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February 1, 2005, 9:00 AM ET, Alert No. 1,067.
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SBC to Acquire AT&T

1/31. SBC Communications and AT&T announced that the two companies have agreed that SBC will acquire AT&T and that they expect the deal to close by the first half of 2006.

They stated in a release that "Under terms of the agreement, approved by the boards of directors of both companies, shareholders of AT&T will receive total consideration currently valued at $19.71 per share, or approximately $16 billion."

Their release adds that "AT&T shareholders will receive 0.77942 shares of SBC common stock for each common share of AT&T. Based on SBC's closing stock price on Jan. 28, 2005, this exchange ratio equals $18.41 per share. In addition, at the time of closing, AT&T will pay its shareholders a special dividend of $1.30 per share. The stock consideration in the transaction is expected to be tax-free to AT&T shareholders."

The acquisition requires approvals by AT&T's shareholders, and regulators.

The two companies described their assets as "complimentary". Edward Whitacre, Ch/CEO of SBC, stated that "We are combining AT&T's national and global networks and expertise with SBC's strong platforms and skills in local exchange service, wireless and broadband".

Ray Gifford, President of the Progress and Freedom Foundation (PFF), offered this analysis. "The antitrust analysis will focus on the horizontal aspects of the merger in the enterprise market ... This once would have been a vertical merger for SBC into the long distance market, but that market is rapidly disappearing altogether. Instead, for antitrust purposes, it appears to be a simple horizontal merger in the enterprise market -- and this is a market with multiple players and even more potential players as VoIP gains a foothold."

Gifford added that "the vertical aspects in the long distance market seem unproblematic at first glance because this is a market in decline and indeed only exists because of legacy regulatory mandates in any event."

The PFF's Kyle Dixon, who previously worked for Federal Communications Commission (FCC) Chairman Michael Powell, stated that "An SBC-AT&T merger proposal should come as no surprise ... These combinations can bring consumers benefits, encouraging companies to provide better bundles of services more cheaply. And a huge goal of the 1996 Act under section 271 was to promote competition by removing restrictions on phone companies that existed when the government broke up Ma Bell."

See, PFF release. The PFF is a Washington DC based, market oriented, think tank.

Robert Sachs, the outgoing P/CEO of the National Cable Telecommunications Association (NCTA), stated in a release that "The proposed combination of the largest and second largest telephone providers in SBC's 13-state region raises obvious antitrust concerns that regulatory authorities will have to scrutinize carefully. Cable companies, other phone competitors, consumers and business users alike have a vital interest in ensuring that this new telco behemoth does not act anticompetitively to thwart emerging phone competition. We will work closely with federal and state regulatory authorities as they examine the proposed SBC-AT&T transaction."

Walter McCormick, P/CEO of the U.S. Telecom Association (USTA) stated in a release that this "is an historic announcement that will translate into new services and products for consumers. While AT&T has receded from the residential market, consumers will reap the benefits of SBCís commitment to serving the residential consumer. AT&Tís investment in advanced networks will also speed the nationís transition from legacy technologies to advanced IP services. This is a classic example of a union that is greater than the sum of its parts."

McCormick added that "This news, and recent announcements from other companies of all sizes, indicates how important it is for Congress to begin its work on updating the nationís telecom laws."

The usual critics of telecom industry mergers and acquisitions criticized this acquisition. Gene Kimmelman stated in a release that "The imminent acquisition of AT&T by SBC is a symbolic reminder that the Telecommunications Act of 1996 has failed to produce the vigorous competition that was promised ... For most consumers, the communications market is rapidly deteriorating into a duopoly dominated by two firms because of the failure of new entrants to gain a foothold in the market."

Kimmelman, whose group is the Consumers Union, added that "It is time for Congress to reconsider the deregulation experiment of the 1996 Act and give consumers the protection that market forces are failing to provide."

Similarly, Mark Cooper stated that "Consumers have only two choices -- a single cable company that dominates video and high speed Internet or a regional Bell operating company that dominates local, long distance and wireless telecommunications ... Two companies are not enough to provide serious price competition or strong incentives to innovate." Cooper's group is named Consumer Federation of America.

See also, SBC brochure [4 pages in PDF] regarding the acquisition.

FCC Releases NPRM on Regulatory Framework to Apply to Price Cap LECs for Interstate Special Access Services

1/31. The Federal Communications Commission (FCC) released a document [49 pages in PDF] titled "Order and Notice of Proposed Rulemaking" in its proceeding titled "In the Matter of: Special Access Rates for Price Cap Local Exchange Carriers: AT&T Corp. Petition for Rulemaking to Reform Regulation of Incumbent Local Exchange Carrier Rates for Interstate Special Access Services".

