo and KPN Mobile will create a new wireless data company
that will be 25% owned by NTT DoCoMo and 75% owned by KPN Mobile.  Creating
the company is the latest step in an ongoing alliance that was launched when
NTT DoCoMo acquired a 15% stake in KPN Mobile (TR, May 15, 2000).

The new company will begin life with $132 million in funding-$85 million from
KPN Mobile and $47 million from NTT DoCoMo.

The company will take possession of the mobile data assets of KPN Mobile and
its subsidiaries, E-Plus Mobilfunk GmbH and KPN Orange.  The new company will
be based in the Netherlands and will be established in March, the companies
said.

Portugal Telecom Eyes Brazil As Fertile Ground for Expansion

Portugal Telecom SGPS SA plans to expand its Brazilian presence by acquiring
wireless operator Global Telecom SA, which operates networks in the Parana
and Santa Catarina states.  Those states are neighbors to Sao Paulo, where
Portugal Telecom already offers wireless service through its Brazilian
subsidiary, Telesp Celular Participacoes SA (TCP).

Under an agreement announced Jan. 15, TCP will pay $556 million in cash and
assume $654 million in debt to acquire Global Telecom from its current owners-
Japan's KDDI Corp., Argentina's ITX Corp., and Brazil's Inepar SA Industria e
Construcoes.

Global Telecom's area has 15 million "pops" (potential customers), of which
the carrier has captured 463,000 subscribers.  TCP has about 4 million
subscribers.

The combination of the two requires the approval of Brazilian telecom
regulator Anatel.  TCP intends to pay for the transaction with its cash
reserves and debt financing.

The announcement prompted Moody's Investors Service to place the debt ratings
of Portugal Telecom on review for possible downgrade.

By acquiring Global Telecom, Portugal Telecom would take "advantage of a
unique investment opportunity in a high-growth wireless business," Moody's
said.  But "the magnitude of the investment may constrain the financial
ratios" of Portugal Telecom, Moody's said, "as well as expose it to a
higher-risk operating environment."

Intelsat Plans Technical, Regional `Flexibility'

Intelsat's chief executive officer says that the intergovernmental
organization is building flexibility into its business plans in preparation
for its expected July 18 privatization.

Rather than limiting the group to its traditional focus on the space segment
of satellite communications, Intelsat intends to expand the terrestrial
elements of its operations, said CEO Conny Kullman.

Intelsat is planning to build technological "intelligence" into its ground
segment, instead of having most of that technology on board the satellites,
he said.

This approach is less risky, can be brought to market more quickly, is "less
complex," and "will come at a lower price tag for us," Mr. Kullman told
reporters during a Jan. 17 briefing at Intelsat's Washington, D.C.,
headquarters.

WorldCom, Intermedia Need State OKs, Face Digex Lawsuit

WorldCom, Inc.'s planned purchase of Intermedia Communications, Inc., and the
latter's 55% controlling stake in Web host Digex, Inc., cleared the final
federal regulatory hurdle last week when three FCC bureaus approved the
transfer of licenses involved in the proposed transaction.

The transaction still needs additional state regulatory approvals, and
WorldCom is facing a lawsuit from Digex minority shareholders seeking to
block the merger (TR, Dec. 18, 2000).  They've argued that WorldCom's
proposed takeover of Intermedia would deprive Digex shareholders of the full
value of their investment.

WorldCom Chief Operating Officer Ronald R. Beaumont wouldn't comment about
the status of the Digex lawsuit during a presentation last week at the
company's Ashburn, Va., offices.  But he told reporters and analysts that the
company was "doing all the right things to bring this deal to closure, and I
feel confident we'll get it done."

Acting on delegated authority in an order issued Jan. 17, the FCC bureaus
said WorldCom's taking control of Digex would serve the public interest by "
increasing competition for next-generation data services provided to business
customers."  The Jan. 17 order notes that the U.S. Department of Justice has
required WorldCom to divest Intermedia's competitive local exchange carrier
assets, essentially leaving WorldCom with just Intermedia's Digex stake (TR,
Nov. 20, 2000).

Meanwhile, WorldCom officials at the Ashburn event stressed that acquiring
Digex would bolster its "generation D" portfolio of Web-based services (TR,
April 17, 2000).  Asked whether WorldCom planned to be back on the
acquisition trail anytime soon, Mr. Beaumont said the company might consider
pursuing some "smaller acquisitions" but added that its own size and sluggish
stock price likely would complicate any efforts to take over a large telecom
company.  "It'll be very, very difficult for WorldCom to do large
acquisitions," as evidenced by the failed merger with Sprint Corp., he
acknowledged.

And even though it doesn't have a strong nationwide cellular presence, Mr.
Beaumont said WorldCom planned to address the growing demand for mobile data
services through "a number of different strategies," including partnerships
and resale agreements.  "Ultimately, we'll be a virtual operator, and tackle
the wireless world in that manner," he said.

Rhythms Trims Workforce, Operations To Reduce Losses

Rhythms NetConnections, Inc., intends to reduce its expected losses this year
by 15%, to $395 million, by cutting 450 employees-or 23% of its workforce-and
by suspending operations in about 20 of its smaller markets.  The Englewood,
Colo.-based "data CLEC" (competitive local exchange carrier) won't eliminate
its presence in those smaller markets but will sharpen its focus on its 40
largest markets, enabling it to cut 100 employees who work in the smaller
markets, the company said.

Productivity gains and improved back-office systems, meanwhile, will enable
the company to cut 300 installer positions.  By scaling back-as other data
CLECs already have done-Rhythms will be able to last a few additional months
before having to seek funding in an iffy capital market.  Rhythms said it
would have enough funding to stay in business until early next year.

"Clearly we'll need additional funding as we get further into 2001" to
support operations in the following year, said Catherine Hapka, the company's
chairman and chief executive officer, in a Jan. 18 conference call with
analysts.  "We're exploring a myriad of options."

Some Wall Street analysts, however, seemed unimpressed by Rhythms' efforts to
reduce spending.  Eliminating 300 installer positions is an "aggressive" move
that "could result in a degradation of service," said Merrill Lynch & Co.'s
Kenneth Hoexter.

Rhythms' losses could be deeper than the $395 million the company predicts,
Mr. Hoexter said in a report.  "We are only lowering our loss estimate by 10%
to $430 million. . .as we believe employee cutbacks will also result in
slower revenue growth."

Mark Kastan, an analyst with Credit Suisse First Boston Corp., estimates that
the cutbacks will give Rhythms only two additional months to obtain funding.

Contrary to the company's projection that it can last until early 2002, the
company will require new financing late this year, Mr. Kastan said in a
report.

"While we are somewhat relieved to see that Rhythms management has scaled
back its business plan, we still estimate that the company needs to raise
over $1 billion of additional capital to be fully funded, and we believe that
the capital markets will remain closed to data CLECs for the foreseeable
future."

Level 3, SBC Reach Agreement On `Recip Comp' Rate Scheme

Level 3 Communications, Inc., and SBC Com-munications, Inc., have agreed on a
two-tiered reciprocal compensation scheme designed to resolve disputes about
payments for terminating dial-up calls to Internet services providers (ISPs).

The agreement covers 13 states and sets two rates, one for "in-balance"
traffic and a lower rate for "out-of-balance" traffic.  Traffic is considered
in balance if the carriers' ratio of originating to terminating traffic is
3-to-1 or less; it is out of balance if the ratio is more than 3 to 1.

Although rates vary by state, the companies said the average rate for
in-balance traffic is $0.0032 cents per minute.  The average rate for
out-of-balance traffic is $0.0018 per minute (retroactive to Sept. 1, 2001)
and declines to an average of $0.00101 by June 1, 2002.  The agreement runs
through May 2003.

"Our agreement should be helpful to state and federal regulators," said
Tricia Paoletta, vice president-government relations at Level 3.

"This freely negotiated agreement proves that a reasonable solution to the
reciprocal compensation issue can be reached in the marketplace," Ms.
Paoletta said.

The agreement comes as the FCC continues trying to craft an order addressing
reciprocal compensation.  FCC Chairman William E. Kennard recently said he
wanted to complete work on the matter before his Jan. 19 departure from the
Commission (TR, Jan. 15).

Sources say that the Commissioners haven't been able to agree on some aspects
of the proposed order and that the issue is likely to remain a priority even
after Mr. Kennard's departure.

Financial analysts at Merrill Lynch & Co. saw the Level 3-SBC agreement as "
modestly positive" for both companies.  "The agreement removes an ongoing
uncertainty relating to fluctuations in both costs for SBC and revenues for
Level 3," Merrill Lynch said.

"But in neither case is the impact sufficiently material for us to alter our
revenue/expense projections, since the amounts fall within any normal range
of forecasting error," it said.

TMI, Motient To Unite Assets, Focus On Wholesale Services

TMI Communications & Co. L.P. of Ottawa and Motient Corp. of Reston, Va.,
plan to integrate their mobile satellite communications operations.  The new
entity, tentatively named Mobile Satellite Ventures, will focus on
provisioning wholesale satellite service to North American carriers.

The companies said they would consolidate some facilities to maximize the
joint venture's efficiency, assuming regulatory approvals.  Columbia Capital,
Spectrum Equity Investors, and Telcom Ventures LLC are investing about $50
million in the new entity.

"We are convinced that a satellite-only system is ideal for rural and remote
areas, and with terrestrial enhancements can also be affordable and
competitive in urban communities," said Gary M. Parsons, Motient's chairman.

New Entrants Will Prolong IXC Price Wars, Analysts Say

The financial future of interexchange carriers (IXCs) continues to be clouded
by downward pressure on rates for voice long distance services, financial
analysts say.  That pressure will intensify-and will begin to affect data
service, too-as new entrants like Global Crossing Ltd. and Level 3
Communications, Inc., finish building networks and Bell companies gain
permission to offer in-region interLATA (local access and transport area)
service, they predict.

"We are deeply concerned about the incumbent long distance companies," said
Daniel P. Reingold, managing director-equity research for Credit Suisse First
Boston Corp.  New entrants will be able to offer cut-rate service because
their next-generation networks cost less to run than older networks, Mr.
Reingold said Friday, Jan. 19, during a conference call with clients.

Rosemarie Kalinowski, an analyst for the credit-rating agency Standard & Poor'
s, agreed that pressure would intensify on long distance carriers.

Incumbents like AT&T Corp. and WorldCom, Inc., are building new Internet
protocol networks, she noted.  But it's unclear whether those networks will
be finished in time to "produce the cost efficiencies necessary to offset the
pricing pressures and compete head-to-head with the new entrants," she said
during a teleconference earlier in the week.

Managers at incumbent IXCs apparently were in a state of denial or were
caught off guard by a steeper-than-expected decline in rates, Ms. Kalinowski
said.  They mistakenly thought they could correct the situation by cutting
rates-and thereby reducing their profitability, she said.

Although Mr. Reingold advised investors to steer clear of most incumbent long
distance carriers, he said he thought Sprint Corp. might increase in value
because of a potential merger with Qwest Communications International, Inc.
He said he expected a Qwest-Sprint merger to be announced in the next 12
months.

Merger activity in general may increase under a Republican administration,
Mr. Reingold asserted.  But some combinations will remain difficult or
impossible because traditional antitrust laws and the Telecommunications Act
of 1996 will stand in the way, no matter who is in power, he said.  For
example, he said, recent speculation that a Bell company might buy WorldCom
is misguided; the regulatory hurdles are simply too high.

But Mr. Reingold said he thought a merger of SBC Communications, Inc., and
BellSouth Corp. might be possible in a few years' time.  Those companies
already have merged their wireless units to form Cingular Wireless.  Bell
companies are well positioned for the current economic climate because they
typically outperform the stock market during recessions, he said.

Bell companies also will benefit from the turmoil in the competitive local
exchange carrier (CLEC) industry, whose inroads into local markets have
slowed as a shortage of funds has forced CLECs to cut back, Mr. Reingold
said.  "I don't believe the CLECs are going away," he said.  "However, there'
s a reality here . . .There are going to be fewer of them coming out of this"
financial strife.

But the CLEC industry already is beginning to show signs of recovery, Credit
Suisse First Boston analyst Mark Kastan said.  "Sentiment has bottomed and
now is improving for the first time since spring of last year," he said.

After a long drought, financing now appears to be available for a select
group of CLECs, Mr. Kastan said.  McLeodUSA, Inc., and XO Communications,
Inc., are engaged in successful fund-raising efforts, he noted, and Time
Warner Telecom, Inc., is poised to attempt to raise $300 million through the
sale of stock.

