May 11, 2012

Senate Approves Nominations of Jessica Rosenworcel and to FCC

The FCC’s three current commissioners joined executives throughout the telecom industry in applauding the Senate’s decision to confirm Jessica Rosenworcel and Ajit Pai as the newest members of the agency. Handed down by unanimous consent on Monday, the Senate’s vote comes on the heels of Senator Charles Grassley’s (R-IA) decision late last month to lift a hold that had prevented the Senate from confirming Rosenworcel and Pai since the end of last year. (Both FCC nominees had been endorsed by the Senate Commerce Committee during confirmation hearings last December.) Rosenworcel, a former legal advisor to FCC Commissioner Michael Copps and recent senior communications counsel to the Senate Commerce Committee, will assume the seat . Senate Approves vacated late last year by Copps. Pai, a former FCC deputy general counsel who has also Nominations of Jessica served at the Department of Justice and as chief counsel to the Senate Judiciary Rosenworcel and Ajit Pai to subcommittee on the constitution, civil rights and property rights, will replace former FCC read more FCC Commissioner Meredith Baker, who left the FCC nearly a year ago. The term to be . FCC Rejects Liberty Bid for served by Rosenworcel, a Democrat, will expire in June 2015, while Pai, a Republican, De Facto Control of will serve through June 2016. While both nominees are expected to be sworn in soon, Sirius read more officials could not predict exactly when that will happen. As Senate Commerce Committee Chairman (D-WV) voiced elation that the Senate “has . Franken Urges Probe into confirmed two qualified and intelligent FCC commissioners,” FCC Chairman Julius Comcast’s Compliance with Genachowski touted Rosenworcel and Pai for their “deep knowledge of our sector and NBCU Merger Conditions proven track records of accomplishment.” Along the same vein, FCC Commissioner read more Robert McDowell praised both nominees as “very talented and knowledgeable public servants who will be able to hit the ground running,” while FCC Commissioner Mignon . Genachowski Defends Clyburn expressed relief that “after long last, this Commission will once again be AT&T/T-Mobile USA Merger operating at full strength.” Among industry officials, U.S. Telecom Association Decision at Conference President Walter McCormick praised Rosenworcel and Pai as “two especially well read more qualified individuals” who “will enhance the work already going on at the Commission.”

. AT&T to Launch Trials of FCC Rejects Liberty Bid for De Facto Control of Sirius Wireless Home Automation Liberty Media was dealt a blow in its quest to assume de facto control of Sirius XM System read more Radio, the nation’s sole provider of digital satellite radio services, as the FCC dismissed . America Movil Offers $3.4 Liberty’s request last Friday as “defective” and “not warranted.” As the largest single Billion to Raise KPN stockholder of Sirius, Liberty currently holds preferred shares of Sirius stock that are Stake read more convertible to a 40% stake. Liberty also controls five of the 13 seats on the Sirius board. Following on the expiration of a standstill agreement that precluded Liberty from seeking control of Sirius without bidding for all of Sirius’ shares, Liberty asked the FCC in March to declare that it held de facto control of Sirius. In documents submitted to the FCC, Liberty cited, as precedent, its previous request for de facto control of DirecTV that was granted by the agency in 2008 and that was based on Liberty’s 40% stake in that

company. (Under FCC rules, a shareholder may be deemed to hold de facto control if it holds fewer than 50.01% of a company’s shares yet controls a large enough stake to be considered effectively in charge.) Opposing Liberty’s request, Sirius advised the FCC last month that expiration of the standstill agreement “does not result in a de facto transfer of control” and further observed that, while Liberty is now free to seek full control, “it has not done so.” Dismissing Liberty’s request as unacceptable for filing, Roderick Porter, the chief of the FCC’s International Bureau, explained in a letter that Liberty had failed to obtain from Sirius signatures, passwords and other information needed for Liberty to properly file its application online. The FCC further concluded that Liberty had not demonstrated it “intends to take actions”—such as converting its preferred shares to common stock or acquiring a majority of board seats—that would give it control. Mel Karmazin, the CEO of Sirius XM, denied last week that his company was “combative” with Liberty but stipulated: “if the time comes that Liberty’s interests are different than the other 60 percent of shareholders, we will do what we have to do to protect the interests of our 60 percent of shareholders.” Officials of Liberty, meanwhile, offered no comment.

Franken Urges Probe into Comcast’s Compliance with NBCU Merger Conditions

Highlighting difficulties experienced by a particular online video distributor (OVD) in gaining access to Comcast-controlled programming, Senator Al Franken (D-MN) urged the FCC and the Justice Department (DOJ) on Monday to investigate Comcast’s compliance with conditions that were attached by the FCC and the DOJ to the cable firm’s merger with NBC Universal (NBCU). In exchange for receiving FCC approval of its acquisition of NBCU last year, the agency required Comcast, among other things, to make “comparable” programming available to an OVD at terms that compare to those offered by Comcast to its peers. In a letter to the FCC and the DOJ, Franken cited a complaint filed with the FCC last fall by Concord, Inc., which cited its problems in gaining access to Comcast-NBCU programming in urging the FCC to enforce OVD access conditions attached to the Comcast-NBCU merger. Franken also took issue with Comcast’s recent request to the FCC to clarify that the OVD program access condition requires OVDs to disclose their peer programming deals, as he termed Comcast’s move as “yet another tactic to delay Comcast’s compliance with the terms of the merger order.” Warning that Comcast’s dispute with Concord “has far reaching implications for the entire OVD market,” Franken urged the FCC and the DOJ to “act quickly” or OVDs will be dissuaded “from seeking Comcast’s programming under the terms of the [merger] order.” With respect to Verizon’s proposed $3.9 billion acquisition of wireless spectrum from the SpectrumCo venture in which Comcast is a member, Franken further advised the FCC and the DOJ to take into account “Comcast’s questionable compliance record” in assessing the potential competition implications of that transaction.