This NPRM starts an examination of the regulatory framework to apply to price cap local exchange carriers' (LEC) interstate special access services after June 30, 2005, when the CALLS plan expires.

The NPRM states that "Although we typically do not examine a single interstate access charges basket (e.g., special access) separate from the other baskets (e.g., common line, switched access, transport), we find that the increased importance of special access services relative to other access services warrants the initiation of a rulemaking proceeding specific to interstate special access charges. Notably, business customers, commercial mobile radio service (CMRS) providers, interexchange carriers (IXCs), and competitive LECs all use special access services as a key input in many of their respective service offerings." (Parentheses in original.)

This item also states that the FCC "commenced a comprehensive rulemaking proceeding in 2001 to reform intercarrier compensation, including an examination of the appropriate rate levels and rate structures for, inter alia, interstate switched access services. In 2004, numerous industry groups and other interested parties submitted intercarrier compensation reform proposals in that proceeding, and we will issue a further notice seeking comment on those proposals in the near future." (Footnotes omitted.)

This item also denies AT&T's request to re-initialize special access rates and to impose a moratorium on consideration of further pricing flexibility applications.

Initial comments will be due 60 after publication in the Federal Register. This has not yet occurred. Reply comments will be due 90 after publication in the Federal Register.

The FCC adopted this item on January 19, 2005, but did not announce or release it until January 31, 2005. This item is FCC 05-18 in WC Docket No. 05-25.

People and Appointments

1/31. President Bush nominated Michael Chertoff to be Secretary of Homeland Security. Bush previously announced his intent to make this nomination. See, White House release. See also, story titled "Bush to Nominate Chertoff to be Secretary of Homeland Security" in TLJ Daily E-Mail Alert No. 1054, January 12, 2005. Also, on February 2 at 10:00 AM, the Senate Committee on Homeland Security and Government Affairs will hold a hearing a hearing on his nomination. The Committee is scheduled to vote on the nomination on February 3.

1/31. Tom Bartlett was named SVP and Treasurer of Verizon Communications. He was previously SVP -- Investor Relations. He replaces Bill Heitmann, who was named SVP -- Finance last month. In addition, Cathie Webster will replace Bartlett as SVP -- Investor Relations. She was previously VP -- Finance for Enterprise and Wholesale Markets.

More News

1/31. The Federal Communications Commission (FCC) adopted and released an Order on Reconsideration [2 pages in PDF] in its proceeding regarding the children's television obligations of digital television broadcasters. This order extends the effective date of the rules pertaining to the display of internet web site addresses during programs directed to children ages 12 and under. The effective date was February 1, 2005. The new effective date is January 1, 2006. The FCC adopted a Report and Order and Further Notice of Proposed Rule Making on September 9, 2004. See, story titled "FCC Adopts Report and Order Re Children's Programming Obligations of DTV Broadcasters" in TLJ Daily E-Mail Alert No. 975, September 13, 2004. This September report and order is FCC 04-221 in MM Docket No. 00-167.

1/28. The U.S. District Court (WDWash) sentenced Jeffrey Lee Parson to serve 18 months in prison, 3 years of supervised release and 100 hours of community service for violation of 18 U.S.C. ß 1030. He sent a variant of the MS B1aster computer worm back in August of 2003. See, U.S. Attorneys Office release of January 28, 2005, and Department of Justice (DOJ) release of August 29, 2003. See also, story titled "FBI Makes Arrest In Connection With Variant of B1aster Worm" in TLJ Daily E-Mail Alert No. 730, September 2, 2003.

1/18. The Progress and Freedom Foundation (PFF) released a report [174 pages in PDF] titled "The Myths and Realities of Universal Service: Revisiting the Justification for the Current Subsidy Structure". The report was written by Joseph Kraemer, Richard Levine, and Randolph May.

1/18. Viviane Reding, the European Commissioner responsible for Information Society and Media, gave a speech in Brussels, Belgium, titled "Challenges ahead for the European Commissioner for Convergence" in which she discussed broadband in Europe. She said that "While it is in the first place for the industry to develop new business models in a sector evolving quickly under the pressure of emerging technologies, policy-makers must support this process by providing the appropriate legal framework, by supporting research, by facilitating the exchange of best practices and by ensuring that European companies operating on international markets have the right starting conditions."

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Washington Tech Calendar
New items are highlighted in red.
Tuesday, February 1

The Supreme Court is in recess until February 22, 2005.

The House will meet at 2:00 PM for legislative business. It will consider several non-technology related items under suspension of the rules. Votes will be postponed until 6:30 PM. See, Republican Whip Notice.

The Senate will meet at 9:45 AM for morning business. It will then begin consideration of the nomination of Alberto Gonzales to be Attorney General.

10:00 AM. The Senate Commerce Committee will hold its organizational meeting for the 109th Congress. Location: Room 253, Russell Building.