Report Offers Road Map To E-government Security

U.S. government agency officials now have guidance on how to address key
security concerns when offering Internet and other electronic services.  A
new publication, Securing Electronic Government, is the product of an
eight-month partnership of the Information Technology Association of America
and two councils for the chief information officers (CIOs) and chief
financial officers (CFOs) in various governmental units.

The report covers electronic security concerns in three principal areas:
government electronic procurement, Web-based information services, and
governmental financial transactions.

"We will. . .provide this to the federal community and, based on [the]
feedback, we will expand to other areas or refine these three areas," said
John Gilligan, deputy chief information officer and principal deputy
assistant secretary for business and information management for the U.S. Air
Force.

Mr. Gilligan stressed that the government needs to ensure the security of
electronic documents to avoid a loss of public confidence.  ITAA, the CIO
Council, and CFO Council initially met in May 2000 to develop guidelines for
adequate security.

The report states that information availability and integrity are the most
important priorities in providing Web-based information services, such as
data on taxes and unemployment rates.  Denial-of-service "attacks"-attempts
to overload a Web site or server with information requests or e-mail messages-
and malicious data change were identified as the biggest threats to these
priorities.  "Techniques do exist to safeguard these priorities," said David
Nelson, deputy chief information officer for the National Aeronautics and
Space Administration.

Regarding Internet-based government procurement, the report says that current
industry security solutions for credit card purchases are adequate for
transactions of $100,000 or less, which make up the bulk of government online
procurement deals.  Midsize procurements between $100,000 and $10 million
require heightened time sensitivity and confidence, necessitating more
extensive security precautions.  Purchases of more than $10 million require
customized solutions to ensure the integrity of data.

"The public holds government to high standards. . .and [the government needs]
to ensure high public confidence," said Sky Lesher, deputy chief financial
officer at the Department of the Interior.  "They need to feel like they are
in a secure environment."

Mr. Lesher said the report advocates a proactive approach to government
electronic security.  "We prefer to be in a prevention mode rather than a
recovery mode," reacting to security breaches, he said.  Mr. Nelson added
that the report provides government managers with security "know-how" from
industry representatives.

Motorola, Inc., says it will stop making mobile phones at its Harvard, Ill.,
facility...

Motorola, Inc., says it will stop making mobile phones at its Harvard, Ill.,
facility as part of a long-term effort to consolidate manufacturing and
improve financial performance.  The company's decision will cost about 2,500
workers their jobs.  Last month, Motorola announced an outsourcing alliance
that will cut 2,870 more positions (TR, Dec. 11, 2000, notes).  Earlier this
month, Motorola reported disappointing fourth quarter results.

FCC Suggests Streamlining Carrier-Change Process

The FCC has proposed rule changes that would make it easier for carriers to
sell or transfer exchanges.  The existing rules require carriers to get an
FCC rule waiver or obtain permission from all their customers before
switching them to a new service provider.

The Commission is considering an alternative scheme to its current "
subscriber selection change" rules as part of its "biennial review"
proceeding.  The Telecommunications Act of 1996 directs the FCC to conduct
reviews of its regulations every two years and to eliminate or revise those
rules that it finds are no longer necessary (see separate story).

Under section 64.1120 of the FCC's current rules and section 258 of the
Communications Act of 1934, as amended, a carrier must obtain and verify a
customer's permission to change his or her service provider.  Those rules are
designed to deter "slamming," or the authorized switching of a customer's
preferred carrier.

In a third further notice of proposed rulemaking released last week in Common
Carrier dockets 00-257 and 94-129, the FCC said it receives numerous requests
a month from carriers seeking waivers of those rules in order to complete
transactions involving transferring customer accounts to another carrier.

The Commission suggested an "expedited process" for such carriers whereby the
carrier would be required only to notify its customers of the upcoming change
and to provide them with an opportunity to switch carriers.  Comments are due
on the rulemaking notice 21 days after it is published in the Federal
Register.  Replies are due 10 days later.

Under the FCC's proposal, the acquiring carrier would be required to notify
the affected customers 30 days before the close of the transaction.  The
Commission is seeking input on the 30-day interval as well as the kind of
information that should be included in the notification.  It also proposed
that carriers notify the Commission of any such transactions.

In its rulemaking notice, the Commission asked if the advance-notice
requirements should differ based on the type of service that the carrier
provides.  It also asked if any additional obligations should be placed on
the carriers, such as establishing a toll-free number to answer customers'
questions.

The Commission also asked how it could tailor the rules to prevent "
unscrupulous" carriers from selling customer accounts to evade enforcement
actions.

Verizon Wireless Asks FCC To Delay 700 MHz Band Auction

Citing a host of concerns, Verizon Wireless has asked the FCC for another
six-month delay of the auction of spectrum in the 700 megahertz band, which
is scheduled to begin March 6.  The auction has been delayed three times
already.

In a Jan. 18 letter to Wireless Telecommunications Bureau Chief Thomas J.
Sugrue, Verizon asked that the sale be postponed until September.  The letter
was signed by John T. Scott, Verizon Wireless' vice president and deputy
general counsel-regulatory law.

Mr. Scott said that if the auction was held as scheduled, potential bidders
wouldn't have enough time to assess their spectrum needs because a reauction
of "C" and "F" block PCS (personal communications service) licenses is still
ongoing (see separate story).  "Short form" applications for the 700 MHz band
auction are due Feb. 2, under the current schedule.

"If the 700 MHz [band] auction begins on the current schedule, there would be
no time for companies that are bidding in the PCS reauction to reassess their
business plans and develop bidding strategies for [the] 700 MHz [band
auction]," Mr. Scott said.

The FCC immediately sought comments on Verizon's request.  Comments are due
Jan. 24 and should reference DA 01-143.

Package Bidding Rules Cited

Mr. Scott also said carriers need more time to prepare because of new package
bidding rules that will be used in the auction (TR, July 10, 2000).  He also
cited continued concerns over when winning bidders would be able to build out
systems to use their newly licensed frequencies.  Similar concerns were cited
by the wireless industry when they successfully petitioned the FCC to move
the 700 MHz band auction from September 2000 to March 2001(TR, Aug. 7 and 21,
2000).

Carriers had complained about the uncertainty of when the spectrum would be
available.  TV broadcasters with licenses for channels 60-69 now occupy large
chunks of the spectrum and don't have to leave until 2006 at the earliest as
part of the transition to digital TV.

Mr. Scott said the uncertainty over when incumbent broadcasters would leave
the spectrum was still an issue.  He also noted that the FCC hadn't yet
adopted proposed band-clearing mechanisms for those frequencies.  Even if
such mechanisms were adopted immediately, 700 MHz band auction bidders wouldn'
t have time to use them, he said.

Mr. Scott also mentioned the high-level government-industry effort to
identify and allocate spectrum for third-generation (3G) services (see
separate story).  He noted that the 700 MHz band could be used for such
offerings and said the FCC should not auction that spectrum until it issued
an order allocating 3G bands.  That order is expected this summer.

"There remains considerable uncertainty about the process for the auction,
the availability of the 700 MHz band itself, and the availability of
alternate spectrum," Mr. Scott said in the letter.  "As a matter of sound
spectrum-management policy, this spectrum should not be auctioned until these
issues are resolved."

"Conducting the auction before prospective bidders are able to make the
necessary assessments about spectrum use will jeopardize the efficient
assignment of this spectrum and ultimately disserve the public interest," he
added.  "Greater certainty will enable the 700 MHz band to realize its full
economic and public benefit."

A spokesman for the Cellular Telecommunications & Internet Association told
TR that Verizon Wireless' request to delay the auction "is legitimate" and
said the trade group planned to file comments in support of a postponement.

During a briefing with reporters last week before Verizon Wireless' letter
was submitted (see separate story), Commissioner Harold W. Furchtgott-Roth
said he had opposed the previous delays of the auction and would oppose any
effort to put it off further.  "I would be very disappointed if there were
any more delays," he said.

Ex-RSA Cellular Licensee Meets Judicial Skepticism

A three-judge panel of the U.S. Appeals Court in Washington expressed
skepticism at a former cellular licensee's argument that the FCC wrongly
revoked its license for "lack of candor."  Alee Cellular Com-munications had
falsely maintained that all of its partners were U.S. citizens.

The judges appeared to agree with the FCC's contention that substantial
evidence showed the licensee's partners knowingly deceived the agency to
retain a rural service area (RSA) license for Catron, N.M.  The license was
awarded by lottery in 1988, when noncitizens were barred from holding an
ownership stake in FCC licensees.

Hearing oral arguments in Alee Cellular Commun-ications v. FCC (case no.
99-1460) Jan. 16 were Chief Judge Harry T. Edwards and Judges Douglas H.
Ginsburg and A. Raymond Randolph.

In 1992, FCC Administrative Law Judge Walter C. Miller ruled that Alee had
told the Commission falsely that all of its 14 partners were U.S. citizens
when it knew one wasn't (TR, Jan. 11, 1993).  The finding was part of a
broader proceeding in which Mr. Miller found that nearly two dozen cellular
license applicants, including Alee, had agreed to share with each other the
revenue earned using RSA licenses.  Those "risk-sharing agreements" were a
violation of FCC rules, the ALJ found..

The FCC's review board upheld Alee's license revocation in 1994.  In 1997,
the full Commission upheld the decision, saying Alee's "lack of candor"
required the revocation (TR, June 9, 1997).

Alee:  License Revocation Unfair

Alee attorney Philip J. Mause told the court that the FCC arbitrarily and
capriciously relied on Mr. Miller's findings about the credibility of
witnesses that had testified in a hearing on the risk-sharing agreements.
Mr. Mause said Mr. Miller compiled no written record of his judgments about
the witnesses to indicate why he found them credible or incredible.

Mr. Mause also contended that the FCC rejected substantial, credible evidence
that showed that Alee's partners hadn't intended to deceive the Commission
regarding the noncitizen partner.  He also said the agency's decision was not
supported by substantial evidence.

Even if there was such evidence to indicate a lack of candor, Mr. Mause said,
the punishment of license revocation was too harsh considering that (1) Alee
reported the infraction to the agency and (2) other licensees in similar
situations had received more mild sanctions.

But FCC attorney Joel Marcus told the court that before upholding the license
revocation, the Commission conducted an independent review of the case, in
which it arrived at the same conclusion Mr. Miller had.

Mr. Marcus said the agency's decision was supported by substantial evidence.
"That standard is easily met here," he said, citing the testimony of
witnesses and documentary evidence.

Mr. Marcus also said the rule violations by other licensees were not as
severe as Alee's.  He added that agencies are given broad deference in
developing sanctions for rule violations.

The judges seemed to agree with the Commission's argument.  "It looked to me
like it was doing its own independent evaluation," Judge Randolph said of the
FCC.

"They rely on documentary evidence, which they cite," Judge Edwards added.
Judge Ginsburg noted that the FCC cited both documentary evidence as well as
evidence of the witnesses' demeanor in reaching its decision to uphold the
license revocation.

The Broadband Wireless Internet Forum has released two technical papers...

The Broadband Wireless Internet Forum has released two technical papers that
provide background and explanation of the technology advocated by the group.
The forum supports fixed broadband systems based on vector orthogonal
frequency division multiplexing (VOFDM).  The papers can be found at
http://www.bwif.org.

Viatel To Cut Workforce, Phase Out Most Voice Service

Viatel, Inc., has disclosed plans to cut 30% of its workforce while phasing
out residential voice telephony services "in countries that do not meet
long-term corporate objectives."  The New York City-based company, which
operates a transatlantic cable system and pan-European network, said that
instead it would focus on higher-growth broadband and corporate
communications services.

It didn't disclose which operating units would be consolidated, nor did it
specify the countries in which it would cease providing residential voice
service.  Viatel said its Jan. 18 decision followed the "logical evolution"
of the company, which is completing a three-year network build-out.

"By streamlining operations and concentrating principally on the pan-European
communications needs of major corporations and carriers, Viatel will
immediately strengthen its current financial profile and improve its EBITDA"
(earnings before interest, taxes, depreciation, and amortization), said
Michael J. Mahoney, Viatel's chairman and chief executive officer.

CLECs Seek Cautious Approach to Regulating Their Access Fees; AT&T, WorldCom
Want Caps

Many competitive local exchange carriers (CLECs) seem resigned to the FCC's
adoption of a "benchmark" rate essentially capping the access charges they
can levy on interexchange carriers (IXCs).

But they urged the FCC to take a cautious approach, recognizing that they
often have higher costs than incumbent local exchange carriers (ILECs),
particularly if they serve rural areas.

IXCs oppose any effort to exempt CLECs operating in rural areas from
complying with future benchmark rates.  Some CLECs and IXCs agreed that a
recent proposal from the Association for Local Telecommunications Services
(ALTS) offered at least a step toward resolving the simmering disputes
between CLECs and IXCs over access charges.

