FCC adopts relief for telecom companies planning TV offerings

Over objections from the two Democratic commissioners, regulators voted 3-2 to adopt the order that will set time limits for local communities to consider franchise agreements and establish FCC oversight to make sure communities don't require "unreasonable" conditions as part of their franchise agreements.
"I think it is critical that we make sure we're doing all we can to make sure we have greater competition in the market for the delivery of multichannel programming," said FCC Chairman Kevin Martin. He has argued that the surest way to do that--and to lower prices--is to ease the entry of telephone companies into the market.
As described at Wednesday's public meeting here, the FCC's order would require local governments to approve new franchise agreements within six months for new entrants and within 90 days for companies with existing access to city facilities; limit franchise fees; and prohibit so-called "build-out" requirements if they obligate new market entrants to serve all of a particular area within an "unreasonable" time frame or on a scale not expected of existing companies serving the area. A copy of the order's text was not immediately available.
The provisions are a direct response to ongoing lobbying by the nation's major phone companies, which have complained that the process by which companies must negotiate local franchise agreements with individual cities and municipalities before rolling out TV offerings is cumbersome and overly sluggish.
Phone companies were quick to applaud the FCC's decision. In a statement, Susanne Guyer, a Verizon senior vice president for federal regulatory affairs, said the agency "is standing up for consumers who are tired of skyrocketing cable bills and want greater choice in service providers and programming." The decision will help Verizon meet an "aggressive" schedule for rollout of its Fios TV service, Guyer added. Lobby has asked for more widespread reliefThe FCC rules attempt to establish national guidance but do not trump state laws that have already been enacted to address the phone companies' concerns, agency representatives said. Fourteen states, including Texas and California, have introduced some type of franchise reform. But the telecommunications lobby has been pleading for more widespread relief on Capitol Hill and now from the FCC.
Democratic Commissioners Michael Copps and Jonathan Adelstein railed against the new rules, saying there was not sufficient evidence that localities have been standing in the way of telephone companies' rolling out new TV services.
"We should have a record clearly demonstrating those local authorities are not up to the task of handling this infrastructure build-out," Copps said. Adelstein grilled members of the FCC's Media Bureau, which helped draft the rules, on names of specific communities that had reported problems, but they were unable to give him immediate answers.
When his turn to speak arrived, Martin ticked off a handful of instances in which it took BellSouth more than two years to receive video franchises in local communities in Florida and Georgia, though he did not explain the reasons for the delays. He also drew attention to an instance in which a New York town declined to grant Verizon a franchise unless it agreed "to film the holiday visit from Santa this year."
The Democratic commissioners also said the order runs afoul of a framework for granting local franchises established by federal law. Congress also drew up its own new national franchise proposal in the last session as part of a broader rewrite of communications laws, but that contentious bill failed to make it to a full vote in the U.S. Senate before politicians went home this month.

Microsoft tunes Zune for Vista

Microsoft and its Zune portable media player have some catching up to do. But although Apple Computer's iPod is by far the leading media device, some analysts and consumers feel there is plenty of room for the Zune to best it. Will the Zune emerge as one of the cool kids in the fast-growing portable media player crowd? Or is that just a rock 'n roll fantasy for Microsoft?

Phone companies looking to compete against cable operators in the TV market...

During its open monthly meeting, the Federal Communications Commission is scheduled to vote on new rules that would make it easier for phone companies to secure local video franchise agreements, which spell out requirements for everything from equipment to environmental protections.
High Impact
What's new:
An FCC vote scheduled for Wednesday could have significant implications for phone companies attempting to offer TV service in addition to telephony and broadband services.
Bottom line:
The FCC's chairman says adding phone companies as competitors in the TV market will ultimately benefit consumers. But cable operators, telecommunications watchdog groups and some members of Congress say the FCC is using flawed data that could lead to it overstepping its authority.
More stories on this topic
The phone companies--namely Verizon Communications and AT&T--have spent billions of dollars over the past few years upgrading their networks with fiber-optic cabling and new equipment so they can offer TV service in addition to telephony and broadband services.
But to offer TV service, operators must negotiate local franchise agreements with cities and municipalities. Phone companies have complained that the process for obtaining these franchise agreements is taking too long. They also complain that some local communities have made unreasonable requests before granting the agreements.
The phone companies have looked for relief from state governments, which in many cases have streamlined the process by offering statewide franchises. So far, 14 states have introduced some form of franchise reform. Texas was the first state to pass franchise reform, and Michigan is the most recent to take up the issue. Phone companies have also taken their fight to Capitol Hill, where a proposed law for national franchise reform stalled earlier this year.
Now, the phone companies are looking to the FCC to help them in their fight. And they have found an amenable ally in FCC Chairman Kevin Martin, who is convinced that adding phone companies as competitors in the TV market will ultimately provide consumers with better programming at a lower cost.
While only Congress can do away with local franchises altogether, Martin believes the FCC can impose new rules to make the process work faster and strip local governments of the ability to add certain conditions to their franchise agreements.
In a speech December 6, Martin outlined his general ideas for reforming the local video franchise process. Specifically, he suggested that the FCC impose a time limit for local franchise authorities to consider new agreements, limiting that period to 90 days in some cases and up to six months in other cases. He also says he believes the FCC should have authority to determine what are reasonable or unreasonable requests made on companies to get those licenses.
"I am very concerned that the commission may be taking an action for which it does not have legal authority and that has not had proper congressional or public scrutiny."
--Rep. Mike Doyle in letter to FCC Chairman Kevin Martin
"The commission has noted that telephone company entry into the video marketplace has the potential to advance both the goals of broadband deployment and video competition," he said. "The commission developed an extensive record on the franchising process. That record indicates that the process can pose an unreasonable barrier to entry."
But cable operators, telecommunications watchdog groups and some members of Congress think the FCC is using flawed data that could lead to it overstepping its authority. The FCC plans to release a report on Wednesday that looks at the average rates for cable TV service over the past 10 years. In his recent speech, Martin said that from 1995 to 2005, cable rates have risen 93 percent, from $22.37 in 1995 to $43.04 in 2005. He used this data point as an argument for changing the local franchise rules to add more competition to the market.
While rates have gone up, the National Cable & Telecommunications Association argues that cable operators have invested more than $100 billion to provide advanced, interactive services like high-definition TV, video-on-demand, high-speed Internet and digital phone service. The group also says that bundled services lead to consumer discounts for those who subscribe to more than one service. And it argues that the number of viewers and the time that people spend watching television have actually increased every year.
What's more, Verizon is entering the market at roughly the same price as cable operators. Its Fios TV service costs $42.99 per month.
A consumer advocacy group called Teletruth says the FCC should be careful in imposing what it calls "Bell-friendly" franchise rules.

