Current Telecom Developments - Paul, Weiss, Rifkind, Wharton

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Current Telecom
Developments
October 2, 2015
Sprint Confirms Plan to Sit Out Incentive Auction
In This Issue:
 Sprint Confirms Plan to Sit
Out Incentive Auction more
 Nexstar Offers $4.1 Billion
for Media General more
 GOP Leaders Question
Constitutionality of IANA
Handoff more
 Sirius XM Claims Radio
Signal Loss from T-Mobile
Transmitters more
 “Global Connect” Initiative
Would Bring 1.5 Billion
People Online by 2020 more
Maintaining that Sprint has all the spectrum resources it needs to fulfill its
wireless broadband network ambitions, Sprint CEO Marcelo Claure told
reporters Saturday that his company will not participate in upcoming incentive
auctions of 600 MHz broadcast television spectrum to be sold to the wireless
industry next March. The decision follows an ongoing pattern in which Sprint
also passed on the opportunity to bid in the Advanced Wireless Service (AWS)3 auction earlier this year. Sprint – which has not participated in a major FCC
auction in at least a decade – also sat out auctions of AWS-1 and 700 MHz band
channels held in 2008 and the FCC’s auction of 700 MHz licenses held in 2011.
Sprint’s decision could benefit T-Mobile US and other prospective incentive
auction participants that lack access to desirable low-band spectrum assets, in
view of the FCC’s recent decision to reserve 30 MHz of recovered 600 MHz
channels for carriers other than Verizon and AT&T.
Currently, Sprint’s nationwide wireless spectrum holdings encompass 34 MHz
in the 1.9 GHz band, 14 MHz in the 800 MHz band, and at least 150 MHz in the
2.5 GHz band. Although most of Sprint’s 1.9 GHz allotment is dedicated to
legacy CDMA network operations, a portion of that spectrum is being used as
the basis for Sprint’s fourth-generation LTE network infrastructure. Sprint is
using its 2.5 GHz assets to provide LTE network services and is also using its
800 MHz spectrum to broaden its LTE coverage. As he emphasized that these
assets are enough to enable Sprint “to deploy its network architecture of the
future,” Claure announced that “Sprint’s focus and overarching imperative must
be on improving its network and market position in the immediate term so we
can remain a powerful force in fostering competition.” A company spokesman
also noted that Sprint is “prioritizing its financial resources” – a strategy which
he claimed is “more important for Sprint and its customers than investing in
spectrum that won’t benefit our subscribers until 2020 at the earliest.”
Nexstar Offers $4.1 Billion for Media General
©2015 Paul, Weiss, Rifkind, Wharton &
Garrison LLP. In some jurisdictions, this
brochure may be considered attorney
advertising. Past representations are no
guarantee of future outcomes.
Three weeks after Media General (MG) unveiled plans to acquire Meredith
Corporation in a $3.1 billion deal that would establish the combined entity as
the nation’s third-largest owner of local broadcast TV stations, MG was courted
Monday with an unsolicited cash, stock and debt offer from Nexstar
Broadcasting which has the potential to create a national broadcasting
powerhouse with 162 stations across 99 markets that would reach 39% of the
U.S. population. Based in Irving, Texas, Nexstar boasts a portfolio of 100 TV
stations in 58 markets covering 18% of U.S. television households. Excluding
debt, Nexstar’s bid values MG at $1.85 billion, and the offer of $14.50 per MG
Current Telecom
Developments
share includes $10.50 per share in cash plus 0.0898 shares of Nexstar stock. With the assumption of MG debt, the value
of Nexstar’s offer rises to $4.1 billion.
Nexstar is touting the advantages of its “pure play” broadcast deal over MG’s planned acquisition of Meredith, which
includes Better Homes and Gardens magazine and other print media assets. Writing to the MG board, Nexstar CEO Perry
Sook characterized the proposed Meredith acquisition as “ill-conceived,” as he voiced his conviction that “a combination
of [MG] and Nexstar is far more compelling strategically and financially.” Sook further asserted that the proposed
transaction “would be a transformational event” that “would deliver superior, immediate and long-term value to [MG’s]
shareholders compared with [MG’s] proposed acquisition of Meredith.” While stations involved in the proposed merger of
Nexstar and MG would cover a higher percentage of the national market (39%) than the MG-Meredith deal (33%), Sook
pointed out that Nexstar’s offer would provide MG with greater scale and less market overlap to further tip the scales in
favor of regulatory approval. Executives of MG and Meredith offered no comment.
GOP Leaders Question Constitutionality of IANA Handoff
Voicing concern that plans by the Department of Commerce (DOC) to relinquish oversight of the Internet domain name
system could result in an illegal transfer of U.S. government property, Republican leaders of the House and Senate
Judiciary Committees asked the Government Accountability Office (GAO) on Monday to assess the constitutionality of
plans to transfer governance of the Internet Assigned Numbers Authority (IANA) to a multi-stakeholder model.
Since 1998, the Internet Corporation for Assigned Names and Numbers (ICANN) has been contracted to operate IANA on
behalf of the DOC. Responding in part to growing international concerns over the U.S. government’s role in managing the
structure of the Internet, assistant Commerce Secretary Larry Strickling asked the National Telecommunications and
Information Administration last year to develop a plan for transitioning U.S. government oversight over ICANN’s IANArelated functions to an international group. The new management would (1) support and enhance the multi-stakeholder
model of web governance on which the Internet was built, (2) maintain the security and resiliency of the domain name
system, (3) satisfy the needs and expectations of global customers and partners, and (4) ensure “the openness of the
Internet.” Although ICANN’s most recent contract with the DOC expired on Wednesday, the DOC recently announced
that it would renew the ICANN contract for one more year (and perhaps extend it for three) to allow sufficient time for
stakeholders to develop an acceptable governance structure.