Seeking additional comments in its long-running proceeding in Common Carrier
dockets 96-262 and 97-146, the FCC late last year asked parties to address
(1) the need for a "rural exemption" to any benchmark established for CLECs'
interstate access charges, and (2) the extent of abuses by CLECs in setting
terminating and originating access rates.

The Association for Communications Enterprises (ASCENT) reiterated its call
for the FCC to adopt "safe harbor" ranges for CLEC access charges; charges
within those ranges would be deemed reasonable and lawful.

ASCENT said there was "significant merit" to the ALTS proposal (TR, Jan. 15),
which would impose ceilings on CLECs' access charges and bar IXCs' "
self-help" actions-meaning their refusal to pay CLEC access charges that they
deem excessive.

In joint comments, e.spire Communications, Inc., KMC Telecom, Inc., Talk.com
Holding Corp., and XO Communications, Inc., supported ALTS' Guaranteed
Reduced Exchange Access Tariffs (GREAT) proposal.

"The GREAT proposal recognizes that the entire industry can benefit from the
establishment of benchmark access rates that are deemed reasonable by the
Commission and that the access charge rates of ILECs and CLECs are not
readily comparable, primarily because ILECs and CLECs do not necessarily
employ the same rate structures or network architectures," they said.

Other CLEC comments didn't address the GREAT proposal directly and urged the
FCC to proceed with caution-if at all-in imposing a benchmark limit on CLEC
access charge rates.

"The vast majority of access charges assessed by CLECs are comparable to
those of ILECs, which is significant in and of itself given the higher costs
CLECs face in providing such access," said Focal Communications Corp., RCN
Telecom Services, Inc., and Winstar Communications, Inc., in joint comments.

If the FCC sets a benchmark for CLEC access rates, it should be done "on the
basis of ensuring that CLECs are able to collect their rightful charges and
that their customers are able to make and receive long distance calls," they
said.  They supported an exception to the benchmark for CLECs serving rural
and other high-cost areas.

Z-Tel Communications, Inc., also supported the use of a benchmark but opposed
mandatory detariffing for CLEC access rates, regardless of their level.  (The
GREAT proposal envisions mandatory detariffing for charges above the
specified ceilings).

Requiring CLECs to detariff would allow ILECs to continue to "bind IXCs with
tariffs," while Z-Tel and other CLECs would have to negotiate access
arrangements with hundreds of IXCs, it said.  "By forcing CLECs to incur
negotiation costs not incurred by incumbents, mandatory detariffing raises a
barrier to entry in local exchange markets," Z-Tel said.

McLeodUSA Telecommunications Services, Inc., said the record "does not
clearly establish" the need for regulation of CLEC access charges.  Any
FCC-established benchmark rate for CLEC access charges thus should "reflect
the higher costs that CLECs incur in providing access service and provide an
exemption for CLECs providing service to customers outside of defined
metropolitan statistical areas," he said.

CTSI, Inc., and Madison River Communications said the FCC should ensure that
any benchmark system "does not legally, or [practically], prescribe a rate
structure for CLECs."  The FCC would need to establish a methodology for "
converting rates of CLECs that choose" a different rate structure from that
reflected in the benchmark rate, they said.  For instance, some CLECs choose
not to charge a separate presubscribed interexchange carrier charge.

USTA:  No Rules Necessary

The U.S. Telecom Association said the FCC should not regulate CLEC access
rates.  "A benchmark should not be adopted based on the arguments raised in
this or any other proceeding by AT&T," it said.  "Neither AT&T nor any IXC
should be permitted to unilaterally determine which CLECs' access rates are
too high and, therefore, which CLECs' access services it will not purchase."

USTA said the record didn't justify imposing a benchmark rate for CLECs'
access fees.  "At a time when the Commission is seeking to encourage
competition and reduce regulation in competitive areas, new regulations
imposed on competitive entrants are not justified," it said.

The National Telephone Cooperative Association said a single nationwide
benchmark for CLEC access charges would lead to "further disputes," "possibly
result in confiscatory rates," and "continue to hinder the development of
facilities-based competition in poorly served rural areas."  The FCC should
establish a separate benchmark for rural CLECs or create some other "
regulatory alternative" to allow them to recover their legitimate costs, NTCA
said.

The FCC should not create a "rural exemption" to any prohibition on CLECs'
tariffing rates above those charged by the ILEC in a given service area, said
AT&T Corp.  "There is neither a legal nor an economic justification for
creating any exclusion for `rural' CLECs" from a general rule linking CLEC
and ILEC access rate levels in the same service area, it said.

A rural exemption would "improperly support operations of a class of CLECs in
some as-yet-undefined `rural' areas through subsidies that are implicit in
tariffed access rates that are higher than those of the ILEC operating in the
same geographic service territory," AT&T said.  Plus, the exemption would "
inequitably place the burden of funding these CLECs' subsidies in rural areas
solely upon those carriers' access customers (including, in particular, IXCs
such as AT&T that serve large numbers of end users in nonurban regions)," it
said.

WorldCom, Inc., joined AT&T in opposition to a rural exemption.  A single,
nationwide benchmark is the "most effective, most easily administered way to
bring about CLEC access charge reductions," it said.

The "general approach" advocated in ALTS' GREAT proposal is "consistent with
sound public policy and merits serious consideration," WorldCom said.  It
worked with ALTS in developing the proposal but said it didn't support all of
its provisions.  Specifically, it opposed ALTS' recommendation for a
six-month transition period before implementing a tariff ceiling.  WorldCom
said such a lengthy transition period was unnecessary.

WorldCom also submitted data on access charges that it said showed that many
CLECs charge substantially more than ILECs.  Nearly one third of the CLECs
from which WorldCom purchases switched access services charge rates that are "
more than five times higher" than the average rates of ILECs.

"IXCs will not be able to continue to absorb these costs for much longer,"
WorldCom said.  "Unless the Commission takes action, it is inevitable that
IXCs will begin blocking switched access traffic from all CLECs with the
highest charges."

U.S. Telecom Revenues

U.S. spending on telecom services and equipment increased by 12.5% last year,
generating revenues of $609.2 billion, according to a report released last
week by the Telecommunications Industry Association.

In its 2001 MultiMedia Telecommunications Market Review and Forecast, TIA
says spending on telecom transport services reached $287.6 billion in 2000,
which is an 8.9% increase over 1999 levels.  Spending on "specialized"
services such as unified messaging, voice messaging, and broadband Internet
access, reached $5.8 billion last year, a 62.2% increase over the previous
year's figures, the report says.

Proposal To Streamline Service-Quality Reporting Gets Booed from All Sides;
Some Question Timing

The FCC's proposal to reduce service-quality reporting requirements for
incumbent local exchange carriers (ILECs) got a big thumbs-down last week as
state regulators, end-user interests, and competitive carriers argued the
need for the ILEC data.  And even the ILECs themselves-which ostensibly would
benefit from the reduced obligations-objected to portions of the plan.

Competitive carriers and small to midsize ILECs took issue with the FCC's
proposal to subject them to the same service-quality reporting requirements
that large ILECs must follow.  And state regulators in particular worried
that reducing the amount of available service-quality data could hamper state
proceedings.

Overall, most parties commenting last week on the proposal criticized it for
adding-rather than eliminating-regulations.  The rulemaking proposal in
Common Carrier docket 00-229 was undertaken as part of the Commission's
biennial regulatory review, which is required by the Telecommunications Act
of 1996.

The biennial reviews are aimed at reducing regulations that are no longer
necessary as a result of increased competition (TR, Nov. 13, 2000, and
separate story in this issue).  Many industry members and state regulators
commenting last week questioned whether competition in local markets had
developed sufficiently to warrant streamlining the reporting requirements.

ILECs are required to submit to the FCC data about their performance in
providing retail service to end-user customers.  The data is submitted in the
carriers' Automated Reporting Management Information System (ARMIS) reports.
Citing increases in competition in local markets, the FCC had proposed, among
other measures, slashing the number of reporting categories from 30 to six
and making the data more consumer-oriented.

States:   We Need ILEC Data

The National Association of Regulatory Utility Commissioners said that
monitoring ILECs' service quality is particularly important "in situations
where no competitive alternatives exist."  It noted that "large incumbents
still hold in excess of 98% of at least the residential market across the
country," and several large ILECs have reported "long-term negative trend[s]
in service quality."  It pointed to instances in which state regulators
relied on the data reported to the FCC to make decisions about an ILEC's
service quality.

The Florida Public Service Commission not only objected to any reductions in
reporting requirements but also pressed the FCC to require ILECs to submit
even more specific data.  It said ILECs' service-quality data should be "
disaggregated" to a state or smaller geographic level to give customers more
useful information.  "It is easy to demonstrate high-quality service
performance overall while performing poorly in small geographic areas," it
said.

The Wyoming Public Service Commission questioned the timing of the
deregulatory proceeding.  Under the Act's biennial review provisions, the FCC
is required to examine its regulations to determine whether they are
necessary "as a result of economic competition between providers."
Competition has had very little influence on the residential local exchange
market nationally, the Wyoming PCS said, adding that competition in Wyoming
is nascent.

"Why would customers living in rural America, much of which is served by
price cap companies without competitive options, want to limit the
service-quality data that could be used by state and federal regulators?" the
PSC asked.  "It is too soon to narrow the focus of the quality-of-service
reporting to only that desired or needed by customers in a competitive
market."

The service-quality data reported to the FCC is important because it "can be
compared across state lines," the Indiana Utility Regulatory Commission said.
 And the reporting requirements are useful even in a competitive service
market, the IURC added.  "The FCC and the states must be vigilant, ensuring
that unwarranted deregulation does not cause service quality to deteriorate,"
it said.

The Illinois Commerce Commission asked the FCC to ensure that states be able
to impose additional service-quality reporting requirements in the absence of
federal requirements.  In its rulemaking notice, the FCC sought comments on "
alternative ways the FCC can continue to work with states" on service-quality
issues.

The Wisconsin Public Service Commission acknowledged that streamlining
service-quality reporting requirements might be justified.  But some of the
FCC's proposals go "too far," it said, and prevent states from accessing
meaningful data.  Monitoring service quality still "is one of the most
important regulatory roles," the Wisconsin PSC said.

The FCC's reference in its rulemaking notice to deregulation in the airline
industry is "interesting," the Texas Public Utility Commission said.  "
Competition in that industry has driven the need to create the reporting of
basic comparative retail performance data."  It said that during times of
industry "transition," regulators must have access to service data to prevent
"backsliding."

The federal service-quality reports are often used in state proceedings
evaluating the Ameritech Corp. telcos' service, the Michigan Public Service
Commission said.  "These reports have allowed us to monitor [Ameritech's
performance in] our state [and] compare . . .it to that of other states in a
meaningful way."

The Ohio Public Utilities Commission supported the FCC's proposal to require
ILECs to submit data that is more useful to consumers. The FCC had suggested
that carriers report consumer-oriented data including time required for
installation, maintenance, and repair of equipment.  The Ohio commission said
ILECs wouldn't need to "develop or retain any data that they do not currently
keep for their own business practices."

End Users Say Data Is `Crucial'

End-user groups mostly opposed reductions in service-quality reporting, which
they said gives customers a means of making informed decisions about
telecommunications service providers.  Most supported various extensions of
the FCC's data reporting rules.

The FCC should continue to require carriers to submit service-quality data
that differentiates between business and residential customers, the General
Services Administration said.  Responding to the rulemaking notice on behalf
of federal agency telecom service customers, GSA said carriers also should be
required to disaggregate data for urban and rural areas, since "these regions
have different competitive conditions and cost characteristics," it said.

The Texas Public Utility Counsel, which represents business and residential
customers in state and federal proceedings, said the FCC should extend
service-quality reporting requirements to regulated DSL (digital subscriber
line) services.  It added, however, that "neither consumers nor regulators
would benefit significantly from an expansion of FCC service-quality
reporting requirements to encompass" competitive local exchange carriers
(CLECs).  It also urged the FCC to require companies to post their
service-quality data on their Web sites and to notify customers periodically
about the available information.

Siemens Medical Solutions Health Services Corp. said that making
service-quality data available enables "consumers to distinguish among
service providers and choose a vendor based on service and value."  ILECs
should be required to submit data about "the length of time a customer has to
wait on hold before speaking to a customer-service representative and the
percentage of callers who hang up while waiting," Siemens said.

ILECs Not Enthusiastic

Incumbent local exchange carriers applauded the FCC's plan to reduce their
reporting requirements, but they disagreed with many other aspects of the
rulemaking notice, including the FCC's proper role in collecting the data and
monitoring service quality and the FCC's plan to require carriers to provide
consumer-oriented data.