Jim Schneider, Dell's chief financial officer, will step down from his position by the end of January...

Donald Carty, the former chief executive and chief financial officer of AMR--the parent company of American Airlines--will replace Schneider, Dell announced Tuesday. Carty has been on Dell's board of directors since 1992 and chaired the audit committee, which is conducting its own investigation into Dell's accounting practices.
Carty will assume the title of vice chairman and chief financial officer, keeping his position on the board. He will officially start his executive duties on January 2, with Schneider staying on until the end of the month to help with the transition, a company representative said.
The company representative said Schneider is "retiring," but he will also be joining the board of directors at Frontier Bancshares as chairman. Frontier is a bank-holding company based in Austin, Texas, near Dell's headquarters in Round Rock.
Schneider has been with Dell since 1996, becoming CFO in 2000. He joined the company when it was still finding its way among the leaders in the PC market, but oversaw a period of strong growth fueled by direct sales and lean inventory management. In the early part of this decade, when its competitors were struggling to cope with the fallout from the dot-com bust, Dell posted strong growth in both revenue and profits quarter after quarter.

But this has not been a good financial year for Dell. The company has missed its earnings targets several times as it copes with a slowdown in demand for desktop PCs. Its accounting practices have also come under scrutiny this year, and Dell has been forced to delay the release of its earnings report to the Securities and Exchange Commission until it can get a handle on its accounting issues.
Carty won't be the only new executive at Dell next year. The company will start 2007 with several new executives in various roles. It also reorganized the product side of the company into two new divisions in a bid to focus more closely on its customers.

IT worker indicted in hacking scheme at health firm

A systems administrator who apparently feared imminent layoffs was arrested Tuesday in connection with installing "destructive computer code" on servers at his company, a major manager of prescription benefit plans.
FBI agents arrested Yung-Hsun "Andy" Lin, 50, at his Montville, N.J., home on Tuesday morning, one day after a grand jury returned a two-count indictment (PDF) against him.
The indictment accuses Lin of planting a "logic bomb" sometime around October 2003 that, if activated successfully, would have deleted "virtually all information" on more than 70 HP-Unix servers at Medco Health Solutions and wreaked havoc on the business and its users.
The servers contained numerous applications and databases that managed bills, rebates, new prescription call-ins from doctors, insurance coverage, and clinical assessments of patients. One database that received special attention in the indictment, known as the Drug Utilization Review, was designed to allow pharmacists to see what drugs patients were already taking so that they could determine whether taking different medicines simultaneously was safe.
"The potential damage to Medco and the patients and physicians served by the company cannot be understated," Christopher Christie, U.S. attorney for the New Jersey district, said in a statement.
According to the indictment, the alleged criminal activity started just after Medco, once a wholly owned subsidiary of Merck & Co., became a publicly traded company in August 2003. During the month that followed, Lin and others exchanged e-mails in which they voiced concerns about possible layoffs in their department. While Lin ultimately kept his job, four fellow systems administrators lost theirs.

Lin allegedly programmed the so-called bomb to do its work on April 23, 2004--his birthday--but because of a coding error, it failed to detonate. He later modified the coding so that it would deploy on April 23, 2005, but another computer administrator happened to stumble upon the program in January 2005 and "neutralized" it, the indictment said.
The New Jersey district has made three such prosecutions in five years, according to a press release. Just last week, 63-year-old Roger Duronio, a former systems administrator for UBS PaineWebber, landed a 97-month prison sentence after being convicted of placing malicious code on some 1,000 corporate computers, triggering more than $3 million in damage.
In 2002, Timothy Allen Lloyd was sentenced to 41 months in prison after a Newark, N.J., jury convicted him of devising a "time bomb" that deleted programs on servers at the high-tech measurement company Omega Engineering. Prosecutors said that activity, which occurred 20 days after Lloyd's departure from the company, cost the company $10 million.