Genachowski Defends AT&T/T-Mobile USA Merger Decision at Conference

In a keynote address at the opening of the CTIA conference in New Orleans, FCC Chairman defended his agency’s actions with respect to AT&T’s now-defunct plan to merge with rival T-Mobile USA, as he insisted that “we have to pursue all the other tools and policies at our disposal” to accommodate the spectrum needs of wireless carriers. Last December, AT&T canceled its plan to acquire T-Mobile after the FCC indicated that it would designate the $39 billion transaction for hearing before an administrative law judge. (At that time, AT&T was also defending itself against a Justice Department lawsuit that sought to block the merger on anticompetitive grounds.) AT&T, which had claimed the merger was needed to provide AT&T with sufficient spectrum capacity to fulfill its plan to bring fourth-generation long term evolution services to 97% of the U.S. population, has since predicted that the FCC’s actions will lead to higher consumer prices. In a recent statement, Jim Cicconi, a senior executive vice president at AT&T, maintained that, “without additional capacity, which would have been created by our transaction, prices rise,” as “basic economics, and the law of supply and demand, apply to the wireless industry as to all others.” Refuting AT&T’s claims, Genachowski told an audience on Tuesday that “the overall amount of spectrum hasn’t changed, except for the amount we’ve added to it.” Genachowski pointed out further that the FCC has approved many other wireless transactions over the past year as he stressed that “our review of one transaction that crossed the line simply proves that there is a line.” While admitting that the FCC “was within its rights to withhold its approval” of the AT&T/T-Mobile deal, Cicconi maintained in reply that the FCC “is incorrect when it denies the impact such decisions have on the price of wireless services.”

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AT&T to Launch Trials of Wireless Home Automation System

AT&T tapped the home automation market as a new area for growth this week, announcing plans to launch a portfolio of wireless home services under the “AT&T Digital Life” brand on a trial basis starting this summer. The trial service, to be offered initially in Dallas and Atlanta, follows in the footsteps of a similar offering that was launched last fall by Verizon Wireless. ABI Research, BCC Research and similar firms have pointed to significant opportunities in the U.S. home automation services market, which is expected to grow at a compound average rate of 10.5% annually between 2011 and 2016. AT&T’s foray into home automation also comes as the carrier continues to shed business lines, such as its majority stake in its Yellow Pages division, that are connected to its underperforming legacy landline network. AT&T Digital Life customers will be equipped with a central control unit that will be installed in their homes and that will enable them to control appliances, door locks, sensors, cameras and a range of other devices through wireless handsets or PCs connected to AT&T’s fixed and mobile broadband networks. Although pricing details were not disclosed, it is expected that Digital Life rates will be similar to those charged by Verizon for its Home Monitoring and Control service, in which subscription costs start at $10 monthly and for which equipment prices range from $40 to $160 depending on the services requested. Asserting that Digital Life “meets a clear need in the market,” a spokesman for AT&T Mobility predicted that the service will “[free] homeowners to do the things they want to do without compromising the things they need to do to care for family and home.”

America Movil Offers $3.4 Billion to Raise KPN Stake

After years of competing against Telefonica for mastery of Latin America’s telecommunications market, America Movil (AM) sets its sights on the European sector adjacent to Telefonica’s home base in Spain with a surprise offer of €3.2 billion (US$3.4 billion) to raise its stake in Dutch carrier KPN. AM’s bid to raise its KPN stake from 4.8% to 28% breaks down to €8 per share, which represents a 23% premium over KPN’s closing share price as of Monday. A spokesman for AM, which boasts 236 million mobile subscribers in 18 countries and commands a 70% share of Mexico’s wireless market, explained that the proposed KPN transaction “gives us a good vantage point to look at this market in Europe” as he acknowledged that his company is exhausting its growth prospects in Latin America. The holdings of KPN, meanwhile, span the Netherlands, Belgium and Germany, and include E-Plus, a German wireless carrier that competes against O2, which is a unit of Telefonica. Noting KPN’s recent financial distress, observers also say that the proposed transaction corresponds with the strategy of Carlos Slim, the billionaire owner of AM, of acquiring otherwise sound assets at a reasonable price. Contingent upon approval by the Dutch financial market authority, the AM offer is slated to go into effect in June. Charging, however, that AM’s bid “substantially undervalues the company,” KPN said it would “seek further clarification as to [AM’s] intentions.”

* * * For information about any of these matters, please contact Patrick S. Campbell (e-mail: [email protected]) in the Paul, Weiss Washington office. To request e-mail delivery of this newsletter, please send your name and e-mail address to [email protected]. (No. 2012-19)

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