The U.S. Telecom Association said the FCC's proposal would increase the level
of detail required for the remaining six service-quality categories.  Despite
the reduction in the number of categories, "it is unclear whether the
reporting burden will be reduced," it said.

USTA also sharply disagreed with the FCC's statement that its "basic role in
service quality is to serve as an efficient clearinghouse for information."
USTA said that role was not statutorily defined and added that it's "unlikely
that ARMIS reports, even a streamlined version, will be a primary source of
information for consumers."

Under the biennial review process, "ILEC service- quality requirements must
be based only upon a predicate of finding federal regulatory necessity in
light of meaningful competition and the public interest," Qwest Corp. said.  "
This would exclude reporting elements claimed to  be `useful' or `helpful.'"
The FCC should determine what the federal interest in service-quality
reporting requirements is and eliminate all requirements that don't meet this
standard, Qwest said.

Service-quality reporting requirements are "a perfect example of the type of
obsolete regulation that Congress had in mind when it enacted" the biennial
review provisions of the Act, Verizon Communications Corp. said. "Elimination
of obsolete regulations is not optional-the Act states that the Commission `
shall' repeal or modify any regulation that is no longer necessary."

Verizon accused the FCC of shifting the focus of the reporting requirements
to consumers as a way of evading the Act's mandate to remove regulations that
have outlived their usefulness.  "To concoct a new rationale for an obsolete
rule evidences a lack of commitment to [the] biennial review," it said.

BellSouth Corp. suggested that service-quality reporting be done at the state
level.  The categories the FCC has proposed leaving in place "relate to the
provision of local service and therefore should be left to the state public
service commissions to establish appropriate requirements for these
categories," it said.

SBC Communications, Inc., was skeptical of the FCC's proposal to use ARMIS
data to inform consumers.  The information in ARMIS reports isn't available
to the public in an accessible format and doesn't allow customers to compare
a wide range of carriers, SBC said.

The Independent Telephone & Telecommunications Alliance, which comprises
midsize ILECs, strongly objected to the FCC's proposal to extend
service-reporting requirements to all its members.  The FCC currently
requires only ILECs that are regulated by a price cap mechanism to file
service-quality reports.

ITTA objected to the FCC's introducing the proposal during a biennial review
proceeding.  "It is unclear under what authority the Commission seeks to
extend service-quality reporting burdens to new classes of carriers and
service providers" in such a proceeding, it said.

Imposing such conditions on carriers that serve less than 2% of the nation's
access lines would place an unfair burden on small and rural carriers, ITTA
said.  "Congress has long endorsed differentiating between LECs [local
exchange carriers] on the basis of size," it added.

Requiring rural LECs to provide service-quality data isn't necessary, the
National Telephone Cooperative Association said.  "Rural LEC customers living
in small, closely-knit communities are intimately familiar with the quality
of service provided by rural LECs.  It is hard to see how such data would be
more valuable to consumers than the reputation a company has in its local
market."

Small and rural carriers are "focused on their communities, and they respond
quickly to problems because they are not insulated from the consumer by
distance or size," NTCA added.

A group of small ILECs from Vermont said in a joint filing that they already
submit service-quality reports to the state commission, and additional
reporting requirements for smaller ILECs would be "an unnecessary and
inefficient use of resources."  The carriers were Franklin Telephone Co.,
Ludlow Telephone Co., Northfield Telephone Co., Perkinsville Telephone Co.,
Shoreham Telephone Co., Topsham Telephone Co., Vermont Telephone Co., Inc.,
and Waitsfield-Fayston Telephone Co., Inc.

CLECs, IXCs Want More Data

Most CLECs had harsh words for the FCC's proposal to extend service-quality
reporting requirements to other classes of carriers, including CLECs.  Most
blasted the plan as favoring ILECs and pushed for additional reporting
requirements.

"Streamlining regulations does not lead to a more competitive market but
rather should be a response to a market that has already moved toward
competition," the Association for Local Telecommunications Services said.
Regulations should be reduced only to the extent that there is a "proven
level of competition," ALTS said.

Some of the reporting requirements that the FCC is considering eliminating
provide "vital" data to CLECs, ALTS said.  "The Commission's actions in this
proceeding could also be setting a dangerous precedent" for other
proceedings, it added.  It cited proceedings related to section 271 of the
Act, under which Bell companies can apply for authority to provide in-region
interLATA (local access and transport area) services once they open their
local exchange markets to competition.

In future section 271 applications, the Bells "may argue that they are no
longer required to report submetrics vital to OSS (operation support system)
performance and [preventing] backsliding," ALTS said.

In joint comments, the Competitive Telecommunications Association, e.spire
Communications, Inc., KMC Telecom, Inc., Net2000 Communications, Inc., XO
Communications, Inc., and Z-Tel Communications, Inc., said the FCC's
proposals would reduce regulation of ILECs while increasing regulation of
CLECs.

"If anything, a review of the state of competition in the local exchange
market reveals that the Commission should institute additional reporting
requirements for ILEC provisions of [unbundled network elements] and
wholesale services the CLECs," the CLECs said.

Measuring CLEC service quality is unnecessary, since CLECs are "beholden to
the ILECs in their provisioning of services," Focal Communications Corp.
said.  Requiring CLECs to report such data would "further hinder competition
by placing an additional burden on carriers already experiencing difficulties
competing with ILECs."

The FCC should use this proceeding as "an ideal opportunity to police the
incumbents' market-opening behaviors," Covad Communications Co. said.  It
suggested that the FCC collect data on ILECs' wholesale service quality and
then use that data to "streamline the section 271 and enforcement
processes."  This could "end the `he said, she said' battle of data
reconciliation," it added.

Advanced TelCom Group, Inc., opined that the reasons the FCC mandated the
reporting requirements "remain valid today."  It pointed out that increases
in the reporting requirements had been included as conditions of the FCC's
approval of several mergers involving large ILECs.  "It seems wholly
inconsistent to increase the reporting requirements for SBC and Bell Atlantic
[now Verizon] and, at the same time, propose reducing the reporting
requirements for price cap LECs generally," Advanced TelCom said.

Making the reporting requirements voluntary, rather than mandatory, as the
FCC suggested, "would defeat the purpose" of the requirements, Dynergy CLEC
Communications, Inc., said.  The FCC's proposed changes of the reporting
system "are unnecessary and will yield an inaccurate service picture of
carrier performance."

CLEC reporting requirements aren't necessary, since CLEC customers are
service-quality-sensitive, Teligent Inc., said.  "To the extent that a CLEC's
service quality is not comparable to an ILEC's, its customers will migrate
back to the ILEC and the CLEC will find itself without customers."

EarthLink, Inc., applauded the FCC's proposal to require ILECs to report
service-quality data on the provisioning of DSL service.  "Limited reporting
obligations for DSL services by large ILECs and their data affiliates would
well serve the public with relevant service information, while reducing
carriers' overall filing burden as compared to the current ARMIS
obligations," it said.

Retaining the current reporting requirements would bring "no material adverse
consequences," AT&T Corp. said.  Meeting those obligations is not a
significant burden for ILECs, it said.  "The systems seeded to generate the
ARMIS data are already established and were funded by captive ratepayers
years ago," AT&T added.  "In fact, introducing different reporting
requirements may be more costly for the ILECs than maintaining the current
ones, because any changes to current requirements will necessitate systems
changes," AT&T concluded.

Interexchange carriers (IXCs) don't have "bargaining power to obtain
good-quality access service provisioning from ILECs," WorldCom Corp. said.
ARMIS data shows a "steady decline" in service quality from ILECs over the
past two years, showing that "ILECs are engaged in precisely the type of
behavior that the service-quality reports are intended to reveal:  maximizing
earnings by reducing service quality," it said.

Time Warner Telecom, Inc., will be the first carrier...

Time Warner Telecom, Inc., will be the first carrier to deploy Lucent
Technologies, Inc.'s WaveStar 1.6T, an optical networking system that Lucent
said can transmit the equivalent of 320 million simultaneous one-page e-mail
messages.  The competitive local exchange carrier has signed a $100 million,
three-year agreement with Lucent to deploy the DWDM (dense-wave-division
multiplexing) equipment.

NECA DSL Tariff

The National Exchange Carrier Association, Inc., has filed its first FCC
tariff transmittal for a DSL (digital subscriber line) promotional offering.

Under the terms of transmittal 888, the rural telcos that participate in NECA
tariffs will waive the installation fee for asymmetric and symmetric DSL
services for customers who agree to take the service for 12 months.

Rohde:  Spectrum Management Holds Key Challenge for Future

Spectrum management, including identifying and allocating spectrum for
third-generation (3G) services, is one of the key issues facing federal
regulators in the coming year, says Gregory L. Rohde, who last week finished
his service as head of the National Telecom-munications and Information
Administration.

At a news conference last week, Mr. Rohde discussed NTIA's achievements over
the past year and its future challenges.  The Commerce Department agency
outlined many of these points in the annual report it submitted to Congress
last week.

Citing highlights from the past year, Mr. Rohde noted numerous
spectrum-management issues, including ultrawideband (UWB) technology testing,
the Clinton administration's effort to identify and allocate bands for 3G
services (see separate story), and U.S. success at last year's World
Radiocommunication Conference (WRC-2000).

Mr. Rohde also cited NTIA's efforts to bridge the "digital divide," its
Technology Opportunities Program, and its work with the FCC to improve
telecom access on tribal lands.   NTIA has revitalized its Minority
Telecommunications Development Program, Mr. Rohde said, and it has worked to
protect online privacy and raise awareness about online profiling.

Looking to the future, he stressed the importance of allocating 3G spectrum
and said regulators must realize the implications of the shift from
traditional telephony to data-transmission services.  He said the nation must
continue to close the digital divide for Americans who don't have Internet
access, and the universal service support system for "high-cost" areas must
be reformed.

Mr. Rohde said the U.S. should reach out to developing countries, or it could
find itself isolated in international telecom policy-making.  "I firmly
believe that it's in our self-interest to work with the developing world to
get more people online," Mr. Rohde said.

At the International Telecommunication Union's World Telecommunication
Standardization Assembly last fall, the U.S. was the only ITU member country
that objected to cost-sharing for international Internet interconnection and
targets for international settlement rates (TR, Oct. 9, 2000).

`Datacasting' License Caps To Be Imposed in Australia

The Australian Communications Authority intends to impose ownership limits on
"datacasting" transmitter licenses, which it expects to auction in the first
half of the year.

Datacasting providers would be limited to holding one license in each of the
nation's eight datacasting service areas.  The regulatory body is putting its
spectrum-allocation plans in final form.

Richard Alston, Minister of Communications, Information Technology, and the
Arts, said Jan. 18 that ownership restrictions were necessary to ensure
competition.  "At this early stage of a new industry, it is important to
encourage the maximum amount of competition in the market, and this is best
done by imposing a limit on the number of licenses that may be purchased by
one player [`or its associates'] in each market," he said.

Upon completing its spectrum engineering and allocation plans, the Australian
Communications Authority probably will defer any further increases in
spectrum availability in the eight service areas "until at least 2003," Mr.
Alston said.

Meanwhile, the government has lifted obligations under the Telecommunications
Act of 1992 that would have required datacasters also to obtain carrier
licenses.  These actions will "increase certainty for potential datacasters,"
he added.

The government hasn't ruled out allocating datacasting licenses in regions
other than the eight specified service areas, "once the channel planning in
regional areas has been completed," Mr. Alston said.

Nigerian Sale Yields $855M For Three Cellular Licenses

A Nigerian auction of three cellular licenses concluded Friday, Jan. 19,
garnering $285 million for each license.  Spectrum auctions in Canada, New
Zealand, and Venezuela are ongoing.

The winning bidders in the Nigerian auction were Communication Investments
Ltd., Econet Wireless Nigeria Ltd., and MTN Nigeria Communications Ltd.  A
fourth license was reserved for state-run Nitel and its Mtel mobile phone
unit; the payment for that license also will be $285 million.  Five groups
bid on the licenses, which were awarded after three days of bidding.

In other international spectrum developments, a Canadian auction of
third-generation (3G) PCS (personal communications service) licenses opened
last week and generated $262.9 million Canadian (US$173.8 million) in bids by
Friday.  Seven companies are bidding on 62 licenses covering 16 markets.

In New Zealand, the first part of an auction for licenses in the 2 gigahertz
band is over after no new bids for management rights were submitted (TR, Dec.
25, 2000).  A second phase of the auction is upcoming.

And in Venezuela, an auction on a third group of five wireless local loop
licenses continued with Empresa Nacional de Telecomunicaciones SA (Entel
Chile) and Digicel CA winning licenses with bids of $1.5 million and
$300,000, respectively (TR, Jan. 15).