Although the Dotcom bill passed by the House in June would give Congress 30 days to review and perhaps block the final
IANA transition plan, Senate Judiciary Committee Chairman Chuck Grassley (R-IA), House Judiciary Committee
Chairman Bob Goodlatte (R-VA), Senator Ted Cruz (R- TX) and Rep. Darrell Issa (R-CA) advised the GAO in a letter that
the proposed transfer would also include the “root zone file,” which contains names and records associated with each toplevel domain name. Declaring that the root zone file was established by the Department of Defense as a national IT asset,
the lawmakers said “Congress should be made aware of the legal status of the root zone file—or any other potential
government property—before it makes any final decisions about whether to transfer the government’s Internet oversight
functions to a third party.” Because the Commerce Department’s contract with ICANN “explicitly state[s]that the root
zone file is ‘the property of the U.S. government,’” the lawmakers warned the proposed transfer could be unconstitutional,
as Congress holds sole authority to transfer U.S. government property. Ranking House Energy and Commerce Committee
member Frank Pallone (D-NJ), however, disagreed with his GOP colleagues, as he asserted that the Dotcom Act
“represents a bipartisan consensus on this issue and the widely-accepted reading of the Constitution.”
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Current Telecom
Developments
Sirius XM Claims Radio Signal Loss from T-Mobile Transmitters
Citing complaints of signal loss by its satellite radio customers in New York City and other major markets, Sirius XM has
asked the FCC to intervene in a dispute in which Sprint has fingered wireless transmission facilities owned by T-Mobile
US as the cause of the interference. In documents filed with the FCC, Sirius described the disturbances—which were first
detected a year ago in New York City—as “alarmingly severe, extensive and frequent.” After satellite radio listeners in that
market reported abrupt losses in service during portions of the morning commute, Sirius conducted drive tests through
which Sirius determined that cell phone transmitters operated by T-Mobile were interfering with Sirius signals.
According to Sirius, the problem became increasingly apparent as T-Mobile ramped up deployments of fourth-generation
wireless broadband services that use spectrum in the Advanced Wireless Services-1 (i.e., 1710-1755 MHz/2110-2155 MHz)
band. Although the closest channels under the control of Sirius consist of satellite downlinks and earth station receive
frequencies in the 2300 MHz band, Sirius claims that the interference is attributable to an anomaly in which two adjacent
airwaves have combined to create a third which is disrupting Sirius’s service. Warning that the problem is likely to worsen
as T-Mobile continues to upgrade its network and add wireless broadband subscribers, Sirius has asked T-Mobile to
contribute to the cost of a remedy, which could include the addition of ground-based transmitters to the Sirius network
that could offset interference.
Insisting that T-Mobile is operating its FCC-licensed frequencies in a manner that complies fully with FCC rules and
license terms, T-Mobile senior engineering director Steve Sharkey countered that the problem is actually caused “by
inadequate filtering in Sirius XM receivers.” While Sharkey promised that his company will work with Sirius “to identify
ways they can fix their problem,” he maintained that T-Mobile is not obligated to shoulder the cost of equipment fixes
required by Sirius. Noting that the airwaves in question have been used by both companies for years, a senior FCC official
confirmed that agency staff members are working to identify the cause of the problem.
“Global Connect” Initiative Would Bring 1.5 Billion People Online by 2020
In remarks before the United Nations on Sunday, Catherine Novelli, the State Department’s undersecretary for economic
growth, outlined the U.S. government’s goal of bridging the digital divide on a global scale with the launch of a new
initiative, known as Global Connect, that would expand Internet connectivity to 1.5 billion people worldwide by 2020.
While significant progress has been made to boost broadband deployment both in the U.S. and abroad, Novelli lamented
that 60% of the world’s population of 4.4 billion still lacks Internet access and that only five percent of residents in
developing countries are connected to the web. Stressing that the Internet “can only be an engine for inclusive growth if it
is available, accessible and affordable for everyone,” Novelli explained that Global Connect will “work with every
stakeholder group that touches development—from national governments, development agencies, NGOs and the private
sector, to mainstream the view that Internet connectivity is as fundamental to economic development as roads, ports,
electricity and other traditional infrastructure.” According to Novelli, the State Department will begin working with
stakeholders early next year in achieving the following goals: (1) integration of Internet connectivity as a “key part” of
national development strategies, (2) prioritization of digital access by international development institutions, and (3)
development of “innovative industry-driven solutions to extend connectivity.” Adding that the U.S. also intends to partner
with interested countries “to develop tailor-made strategies to create the right enabling environments,” Novelli predicted
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Current Telecom
Developments
that such strategies “will not only spur connectivity, but also entrepreneurship, cross-border information flows and open
and competitive marketplaces.”
As she confirmed the commitment of USAID, the Overseas Private Investment Corporation, and other U.S. development
groups “to make Internet access a top priority in their work around the world,” Novelli further maintained that the
creation of an optimal policy environment “is critical for long-term success.” Agreeing that, “there is tremendous potential
for digital technologies to drive economic growth, innovation and increased living standards, particularly in the
developing world,” Information Technology Industry Council President Dean Garfield congratulated the State Department
“for its leadership . . . and for providing a roadmap for the international community.”
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