10:00 AM. The Senate Budget Committee will hold a hearing on the Congressional Budget Office (CBO) budget and the economic outlook. Location: Room 608, Dirksen Building.

10:00 AM. The Progress and Freedom Foundation (PFF) will hold a news conference to announce its proposals for revisions to the Communications Act. The PFF proposal will address universal service, federal state relations, spectrum, institutional reform of the Federal Communications Commission (FCC), and other topics. See, notice. For more information contact Patrick Ross at 202 289-8928. Location: First Amendment Lounge, National Press Club, 529 14th St. NW, 13th Floor.

10:15 AM. The U.S. District Court (DC) will hold a status conference in USA v. Microsoft, No. 98-1232 (CKK). See, rescheduling order. Location: Prettyman Courthouse, 333 Constitution Ave., NW.

11:00 AM. Attorney General John Ashcroft will give a speech. See, notice. Location: Allison Auditorium, Heritage Foundation, 214 Massachusetts Ave., NE.

12:00 NOON - 1:30 PM. The DC Bar Association will host a brown bag lunch titled "Entertainment Law: The Year In Review". The speakers will be Maurita Coley and David Silverman (both of Cole Raywid & Braverman). See, notice. Prices vary from $20 to $30. For more information, call 202 626-3463. Location: D.C. Bar Conference Center, B-1 Level, 1250 H St., NW.

2:15 PM. The Senate Foreign Relations Committee will hold its organizational meeting for the 109th Congress. Location: Room S-116, Capitol Building.

5:00 PM. The House Rules Committee will meet to adopt is rules and oversight plan for the 109th Congress.

Deadline to submit applications to the U.S. Department of Agriculture's (USDA) Rural Utilities Service (RUS) for Distance Learning and Telemedicine (DLT) grants. See, notice in the Federal Register, December 3, 2004, Vol. 69, No. 232, at Pages 70217 - 70222; and notice in the Federal Register, January 18, 2005, Vol. 70, No. 11, at Pages 2844 - 2849.

Wednesday, February 2

8:45 PM. President Bush will deliver his State of the Union Address to a joint session of the House and Senate.

The House will meet at 10:00 AM for legislative business. It will consider several non-technology related items. See, Republican Whip Notice.

9:30 AM - 12:00 NOON. The Department of State's International Telecommunication Advisory Committee (ITAC) will meet to prepare for the International Telecommunications Union's ITU-T Study Group 2 (Service Definitions, Numbering, Routing, and Global Mobility) meeting. See, the ITU's calendar of meetings. See, notice in the Federal Register, December 30, 2004, Vol. 69, No. 250, at Pages 78515-78516. For more information, including the location, contact minardje@state.gov. Location: undisclosed.

10:00 AM. The Senate Committee on Homeland Security and Government Affairs will hold a hearing on the nomination of Michael Chertoff to be Secretary of Homeland Security. See, notice. Location: Room 342, Dirksen Building.

10:30 AM. The House Ways and Means Committee will meet to adopt Committee rules, approve the Committee budget, approve the Committee oversight plan, and make subcommittee assignments. See, notice. Location: Room 1100, Longworth Building.

10:45 AM. The House Education and Workforce Committee will meet to adopt the committee's rules and oversight plan. Location: Room 2175, Rayburn Building.

2:00 - 4:00 PM. The Department of State's International Telecommunication Advisory Committee (ITAC) will meet to prepare for the International Telecommunications Union's (ITU) Telecommunication Standardization Advisory Group (TSAG) meeting. See, the ITU's calendar of meetings. See, notice in the Federal Register, December 20, 2004, Vol. 69, No. 243, at Page 76027. For more information, including the location, contact Julian Minard at minardje@state.gov. Location: undisclosed.

2:30 PM. The House Financial Services Committee will hold its organizational meeting for the 109th Congress. See, notice. Location: Room 2128, Rayburn Building.

Deadline to register for the Federal Communications Bar Association's (FCBA) February 8 continuing legal education (CLE) seminar titled "Communications Law 101". See, registration form [PDF].

Thursday, February 3

9:30 AM. The Senate Judiciary Committee will hold a business meeting. See, notice. Location: Room 226, Dirksen Building.

TIME? The Senate Committee on Homeland Security and Government Affairs will hold a business meeting to consider the nomination of Michael Chertoff to be Secretary of Homeland Security. Location: undisclosed.