BT To Prioritize Local Loop Unbundling in Top Exchanges

British Telecommunications plc has agreed to make unbundling the local loop
in the urban exchanges most sought by competitors a top priority, the United
Kingdom's Office of Telecommunications has announced.

Oftel, which held a Jan. 18 meeting to discuss solutions to collocation
problems often encountered by BT's competitors, also has launched an
investigation into the costs of providing collocation space.

Although Oftel last year modified BT's license to require local loop
unbundling, "operators did not place as many firm orders for collocation
space as had been anticipated," it said (TR, Aug. 14 and Nov. 13, 2000).

Some operators that ordered collocation space last year have decided not to
pursue local loop unbundling, Oftel noted.  "Other operators want to wait
until their top priority sites become available, while others were concerned
about collocation costs," it said.

Court Allows Mobile Phone Lawsuit To Continue

A U.S. District Court judge in Louisiana is allowing a plaintiff to go
forward with a lawsuit that says the wireless industry should be required to
include headsets with mobile phones to protect against the risks of radio
frequency (RF) exposure.

The wireless industry had asked the court to dismiss the litigation on the
grounds that the Food and Drug Administration's authority to oversee mobile
phone safety preempts court involvement.  But Judge Ivan L.R. Lemelle of the
U.S. District Court in New Orleans rejected that argument last week and
allowed the case (Garrett J. Naquin et al. v. Nokia Mobile Phones, Inc., et
al. case no. 00-2023) to proceed.  A separate lawsuit against the industry
has been in filed in Maryland (see separate story).

The lawsuit, which was filed last year, says the mobile phone industry has
known of the potential health risks of the devices and should be required to
reimburse consumers who already have purchased mobile phones without headsets
and to provide headsets to those who buy phones in the future.  It also seeks
unspecified monetary damages for anguish and medical monitoring.

The lawsuit originally was filed in state court in New Orleans but was moved
to federal court at the request of the wireless industry.

New Orleans attorney Michael Allweiss told TR he planned to amend the lawsuit
to add at least one more plaintiff.  He is asking the court to certify the
lawsuit as a class action.

Notes on the News. . .

At the House Energy and Commerce Committee, Jessica Wallace has been named
telecom counsel, and Chairman W.J. (Billy) Tauzin has tapped Nydia Bonnin to
be deputy staff director.  Ms. Wallace was telecom counsel in Rep. Tauzin's
personal office before he became chairman.  Ms. Bonnin previously was a
senior finance adviser to the National Republican Congressional Committee,
where she managed the NRCC's major donors program and staff.  Before that Ms.
Bonnin was director-federal relations for Atlantic Richfield Co.

Gov. Gray Davis (D.) has appointed Geoffrey Brown to a seat on the California
Public Utilities Commission, subject to Senate confirmation.  He would
succeed Josiah Neeper, whose term expired Dec. 31, 2000.  Earlier this month
Gov. Davis appointed his lead energy adviser, John Stevens, to fill the seat
on an interim basis (TR, Jan. 8, notes).  Mr. Brown is the public defender
for the city and county of San Francisco, a four-year elective office he has
won six times.

Wisconsin Gov. Tommy G. Thompson (R.) has appointed Robert Garvin to a seat
on the Wisconsin Public Service Commission, effective March 1, subject to
state Senate confirmation.  Mr. Garvin has been PSC Chairperson Ave M. Bie's
executive assistant.  He previously held staff attorney and legislative
liaison posts at the commission.  He would succeed Commissioner John H.
Farrow, who recently asked the governor not to reappoint him when his term
expires in March.  Mr. Farrow plans to return to his faculty position at the
Milwaukee School of Engineering.

Stanley T. Sigman has been named president and chief executive officer of
Southwestern Bell Telephone Co.  His most recent position at SWBT was senior
executive vice president-services.  Mr. Sigman succeeds J. Cliff Eason, who
has retired after 30 years with parent company SBC Communications, Inc.

Kymata Ltd. has announced that Brendan Hyland will step down as chief
executive officer of the Scottish optical telecom system manufacturer.  Chief
Operating Officer Michael Hickey has been named interim CEO.

Aquis Communications Group, Inc., a Parsippany, N.J.-based paging company,
has named Keith J. Powell president.  He was general manager of Adelphia
Business Solutions, Inc.

Duncan Lewis has been named president and chief operating officer of Global
TeleSystems, Inc. (GTS), a London-based international carrier.  Mr. Lewis was
managing director and chief corporate development officer for Equant NV.  He
succeeds Robert J. Amman, who will remain GTS's chairman and chief executive
officer.  But after GTS completes its proposed restructuring (TR, Nov. 20,
2000), Mr. Amman will become non-executive chairman, and Mr. Lewis will be
the CEO.

Pedro Padilla has been named chief operating officer at Grupo Salinas, a new
Mexico City-based management group with various telecom, Internet, broadcast
TV, and wireless messaging assets in Mexico.  He was chief executive officer
at the company's Grupo Elektra affiliate.

Albert Cohen is the new chief operating officer at Tachion Networks, Inc., a
West Long Branch, N.J., communications network equipment manufacturer.  He
had been chief executive officer at Siemens AG's packet switching unit.

Jeffrey D. Lin has been named chief financial officer at Zaffire, Inc., a
California optical network developer.  He was director and
manager-investments at Vulcan Ventures, the investment firm of Microsoft
Corp. co-founder Paul G. Allen.

John W. Gamble Jr. has been named senior vice president and treasurer at
Agere Systems, Inc., the microelectronics group spin-off of Lucent
Technologies, Inc.  He was VP and chief financial officer at Honeywell
International, Inc.'s industrial controls unit.  Kevin Pennington was named
senior VP-human resources.  He was executive VP-administration at Excel
Communications, Inc.

Somera Communications, Inc., has named Brandt A. Handley vice
president-international sales.   He was VP-international sales at Walt Disney
Co.  Somera is a Santa Barbara, Calif., telecom equipment manufacturer.

Stephen Cardwell has been named director-national accounts at Touch America,
the broadband telecom subsidiary of the Montana Power Co.  He comes to Touch
America from WorldCom, Inc.'s national account team.  Mark Tippett was named
director-carrier accounts. He most recently led Pathnet, Inc.'s dark-fiber
sales team.

Murray Simser has been named vice president-business development at Wireless
Services Corp., a Bellevue, Wash., wireless platform manufacturer.  He was
senior VP-international operations and co-founder of eAssist Global
Solutions, a communications software manufacturer.

Loren Stokes was named vice president-research and development at Cierra
Photonics, Inc.,  a California fiber optics integration technology
manufacturer.  He was director-R&D at Hewlett Packard Co. spin-off Agilent
Technologies, Inc.

Wireless infrastructure operator Crown Castle International, Inc., has named
John Binkley vice president and general manager of its new Illinois regional
unit.  He was VP/GM-Kentucky region.

Advanced Remote Communication Solutions, Inc., has named David A. Brooks
director-government markets for its Innovative Communications Technologies,
Inc., subsidiary.  Mr. Brooks previously was project director for British
Telecom Aeronautical and Maritime.

Timothy Lewis has been picked to lead a new wireless asset-tracking team at
QUALCOMM, Inc.  The unit will focus on providing wireless communications
technology to construction industry fleet-management operations.  Mr. Lewis
was vice president and general manager at Tracsat, Inc.

Dorothy McCarthy is the new head of telecom real estate initiatives at Global
Broadband, Inc., a New York City integrated communications provider.  She was
managing director-national real estate at OnSite Access, Inc.

Regina M. Keeney, former FCC International Bureau Chief, has become a partner
at the Washington, D.C., law office of Lawler, Metzger & Milkman.  Her
practice will focus on telecom legislative and regulatory matters.  She most
recently was chief policy counsel at Dell Computer Corp.

Lauren J. (Pete) Belvin and Barry P. Miller have become members of the law
firm of Wilkinson Barker and Knauer LLP.  Ms. Belvin joined the firm in
September 2000, leaving her previous post as senior majority counsel for the
Senate Commerce Committee's communications subcommittee (TR, July 10, 2000,
notes).  Mr. Miller will lead Wilkinson Barker's intellectual property and
Internet practice group.  He had been with the suburban Washington law firm
of Shulman, Rogers, Gandal, Pordy & Ecker.  Wilkinson Barker also has hired
12 new associates, the firm announced.

Ten attorneys from the Washington, D.C., law firm Greenberg Traurig have left
the firm to join Akin, Gump, Strauss, Hauer & Feld's telecom and information
technology practice in McLean, Va.  Eric Cowan, Richard Rubin, and Marjorie
Connor were named partners; Glynna Parde and Joseph Triano were named
counsels; and Roger Cepeda, Brad Haque, Alex Konde, Jeffrey Neuman, and Fadi
Samman were named associates.

A New York City telecom/real estate law firm has joined forces with the New
York law office of Mintz Levin Cohn Ferris Glovsky and Popeo P.C.  Jeffrey A.
Moerdler, who has moved his private law practice to Mintz Levin, has become a
partner and head of the firm's  telecom and real estate sections.  He brings
with him seven lawyers:  Stephen E. Friedberg and Pamela Caruso Yerman, who
will be partners; and associates Helen Allison, Lorette H. Dundas, Carolyn C.
Jones, Rhona J. Kisch, and C. Anthony Mulrain.

Pace A. Duckenfield has been named associate counsel at the United Telecom
Council, an association that represents the telecom and information
technology interests of critical infrastructure utilities.  He was staff
counsel at the Alliance for Public Technology.

The National Telephone Cooperative Association has named Aaryn Slafky
director-communications.  She was manager-public affairs and Web coordinator.

The Wireless Communications Association International has named Joey R.
Weedon communications director.  He was deputy communications director for
the national Republican Governors Association.

Patricia Mathis has been elected to the board of COM DEV International Ltd.,
a Canadian wireless communications systems manufacturer.  She's chief
executive officer of Webley Systems, Inc., and president of Mathis, a
communications planning and marketing consulting firm.

The current issue of the KMB Video Journal is titled Perspectives on Telecom
Policies for the New Century - What can A Bush Administration Consider?  The
program guest is Albert Halprin, partner at Halprin, Temple, Goodman &
Maher.  Contact Mike Beilis at KMB, 3882 Belle Vista Dr. E., St. Pete Beach,
Fla. 33706 or by phone at 727/367-2444, or get more information at
http://www.kmbvideojournal.com.

Regulatory & Government Affairs

The FCC has accepted the applications of three prospective bidders for its
auction of eight licenses in the "guard bands" surrounding public safety
spectrum in the 700 megahertz frequencies.  The sale is scheduled to begin
Feb. 13.  The Form 175 applications of Nextel Spectrum Acquisition Corp.,
Harbor Wireless LLC, and Pegasus Guard Band LLC have been accepted.  The
applications of Access Spectrum LLC and PTPMS II Communications LLC are
incomplete because of invalid attachments, the agency said.  Those two
applicants must correct the minor deficiencies and submit the require
up-front payments by Jan. 26. in order to participate in the auction.
Companies whose applications have been accepted also must submit up-front
payments by that time.  The licenses involved went unsold at an auction in
September 2000.

The Commercial Wireless Division of the FCC's Wireless Telecommunications
Bureau has extended the time to comment on the Real Access Alliance's motion
for a stay of certain rules on access to multitenant buildings (TR, Jan.
15).  The division said comments now will be due Jan. 26 in Wireless
Telecommunications docket 99-217 and Common Carrier dockets 96-98 and 88-57.
The Wireless Communications Association International had requested the
extension.

The FCC's Wireless Telecommunications Bureau is seeking comments on two
requests for waivers of the Commission's construction rules governing 900
megahertz band licensees.  The rules require major trading area (MTA)
licensees to provide coverage to at least two-thirds of their population
within five years of being granted a license.  Neoworld License Holdings,
Inc., is seeking an extension of the five-year deadline from Aug. 12, 2001,
to Dec. 31, 2002.  FCI 900, Inc., a subsidiary of Nextel Communications,
Inc., is seeking an extension from Aug. 12, 2001, to Aug. 12, 2004.  Comments
on the requests are due Feb. 1 and replies Feb. 8.  Comments on FCI 900's
request should reference DA 01-121 and comments on Neoworld's request should
reference DA 01-122.

The FCC's Wireless Telecommunications Bureau is seeking comments on
applications to transfer wireless licenses from Price Communications Corp. to
Cellco Partnership (d/b/a Verizon Wireless).  Comments are due Feb. 16 and
replies Feb. 26 in Wireless Telecommunications docket 01-8.  Comments should
reference DA 01-120.

The FCC's Wireless Telecommunications Bureau is seeking comments on
applications to swap licenses filed by Cingular Wireless LLC and VoiceStream
Wireless Corp. (TR, Nov. 6, 2000).  Under the proposed transaction, Cingular
subsidiaries would give PCS (personal communications service) spectrum in the
Los Angeles and San Francisco markets in exchange for VoiceStream-controlled
PCS spectrum in New York City, St. Louis, and Detroit.  Comments are due Feb.
20 and replies are due March 2.  They should reference Wireless
Telecommunications docket 01-10 and DA 01-135.

The FCC has established a comment schedule for a rulemaking notice that seeks
comments on technology standards for public safety channels in the 700
megahertz band (TR, Jan. 15).  Comments are due 30 days after publication of
the notice in the Federal Register and replies are due 15 days after that in
Wireless Telecommunications docket 96-86.

The FCC has signed agreements with BoatU.S. and MariTEL to distribute
maritime mobile service identities (MMSIs) to operators of ships that aren't
required to obtain individual licenses from the Commission because they don't
have to carry a radio.  The action came after the FCC and the U.S. Coast
Guard developed a standard agreement to use with the private parties.  MMSIs
are nine-digit numbers assigned to vessels participating in the Global
Maritime Distress and Safety System.

The Satellite and Radiocommunications Division in the FCC's International
Bureau has added the Brasilsat A2 satellite operated by Empresa Brasileira de
Telecomicacoes SA to its "permitted space station list."  That list covers
all satellites with which U.S. earth stations are allowed to communicate
without receiving special Commission authorization.  The division said the
Brasilsat satellite would be added to the list with conditions that include
its compliance with operational requirements.  The satellite is not
authorized for use to provide direct-to-home or direct broadcast satellite
(DBS) services, the division said last week in file no.
SAT-PDR-20000111-00047.  The authorization was granted under the framework
established in International Bureau docket 96-111 for considering requests
from non-U.S. satellite systems to serve the U.S.

The Telecommunications Division of the FCC's International Bureau has added
Time Warner Telecom of Hawaii LP as a party to a cable landing license held
by GST Telecom Hawaii, Inc.  The addition was made as a result of Time Warner'
s purchase of 12 fibers on GST's "Interisland" fiber optic submarine cable
system linking Hawaiian islands.  Under the Cable Landing License Act and
executive order 10530, the Division also granted the companies' request to
modify the license to reflect the way the cable system actually was
constructed.  The requests were granted in file SCL-MOD-20001025-00036.

Then-FCC Chairman William E. Kennard last week released a report summarizing
the agency's efforts to help bridge the "digital divide" in developing
countries.  Connecting the Globe: Telecommunications Development 2000
chronicles the meetings, agreements, and plans for partnerships that the FCC
reached during its global initiative in 1999-2000.  During his tenure, Mr.
Kennard spearheaded an effort to assist his regulatory counterparts in other
countries in developing telecom markets.  The report is available online at
http://www.fcc.gov/ib/developinitiative.

The FCC's Wireless Telecommunications Bureau has rejected allegations by
Pegasus Broadband Corp. that Northpoint Technology Ltd. and its subsidiaries
violated the Commission's ex parte rules when they lobbied the agency to use
the Ku-band to operate a terrestrial wireless system.  The Commission
approved Northpoint's request in December 2000 (TR, Dec. 4, 2000).  In a
memorandum opinion and order released Jan. 17, the bureau said that while
Northpoint representatives' meetings with FCC officials were permitted under
the ex parte rules, the company should have filed copies of notices of those
meetings in the files of the relevant proceedings.

The FCC's Wireless Telecommunications Bureau has denied Metrocall, Inc.'s
petition asking it to reconsider the approval of Arch Communications Group,
Inc.'s acquisition of Paging Network, Inc. (TR, May 1 and Sept. 18, 2000).
Metrocall had contended that Arch abdicated an impermissible level of control
to its lenders as part of the transaction.  In an order on reconsideration
released Jan. 18 in Wireless Telecommunications docket 99-365, the bureau
dismissed the petition as untimely filed.

Bartholdi Cable Co., Inc. (formerly Liberty Cable Co., Inc.) has asked the
FCC to reconsider its order affirming an administrative law judge's
decision.  The ALJ had denied the company's 15 applications for private
operational fixed microwave service (OFS) facilities and impose a $1.425
million forfeiture for the company's lack of candor in connection with the
applications (TR, Dec. 18, 2000, notes).  Filing its petition in Wireless
Telecommunications docket 96-41, Bartholdi said the ALJ's findings were
tainted and that the FCC's actions were excessive.

The FCC has granted Mescalero Apache Telecom, Inc., a waiver of its rules
that will enable the carrier to receive high-cost universal service support
based on the average cost of the 950 access lines it has acquired from Valor
Telecommunications of New Mexico, Inc.  Those access lines serve the
Mescalero Apache reservation in New Mexico.  Without the waiver, Mescalero
only would be eligible for per-line support at the level Valor received
before the acquisition.  Section 54.305 of the Commissions's rules says that
a carrier acquiring exchanges from another carrier shall receive the same
levels of per-line support for which the acquired exchanges were eligible
before the acquisition.  The FCC cited low subscribership rates on the
reservation and a great disparity in the amount of support Mescalero would
receive with and without the waiver.

The Competitive Pricing Division of the FCC's Common Carrier Bureau has
suspended for a day and added to an ongoing investigation a tariff revision
submitted by Citizens Telecommunications Co.  Citizens had proposed in tariff
transmittal no. 93 to adjust its expanded interconnection service rates for
cross-connects, "including the unbundling of the DS3-DS1 multiplexing
function."  The division said last week that the revision "raises the same
issues regarding rate levels, rate structures, and terms and conditions" as
those tariff transmittals already under investigation in CC docket 97-240.

The Commerce Department and several high-tech firms have formed the
Information Technology Information Sharing and Analysis Center (IT-ISAC) to
work on critical infrastructure issues.  In announcing the group's formation,
Commerce Secretary Norman Mineta said Jan. 16 that IT-ISAC would "enable the
high-tech industry to take the lead in spotting potential threats to the
Internet and information infrastructures, sharing state-of-the-art Internet
and information infrastructure security measures, and responding in a more
coordinated way."  Listed among the group's 19 "founding members" are AT&T
Corp., Cisco Systems, Inc., Nortel Networks Corp., and Microsoft Corp.

Illinois Commerce Commission Chairman Richard L. Mathias has asked colleagues
on four other state utility commissions how to respond to recent remarks that
SBC Communications, Inc., officials made to financial analysts.  Mr. Mathias
says the remarks raise "legitimate questions" about information that company
officials previously presented to regulators in the five-state territory of
SBC subsidiary Ameritech Corp.  According to Mr. Mathias, SBC Chairman and
Chief Executive Officer Edward E. Whitacre Jr. told analysts late last month
that Ameritech's service-quality difficulties stemmed from "an outside plant
problem," citing lack of network capacity.  During an October meeting with
state regulators, Mr. Whitacre had blamed service-quality problems on a lack
of qualified technicians (TR, Oct. 23, 2000).

Legislators in Indiana, Maine, Virginia, Minnesota, and Arkansas are among
the latest to introduce bills that would restrict the use of mobile phones
while driving (TR, Jan. 15).  In addition, a Mississippi measure would make
causing a traffic accident while using a wireless phone a misdemeanor subject
to a fine of up to $1,000.

Ireland's Office of the Director of Telecommunications Regulation says that
eircom plc has agreed to modify its definition of "available" collocation
space.  The Irish carrier will take that definition into account "when
planning development of space in its exchanges."  Eircom also has agreed to
expand its list of equipment that competitors can deploy in its collocation
spaces.  Finally, eircom agreed to permit sharing of collocation space by
potential competitors.  The regulator requires eircom to make these changes
in its Reference Access Offer document by Jan. 31.

The South Korean Ministry of Information and Communications has granted an
international private leased circuit license (IPLC) to Korea Thrunet Co.
Ltd.,  a Seoul-based broadband service provider.  Korea Thrunet plans
initially to use the license for internal purposes.  Next year it will offer
IPLC services via satellite and submarine cable to domestic and global
customers.

The United Kingdom's Office of Telecommunications has announced that four of
the U.K.'s largest mobile network operators on the average complete 95% of
calls placed on their networks.  Six-month surveys, which were carried out in
consultation with Oftel and consumer groups, were performed by BT CellNet,
One2One, Orange plc, and Vodafone Group plc.

Industry News

Level 3 Communications, Inc., intends to raise as much as $3 billion through
the sale of common stock, preferred stock, debt securities, warrants, stock
purchase agreements, or depositary shares.  The Broomfield, Colo.-based "
carrier's carrier" revealed its plan in a "shelf registration statement"
filed with the Securities and Exchange Commission.  Further details will be
disclosed in future filings.  Level 3 will use the funds for network
construction, acquisitions, and other corporate expenses.

Sprint Corp.'s funding arm, Sprint Capital Corp. is preparing to raise $2
billion through the sale of senior unsecured debt securities.  The proceeds
will be used to refinance short-term debts.  The company did not give a date
for the sale.

CIENA Corp. intends to raise $1.5 billion through the sale of stock, bonds,
or other securities, the company said in a "shelf registration statement"
filed with the Securities and Exchange Commission.  The Linthicum, Md.,
telecom equipment maker will use the funds for capital expenditures,
acquisitions, and other corporate expenses.

American Tower Corp. says it is seeking to raise about $350 million through
an institutional private placement of senior notes.  It expects to complete
the offering later this month, subject to market conditions.  It says
proceeds from the offering will be used to finance the construction of new
towers, fund acquisitions, and for "general corporate purposes."

Genuity, Inc., is postponing plans to raise funds through the sale of debt
securities while it assesses "the current slowdown in economic activity" and
information technology spending, the company said.  Instead, it will fund its
operations with money from cash reserves, bank loans, and its parent company,
Verizon Communications, Inc.

Net2000 Communications, Inc., a competitive local exchange carrier based in
Herndon, Va., plans to trim its workforce by 10% and delay some expansion
plans to save money.  The expected savings of $80 million in 2001 will enable
the company to operate into the third quarter of 2002 without additional
financing, Net2000 said.

TruePosition, Inc., has filed a lawsuit alleging that SigmaOne Communications
Corp. is infringing on three patents related to TruePosition's network-based
wireless location systems.  The lawsuit, filed in the U.S. District Court in
Delaware, seeks damages and an injunction prohibiting SigmaOne's further
infringement of the patents.  SigmaOne officials could not be reached for
comment.

InvestAmerica, Inc. (d/b/a Optica Communications, Inc.) has signed a
nonbinding letter of intent to buy optical networking equipment valued at
$675 million from Nortel Networks Corp.  The Utah-based start-up said it will
deploy a 20,000-mile North American network during first quarter 2002.  It
plans to expand globally.

Oy Nokia and America Online, Inc., have entered into a licensing agreement
enabling AOL to develop and market Nokia's WAP (wireless application
protocol) microbrowser "with AOL enhanced features."  The companies said they
expected the Netscape-branded microbrowser to be used in a "wide variety" of
mobile devices.

British Telecommunications plc has raised $9.1 billion through the sale of
bonds in Europe, generating cash to repay short-term borrowings.  The bonds
were sold in four tranches with terms ranging from three to 15 years.

Qwest Communications International, Inc., has signed a contract to provide
network capacity in the U.S. to Cable & Wireless plc, a London-based global
telecom carrier.  Qwest, which said it sold about $90 million worth of
capacity to C&W last year, placed a $100 million value on the new contract.

Nippon Telegraph & Telephone Corp. subsidiary NTT Com has agreed to form a
data center joint venture with Shin Corporations Public Co. Ltd., a Thai
telecom conglomerate.  Each partner will hold a 47.5% stake, and Saha Pathana
Inter-Holding Public Co. Ltd. will have 5%.  The venture will be capitalized
at 1.72 billion yen (US$14.5 million).

Lucent Technologies, Inc., is selling portions of its manufacturing assets in
Poland to APW Ltd., a Wisconsin electronics infrastructure manufacturer.  APW
will acquire 215,000 square feet of Lucent's global provisioning center in
Bydgoszcz, Poland, for an undisclosed sum.  APW agreed to offer jobs to all
300 of Lucent's employees at the site.

A group of multichannel multipoint distribution service (MMDS) operators in
Latin America are creating an alliance to promote the industry.  The founding
members of Latin American Networking serve more than 40.9 million households,
or 36% of households in the region.

Pangea Ltd. says it will lease a 1,250-mile "dark" (unpowered) fiber link to
Arrowhead AB, a Swedish broadband communications provider.  The Bermuda-based
"carriers' carrier" will provide Arrowhead an "end-to-end link between
Copenhagen [Denmark] and Stockholm [Sweden]."  Arrowhead will use the fiber
capacity to expand its reach throughout Scandinavian markets.