12:00 NOON - 1:30 PM. The DC Bar Association's Intellectual Property Law Section will host a brown bag lunch titled "What's Hot and What's Not on Capitol Hill?". The topic is the prospects in the 109th Congress for intellectual property bills, such as the the Family Movie Act, Art Act, PIRATE Act, CREATE Act, Inducing Infringement of Copyright Act, Digital Media Consumers' Rights Act, Piracy Deterrence & Education Act, and Stop Counterfeiting in Manufactured Goods Act. The scheduled speakers are Paul Martino (Majority Counsel for Senate Commerce Committee's Subcommittee on Communications), David Strickland (Senior Counsel for Senate Commerce Committee's Subcommittee on Competition & Consumer Affairs), Jonathan Meyer (Counsel to Sen. Joe Biden), Robert Brauneis (George Washington University Law School), and Barbara Berschler. See, notice. Prices vary from $10 to $30. For more information, call 202 626-3463. Location: D.C. Bar Conference Center, B-1 Level, 1250 H St., NW.

1:30 - 3:30 PM. The WRC-07 Advisory Committee's Informal Working Group 2: Satellite Services and HAPS will meet. See, FCC notice [PDF]. Location: Leventhal Senter & Lerman, 7th Floor Conference Room, 2000 K St. NW.

TIME? The Judicial Conference of the United States (JC) will hold a public hearing on its proposed amendment to Bankruptcy Rule 5005 regarding electronic filings. The JC has proposed amendments to Civil Rule 5, Appellate Rule 25, and Bankruptcy Rule 5005. Each of these proposed amendments would permit the applicable court, by local rules, to "permit or require papers to be filed, signed, or verified by electronic means" (or similar language). Current rules provide that the applicable court may "permit" filing by electronic means. See, JC notice [PDF] and notice in the Federal Register, Federal Register, December 2, 2004, Vol. 69, No. 231, at Page 70156. Location: undisclosed.

Friday, February 4

9:30 AM - 1:30 PM. The WRC-07 Advisory Committee's Informal Working Group 4: Broadcasting and Amateur Issues will meet. See, FCC notice [PDF]. Location: Shaw Pittman, 2300 N St., NW, Room 1B.

Monday, February 7

9:30 AM. The U.S. Court of Appeals (DC) will hear oral argument in National Science and Technology Network, Inc. v. FCC, No. 03-1376. Judges Ginsburg, Henderson and Randolph will preside. This is an appeal of the FCC's cancellation of nine licenses to operate private land mobile radio stations in the Los Angeles, California area. See, FCC's brief [25 pages in PDF]. Oral argument is limited to 10 minutes per side. Location: Prettyman Courthouse, 333 Constitution Ave., NW.

12:00 NOON. The Cato Institute and the Discovery Institute will host a luncheon and panel discussion titled "The Telecom Act Nine Years Later: Why Reform Can't Wait". The speakers will be George Gilder (Discovery), Adam Thierer (Cato), John Wohlstetter (Discovery), and John Drescher (Discovery). Gilder is the author of Telecosm: The World After Bandwidth Abundance [Amazon]. Lunch will be served. The event is free. See, notice and registration page. Location: Room B-338, Rayburn Building, Capitol Hill.

Deadline to submit comments to the National Science Foundation (NSF) regarding its notice of proposed rulemaking (NPRM) regarding amending the NSF patents regulation to require grantees to use an electronic reporting and management system for inventions made with NSF assistance. See, notice in the Federal Register, December 9, 2004, Vol. 69, No. 236, at Pages 71395 - 71396.

Deadline to submit comments to the National Institute of Standards and Technology (NIST) regarding its draft of SP 800-76. This is Special Publication 800-76, Biometric Data Specification for Personal Identity Verification [PDF]. Send comments and questions to DraftFIPS201@nist.gov.

Tuesday, February 8

2:00 - 6:00 PM. The Federal Communications Bar Association's (FCBA) will host a continuing legal education (CLE) seminar titled "Communications Law 101". Prices ranges from $125 to $275. See, registration form [PDF]. The deadline to register is February 2. Location: Wiley Rein & Fielding, 1776 K St., NW.

6:30 PM. The Federal Communications Bar Association's (FCBA) Young Lawyers Committee will host an event titled "Happy Hour". Location: Porter's, 1207 19th St. NW.

Deadline to submit reply comments to the Federal Communications Commission's (FCC) in response to the further notice of proposed rulemaking (FNPRM) portion of its Report and Order and FNPRM regarding the former ITFS, MDS, and MMDS, now named the Broadband Radio Service (BRS) and the Educational Broadband Service (EBS), in the 2496-2690 MHz band. The FCC adopted this item at its June 10, 2004 meeting. The FCC released the text on July 29, 2004 (FCC 04-135), and then released a modified item on October 29, 2004 (FCC 04-258). This is WT Docket 03-66. See, notice in the Federal Register, December 10, 2004, Vol. 69, No. 237, at Pages 72019 - 72047. See also, story titled "FCC Adopts RO & NPRM Re ITFS/MDS Band" in TLJ Daily E-Mail Alert No. 916, June 11, 2004.