Global One has signed an interconnection agreement with Latinet, a broadband
and Internet service provider.  The pact will enable Global One to provide
frame relay service in Ecuador and Panama.

360networks, a British Columbia-based global network operator, has acquired "
dark" (unpowered) fiber in Berlin and Munich, Germany, and Zurich,
Switzerland, from Carrier1 International S.A.  The purchase is part of a $175
million contract signed last year in which the companies agreed to sell fiber
and capacity to one another between North America and Europe.

Advanced Radio Telecom Corp. of Bellevue, Wash., says that its ART Nordic AB
subsidiary will team up with a Swedish broadband communications company to
provide IP (Internet protocol) service in Norway.  ART Nordic will make
available its fixed wireless IP network  to Utfors Bredband AB of Stockholm,
which will use the system with its fiber optic infrastructure.

FCC Reauction

Net bids in the FCC's ongoing reauction of 422 "C" and "F" block PCS
(personal communications service) licenses hit $16.8 billion at the end of
bidding Friday, Jan. 19 (TR, Jan. 15).  The action continued to slow down,
with only 27 new bids submitted in the 73rd round.

Verizon Wireless still led all bidders, offering $8.8 billion. It was
followed by Alaska Native Wireless LLC, which is partly owned by AT&T
Wireless Services, Inc., which bid $2.8 billion.  Salmon PCS LLC-partly owned
by Cingular Wireless LLC-bid $2.3 billion.

The highest bids continued to be for licenses in the largest market, New York
City, with Verizon Wireless the high bidder on two licenses there and Alaska
Native Wireless the top bidder on a third.

Thirty-seven bidders remained eligible after bidding was completed Jan. 19.
The reauction has moved into a phase that requires bidders to be more active
in each round to retain their bidding eligibility.

In a related development, the FCC affirmed its decision last year to modify
its rules for C and F block auctions (TR, Aug. 28, 2000).

In an order on reconsideration released in Wireless Telecommunications docket
97-82, the Commission denied five petitions for reconsideration of the rules
changes, which allow large entities to bid on some licenses while reserving
others for small businesses known as "designated entities" (DEs).  The FCC
said the changes balanced the needs of both large and small carriers.

Infostrada Acquisition

The European Commission has approved Enel Holding SpA's acquisition of
Infostrada SpA from Vodafone Group plc.  It said Jan. 19 that the transaction
wouldn't harm competition in the telecom and Internet markets.

Enel, an Italian telecom and electricity provider, intends to merge
Infostrada into Wind Telecomunicazioni SpA, an Italian telecom joint venture
of Enel and France Telecom.  The commission acknowledged that the merger
would create overlaps in the fixed telecom and Internet service markets in
Italy, but said "the overlaps are not such as to lead to any creation or
strengthening of a dominant position."

Interconnection Dispute

The FCC has agreed to preempt the Virginia Corporation Commission in a
dispute over an interconnection agreement between WorldCom, Inc., and Verizon
Virginia, Inc. (TR, Oct. 30, 2000 p.37).  WorldCom had asked the FCC to act
on the matter after the Virginia commission refused to arbitrate the terms of
the parties' interconnection agreement.

The state commission had cited uncertainty over whether the immunity from
federal court review granted by the 11th Amendment to the U.S. Constitution
applies to such proceedings.

The Virginia commission had said it was concerned that arbitrating the
dispute would be deemed a waiver of its immunity under the 11th amendment.
The FCC released its decision late Jan. 19 in Common Carrier docket 00-218.

Meanwhile, in a separate, undocketed order, the FCC also granted additional
discretion to its own arbitrator when it has preempted a state commission's
authority over an interconnection dispute, as it did in the Virginia case.

What's Ahead. . .

JANUARY

23-Comments are due to the FCC's Wireless Telecommunications Bureau on a
draft programmatic agreement that aims to streamline the review of antenna
collocations under the National Historic Preservation Act (TR, 1/8/01 p.21).
Filings should reference DA 00-2907.  The FCC may take action on the final
agreement around Jan. 29.

23-The FCC's Wireless Telecommunications Bureau holds a bidding seminar to go
over bidding procedures for the March 6 auction of licenses in the 700
megahertz band.  The bureau plans to hold a test of the package bidding
system Jan. 24-26 (TR, 1/8/01 p.25).

24-Comments are due to the FCC on two requests for waivers of its "study
area" definitions (TR, 1/8/01 p.21).  Replies are due Feb. 5, and filings
should refer to Common Carrier docket 96-45.

26-Comments are due to the Office of the U.S. Trade Representative on the
effectiveness of several international telecom trade agreements (TR, 1/15/01
p.32).  The USTR expects to complete its assessment of telecom trade accords
by March 31.  For more information, call 202/395-9620.

26-PENNSYLVANIA:  Administrative law judge's decision is expected in a
proceeding to implement structural separation of Verizon Pennsylvania, Inc.'s
wholesale and retail operations (TR, 12/11/00 p.25).

28-31-The Association for Communications Enterprises holds its winter carrier
forum in Palm Desert, Calif.  For more information, go to
http://www.ascent.org.

29-New deadline for Verizon Communications, Inc., to submit to the FCC a
report on its compliance with a condition placed on the merger that created
the company (Bell Atlantic Corp. and GTE Corp.)  The original deadline was
Dec. 27, 2000.  The report must address Verizon's compliance with a condition
governing its provision of unbundled network elements and line-sharing
agreements (TR, 12/25/00 p.35).

29-Feb. 1-The annual ComNet conference and expo is held in Washington.  For
more information, go to http://www.comnetexpo.com.

30-The Federal Trade Commission and the Electronic Retailing Association hold
a seminar in Tysons Corner, Va., to go over FTC rules regarding Internet
marketing.  For more information, call Eric London at the FTC at 202/326-2180.

30-The Broadband Wireless Internet Forum holds a meeting in London.  For more
information, go to http://www.bwif.org.

30-The initial meeting of the FCC's advisory committee on the 2003 World
Radiocommunication Conference is held in the Commission's meeting room.

FEBRUARY

2-The National Telecommunications and Information Administration holds a
workshop in Washington to discuss the 2001 Technology Opportunities Program.
It will hold a similar workshop in Denver on Feb. 6, and in St. Louis on Feb.
8.  Registration information can be found on NTIA's Web site:
http://www.ntia. doc.gov.

5-The U.S. Court of Appeals in Washington will hear oral arguments in
National Exchange Carrier Association, Inc., v. FCC (case no. 00-1055).  NECA
is challenging the FCC's December 1999 decision rejecting NECA's proposed
modifications to the 1999 "average-schedule" Universal Service Fund formula
(TR, 10/9/00 p.36).

6-New deadline for the Universal Service Administrative Co. to file at the
FCC its financial projections for the second quarter of 2001.  Original
deadline was Jan. 30 (TR, 1/15/01 p.39).

7-Comments are due to the United Kingdom's Office of Telecommunications on
whether to impose additional conditions on Cable & Wireless plc's operator
license for certain international routes (TR, 1/15/01 p.32).

7-Deadline for Telenor AS to exercise its option to sell its 49.5% stake in
Esat Digifone to British Telecommunications plc for a 33% stake in Esat
Telecom Group plc (TR, 12/11/00 p.35).  Telenor and BT agreed to extend the
deadline from Dec. 7, 2000.

8-The FCC holds a meeting.

8-Section 275 of Telecommunications Act prohibits Bell operating companies
from providing alarm monitoring services until this date (TR, 11/17/97 p.7).
The Act grand-fathered alarm monitoring operations existing as of Nov. 30,
1995.

8-FCC begins phasing in rate increases under a two-step methodology for
setting pole attachment rates based on "usable" and "unusable" space (TR,
2/2/98 p.33).

13-The FCC's Wireless Telecommunications Bureau holds an auction of eight
700-megahertz band licenses that weren't bought at the "guard-band" auction
(TR, 10/16/00 p.38).

NTCA Makes Push for MAG Plan, Lifting Caps on Universal Service

Policy-makers need to realize that even though rural telcos serve only a
small percentage of the telecom market, their operations cover nearly 40% of
the nation's land and, in many cases, they're entering multiple lines of
business.  That's the message the National Telephone Cooperative Association
is carrying to the FCC and Congress as it seeks to garner more federal
support for some of its pet projects.

On Capitol Hill, NTCA plans to revive its legislative push to eliminate caps
on the amount that individual carriers are eligible to receive in universal
service support, says Chief Executive Officer Michael Brunner.  The
association is considering broadening that proposal to include a broadband
tax credit plan, he says.

At the FCC, the group's most pressing concern is getting quick adoption of
the multiassociation group (MAG) plan for overhauling the interstate access
charge system for telcos operating under rate-of-return regulation, Mr.
Brunner tells TR.  An edited transcript of our conversation follows.

TR:  What are NTCA's top priorities for the 107th Congress?  Should we expect
to see your proposal from the last Congress to lift the universal service cap?

Brunner:  The answer is yes.  As you know, we were instrumental in working
with [Sen. Conrad] Burns [R., Mont.] in getting that bill introduced in the
last session.  Obviously that's a priority again, as the Rural Task Force has
sort of come up with half a loaf in recommending an index cap.

We see the Rural Task Force plan as better obviously than the current
situation, but we see it causing a problem down the road.  For example, if a
lot of acquisitions occur-and I think they will-then there's going to be a
need to upgrade all those lines.

The current cap won't be adequate to do that, and we hope the Commission,
under any circumstances, wouldn't go below what the Rural Task Force is
recommending.

TR:  That effort garnered bipartisan backing from key U.S. senators last
session.  What's your strategy for expanding congressional support for it in
the 107th Congress?

Brunner:  One way to do that might be to go back to the drafting of the
Telecommunications Act of 1996, when Congress really understood that we have
to give equal weight to the twin goals of competition and universal service.
Our feeling is that this Commission and the past Commissions, perhaps, may
have given more weight to competition and less to universal service.

It's real clear in the statute that Congress thinks those issues are equally
weighted, and whether or not people like it, things cost more in rural
America.  If we really want to bring broadband services to all Americans, we
can't do it without some kind of support.

And if Congress is saying on the one hand, "Deploy advanced services," it
seems odd to say on the other hand, "We're going to limit this cap, limit the
support."

Rep. Nathan Deal [R., Ga.] was our key guy in the House on this last year,
and Sen. Burns in the Senate.  We're working with a lot of other people, too,
to see if we can't be more comprehensive this time around.

For example, another key component of our plan could be some kind of tax
credit or a low-interest [Rural Utilities Service] loan.  And rather than
have one bill address this part and one for that part, we may have all of
those wind up in one comprehensive package.

On the broadband tax credit plan, the idea is to develop. . .a bill that
would enable carriers to claim a fairly substantial credit for deploying
broadband services to rural areas.  We don't want it to be technology-
specific, where you end up with something that seems to favor one technology
over the other.

I don't want to be too specific because we're still working with a number of
our own members to work out the details.  We don't have a perfect package
yet. . .and I don't think it would be hugely expensive.  We realize no one's
going to go for a big spending bill, especially with the economy sort of
turning right now, or potentially turning.

But we're still moving forward on this.  Our annual meeting will be held the
first week in February, and that's when we're really going to start hashing
out some of these things and talking about some overall policy resolutions.

TR:  One thing you haven't mentioned is a deregulatory approach to broadband
service deployment.  Why?

Brunner:  We really haven't been drawn to that approach for a lot of reasons,
one being that we think a broadband tax credit bill is a more targeted
approach that really gets at the issue.  If the policy-makers really want to
deploy broadband services nationwide, and they say they do, this is the way
to help us to do it.

TR:  Staying on the congressional front, what's NTCA's reaction to Fred Upton
[R., Mich.], who has limited telecom experience, being named chairman of the
House Energy and Commerce Committee's telecommunications subcommittee?

Brunner:  We're excited about Fred Upton being in that role.  He does have
some rural parts to his district; in fact, some of our own commercial telco
members are up there-Bloomingdale Telephone Co. of Bloomingdale, Mich., and
Climax Telephone Co., of Climax, Mich.

Also, the ratio now in the House is about 14 urban members to one rural
member.  So whenever you get a person with some rural territory in a key
telecom policy-making slot, NTCA is thrilled.  We think that Mr. Upton will
do a good job and hope he'll be sensitive to NTCA's issues.

TR:  I understand that you've been consulting with members of Congress about
the MAG plan and that some senators have asked the FCC to put it on the front
burner.  What kind of time line do you have in mind for action on the MAG
plan?

Brunner:  We want to move it quickly.  We've spent a lot of time, as have
other trade associations, getting our members on board.  It was a grueling
process, and I think the product's pretty good.  So our feeling, at this
point, is that we really want the whole thing adopted as is.

We're not comfortable backing off any part of it.  If the Commission does
back off or review it, then we reserve the right to say, "Stop, and let's
look at it again."

The main thing is keeping the process moving.  It's easy for things to get
bogged down in the regulatory or congressional processes.  We have many
friends on Capitol Hill, mainly in the Senate, where so many members have key
rural areas in their state.  The main message right now is, "Let's keep the
MAG plan moving."

Most people think it'll probably take six months to a year to get the whole
thing through.  The other wild card, to some extent, is the Rural Task Force
report, which is moving along on a fast track.  There's some commonality
between those two.  Our dream-although we thought it probably wasn't super
likely-was that the Commission would just simply adopt the MAG plan as is.

TR:  What about the expected turnover at the FCC?  How do you see that
affecting the Com-mission's consideration of the MAG plan?

Brunner:  It could go a bunch of different ways.  You could get someone
coming in who says, "A lot of real smart people spent a lot of time on this,
and rather than reinvent the wheel, I'm more inclined to support it."

Or you could get someone else who says, "I don't understand all this, and I
want to start from square one and take my time."  We just don't know who the
players are going to be.  I expect some of the current Commissioners still
will be there.

TR:  Most believe Commissioner Michael K. Powell will be tapped to fill the
vacant chairman seat, at least initially.  Have you gotten any feedback from
his office about his position on the MAG plan?

Brunner:  Not really.  We've visited the staffs of all the Commissioners, and
most of them weren't real specific on [the plan].  So we certainly want to
give him and others the benefit of the doubt.  We hope they would view it
favorably.  I think everyone will respect the work that went into it, even if
they don't agree with it.

TR:  Let's talk about your recent white paper recommending that universal
service "high-cost" support be "nonportable" [TR, Jan. 15].  How did you come
to this conclusion, and where do you go with it?

Brunner:  What we've got there is a study with some actual data.  It shows
that introducing competition in rural areas is ultimately going to lead to
less broadband technology deployment.

Our next step is to try to convince regulators that artificial competition
doesn't work.  If there's an actual market for more than one carrier, then
indeed consumers might benefit.  But there aren't great public benefits, as
we see it, to artificially creating competition where markets don't
ordinarily permit competition as a matter of course.

Our point is that sometimes the regulators try to take an urban solution and
inject it into rural America.  It makes sense to induce competition in
downtown areas like Los Angeles or Chicago, where the average Bell company
has anywhere from 130 to 150 customers per mile.  But we only have four or
five or six per mile-very small numbers.

We would argue that it's hard for one carrier to really make it in these
markets.  And if they force a second one or a third one in, it splits up the
business even more, and no one's going to have the wherewithal to deliver
broadband services.

One of our main themes on Capitol Hill and at the Commission is that
policy-makers need to appreciate the fact that rural areas are different.
Most policy-makers, as you might imagine, have an urban background. . .Our
job is to continue to try to educate people about the differences between
urban and rural areas.

We've done that with some success.  For example, we've had several of the
Commissioners come out and speak at our meetings, spend time with our
members, talk with them one-on-one.  [Commissioner Harold W.]
Furchtgott-Roth, for example, came out and visited a small telco with us.  We
really look for opportunities to give them a greater appreciation of these
kinds of things.

Going back to Congress, we also want to really caution people not to reopen
up the Telecommunications Act or to pass a new Act until some of the key
rural issues are resolved.  We're now going on five years since passage of
the Telecommunications Act, and some of our members still can't plan because
they don't know about [the outcome of] access charge reform.  As you know,
our members get better than 50% of their revenues from access charges.

The biggest decisions for the new Commission will be on high-cost support and
access charge reform.  Both the MAG and the Rural Task Force plans have
touched on that.

TR:  Switching gears to the incoming Bush administration, how do you foresee
the Department of Agriculture's Rural Utilities Service [RUS] developing over
the next few years?  Will there be major changes?

Brunner:  Actually, to be honest, no one knows.  My sense is that the RUS no
longer is the political issue it used to be because when people look at it,
they're seeing that the cost of that program is so minute.  It's somewhere
around $6 million or $7 million in interest subsidies for about $600 million
in loans.

And everyone thinks it does work well; there's never been a default.  So I
don't sense we're going to have an effort, as was made in the Reagan
administration, to really cut back on some of these things.  I could be
totally wrong, but my sense is it has enough respect and support on both
sides of the aisle.

Plus, the lending no longer is simply for the same "plain old telephone
service"; it's now for some new things.

TR:  Let's talk about NTCA's membership.  What kind of efforts are under way
to accommodate some of your members' non-ILEC [incumbent local exchange
carrier] operations?

Brunner:  Many years ago there were questions about how our members would
adapt to change in competition.  My sense is that they're adapting quite
well, as almost all of them are in multiple lines of business.  They're
becoming Internet service providers, many of them are in the cable TV
business, most of them have wireless or broadcast satellite operations, some
are resellers, and many are becoming CLECs [competitive local exchange
carriers].

They've gotten into multiple lines of business, so they are becoming, in a
lot of ways, more than ILECs.  We've broadened our approach to assist them in
some other areas.  So it's a very active membership, some more than others.

We have a new initiative called C3A.  It's really an effort to get members
who are thinking more competitively to get together and perhaps aggregate
their businesses with things like volume discounts.

I've been very pleased with our membership's willingness to grow and change.
For a while I thought they just might want to keep doing things the same old
way that has always worked for them.  But they really are changing.

We're not the biggest player.  We're only about 5% of the industry, but it
really is a critical 5%.  We represent roughly 40% of the land in this
country, but it's a unique and critical part.

We would just really hope that the policy-makers would make it a priority to
understand that the 5% we serve is as important as the whole.  That's
something that some people miss.

Executive Briefings

The New FCC? - Speculation is rife that a decision on the FCC top spot is
imminent, as FCC transition team advisers meet to discuss potential changes
at the agency.  (Page 3)

Biennial Regulatory Review - The FCC asks its staff to prepare proposals to
eliminate or streamline a broad range of rules, including those governing
intercarrier compensation for terminating telecom traffic, wireless licensing
terms and renewals, and international service tariffs for nondominant
interexchange carriers.  (Page 5)

FCC Gridlock? - Although the departure of FCC Chairman Kennard leaves the
agency temporarily with four members-two Republicans and two Democrats-
Commissioner Furchtgott-Roth doesn't expect the agency to be deadlocked.
(Page 6)

Ultrawideband Technology Testing - Ultrawideband devices can likely operate
in spectrum between 3 and 6 GHz without harming incumbent users, including
fixed satellite service operators, according to NTIA test results.  But NTIA
says that steps to mitigate interference would probably be necessary.  (Page
7)

Mobile Phone Litigation - Noted attorney Peter G. Angelos enters the legal
fray against the wireless industry over the safety of mobile phones.  Mr.
Angelos files an amended lawsuit on behalf of a Maryland doctor who claims
that using a mobile phone caused his brain tumor.  (Page 8)

Spectrum Relocation Reimbursement - NTIA proposes procedures under which
federal government spectrum incumbents would be reimbursed if they relocate
to other bands to make way for commercial users.  NTIA Administrator Greg
Rohde says the rules could bolster efforts to identify and allocate spectrum
for "3G" services.  (Page 9)

State Immunity - The Fifth Circuit joins a chorus of appeals courts in ruling
that the U.S. Constitution doesn't protect state utility commissions from
federal judicial review of their decisions regarding carrier interconnection
agreements.  (Page 11)

InterLATA Bid Redux - Verizon officials are counting on new data to satisfy
regulators' concerns about its application to provide interLATA services in
Massachusetts.  Verizon again asks the FCC to allow it to enter that market;
it withdrew its earlier application last month.  (Page 13)

Interactive TV Inquiry - Although the market for high-speed interactive TV
services is in the early stages of development, the FCC hopes to stay "ahead
of the curve" by collecting information on the status of the ITV market and
whether it should regulate it.  (Page 14)

Qwest-BellSouth Alliance - It was the rumor du jour 21 months ago:  BellSouth'
s purchase of a 10% stake in Qwest meant the companies might merge.  Times
have changed, however, and BellSouth now is cashing in much of its Qwest
investment to raise $1 billion for other projects.  (Page 15)

Qwest Performance Data - Qwest says it has improved its service to end-user
customers and other carriers in key areas-including those that have come
under fire from consumers and regulators.  The company cites new data and
announces four permanent line-sharing pacts.  (Page 15)

NorthPoint Bankruptcy - NorthPoint Communications doesn't expect to emerge
from bankruptcy as an independent entity but has asked a bankruptcy court to
allow a "structured sale" of its assets.  One analyst expects bids from
McLeodUSA, XO Communications, and interexchange carriers seeking local
broadband infrastructure.  (Page 16)

Reseller Discrimination Case - A federal appeals court upholds a lower court
decision directing AT&T to pay $2.1 million for discriminating against a
reseller in favor of its own retail customers.  (Page 17)

WorldCom Customer Settlement - WorldCom agrees to pay $88 million to
customers who claim they were overcharged by being billed nonsubscriber
rates.  (Page 17)

Globalstar Trouble - A skeptical teleconference audience confronts Globalstar
Chairman and CEO Bernard Schwartz as he announces the company's plan to
suspend payment on its debts.  Investors demand to know why they shouldn't
force the company into bankruptcy.  (Page 18)

Asian Networks - A Washington, D.C.-based international telecom lawyer says
that "creative financing" is necessary to get capital for telecom
infrastructure projects in Asia.  He unveils a white paper recommending
combinations of funding methods such as vendor financing and export credit
agency support.  (Page 18)

Brazilian Wireless Merger - Portugal Telecom plans to expand its Brazilian
presence by acquiring wireless operator Global Telecom, which operates
networks in the Parana and Santa Catarina states.  Those states are neighbors
to Sao Paulo, where Portugal Telecom already offers wireless service through
its Brazilian subsidiary, Telesp Celular Participacoes.  (Page 19)

Intelsat Privatization - Intelsat CEO Conny Kullman says the group is gearing
up for privatization by building technological and regional flexibility into
its business plans.  (Page 19)

WorldCom-Intermedia Merger - The transaction clears its final federal
regulatory hurtle as three FCC bureaus approve license transfers related to
the proposed transaction.  It still needs additional state regulatory
approvals, and WorldCom is facing a lawsuit from Digex minority shareholders
seeking to block the transaction.  (Page 20)

Rhythms Cutbacks - Rhythms NetConnect-ions intends to reduce its expected
losses this year by 15%, to $395 million, by cutting 450 employees-or 23% of
its workforce-and by suspending operations in about 20 of its smaller
markets. (Page 20)

Reciprocal Compensation - Level 3 and SBC agree on a two-tiered reciprocal
compensation rate scheme designed to resolve disputes about payments for
terminating dial-up calls to Internet service providers.  (Page 21)

More Trouble for IXCs? - The financial future of interexchange carriers
continues to be clouded by downward pressure on rates for voice long distance
service, analysts say.  That pressure will intensify-and will begin to affect
data service, too-as new entrants like Global Crossing and Level 3
Communications finish building new networks.  (Page 22)

700 MHz Band Auction - Citing a host of concerns, Verizon Wireless asks the
FCC to delay until September the auction of spectrum in the 700 MHz band.
The auction currently is scheduled to begin March 6.  The FCC sets a Jan. 24
deadline for comments on the request.  (Page 24)

Cellular License Revocation - Judges on a federal appellate panel express
skepticism at a former cellular licensee's argument that the FCC wrongly
revoked its license for falsely maintaining that all its partners were U.S.
citizens.  (Page 25)

CLEC Access Charges - Many CLECs seem resigned to the FCC's adoption of a "
benchmark" rate essentially capping the access charges they can levy on
interexchange carriers.  But they hope the FCC will take a cautious approach,
recognizing that they often have higher costs than ILECs, particularly if
they serve rural areas.  (Page 26)

Service-Quality Reports - The FCC's proposal to reduce service-quality
reporting by ILECs gets a resounding thumbs-down as state regulators,
end-user interests, and competitive carriers argue the need for the data.
Even the ILECs-which likely would benefit from the reductions-object to
portions of the plan.  (Page 28)

NTIA's Assessment -  Spectrum management, including identifying and
allocating services for 3G services, is one of the key issues facing federal
regulators in the coming year, says NTIA Administrator Greg Rohde.  (Page 32)

NTCA's Agenda - CEO Michael Brunner says NTCA will make a big push to get
more members of Congress on board with its plan to repeal caps on universal
service support and to approve a broadband tax credit bill.  At the FCC, he
says NTCA's main concern is adoption of the MAG access charge plan.  (Page
41)
Copyright 2001, Telecommunications Reports International, Inc. All rights
reserved.