February 10, 2012
Wireless Carriers Urge Removal Of Auction Eligibility Restriction From Spectrum Bill
Writing to members of a congressional conference committee on Wednesday, Sprint
Nextel, T-Mobile USA, and various other wireless entities pleaded for removal of a
provision in House spectrum legislation that would bar the FCC from imposing eligibility
restrictions on auction participants. The spectrum provisions—which also mandate
incentive auctions of broadcast television spectrum and direct allocation of the 700 MHz
D-block to public safety agencies—are included within a larger House bill on extensions
to the payroll tax cut that conferees are negotiating. Calling on members of Congress to
“support fair spectrum auctions,” Sprint, T-Mobile, and other groups warned that the
provision barring eligibility restrictions “would substantially limit the FCC’s ability to
promote competition . . . facilitate spectrum warehousing, inefficient use of scarce
spectrum resources, and reduce spectrum auction revenues to the U.S. Treasury.” (Other
signers of the letter include C-Spire Wireless, Leap Wireless, Atlantic Tele-Network,
Inc., and the Rural Cellular Association.) The groups further argued that placing limits
on the FCC’s authority to restrict auction eligibility would permit “unchecked
participation by the two largest, best-funded wireless carriers in future spectrum
auctions” and “discourage smaller competitors from participating, thereby reducing
auction revenues.” In a blog posting, however, AT&T senior executive vice president
Jim Cicconi countered that “any qualified carrier . . . should have a chance to bid on any
spectrum available in an auction.” Charging that Sprint, T-Mobile, and their supporters
want “the FCC to stack the deck in their favor,” Cicconi challenged the carriers to “be
prepared to compete in a fair and open auction.”
Verizon, Coinstar To Team Up On Video Delivery Service
The fast-growing market for online video delivery and streaming gained an important
new entrant on Monday with the establishment of a joint venture between Verizon
Communications and Coinstar, Inc. that is expected to put competitive pressure on
services such as Netflix and Hulu. Coinstar is the owner of the Redbox DVD service that
enables customers to rent recently-released Hollywood films at a nightly rate of $1
through a network of more than 35,000 rental kiosks throughout the country. Because
Verizon already has deals in place with programmers to support its FiOS IPTV service,
the venture is expected to give Coinstar the leverage it needs to expand its relationship
with content providers and to add online video streaming to its DVD rental service. For
Verizon, the venture is expected to bring in new customers that will help the nation’s
largest telecommunications company to add further scale and scope. Although Verizon
and Coinstar disclosed few details about their partnership, a spokesman confirmed that
the venture intends to launch a combined DVD rental and video streaming service later
this year that will be open to all prospective customers, regardless of whether they are
current broadband subscribers of Verizon. Citing projections that nearly half of U.S.
Wireless Carriers Urge
Removal Of Auction
Eligibility Restriction From
Spectrum Bill read more
Verizon, Coinstar To Team
Up On Video Delivery
Service read more
Web Users With Unsecured
Wireless Connections
Fingered In Copyright
Lawsuit read more
Hutchison Strikes
$1.7 Billion Deal For Orange
Austria read more
Sprint, Orange Join Forces
On Global M2M
Services read more
Mexico Rejects Proposed
Joint Venture Between
Televisa And Iusacell
read more
PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP 2
homes with televisions will have Internet-enabled sets by 2015, Bob Mudge, the president of Verizon’s consumer and mass business
markets division, explained that a goal of the venture is to add the Redbox icon alongside the icons of Netflix, Hulu, YouTube, and
other streamed services on web-enabled sets. Verizon will own a 65% stake in the joint venture, and Coinstar will own the remaining
35% interest.
Web Users With Unsecured Wireless Connections Fingered In Copyright Lawsuit
In a development that could impact providers of free Wi-Fi services and broadband subscribers who rely on wireless routers, Liberty
Media Holdings LLC has asked a Massachusetts federal court to rule that broadband subscribers with wireless routers may be held
liable for copyright violations when other persons illegally download copyrighted content through unsecured wireless network
connections. Liberty’s complaint targets fifty defendants in Massachusetts—including several unnamed “John Does”—whose IP
addresses were traced to illegal downloads of an adult film copyrighted to Liberty. The lawsuit claims that the defendants in question
(1) used the BitTorrent file sharing website to download the material in question directly, or (2) contributed indirectly to illegal
downloading activity by neglecting to secure their wireless network connections. Asserting that the defendants “failed to adequately
secure their Internet access, whether accessible only through their computer when physically connected to an Internet router or
accessible to many computers by use of a wireless router,” Liberty told the court that the defendants’ negligence “allowed others to
unlawfully copy and share Plaintiff’s copyrighted motion picture” and caused “financial harm to Plaintiff.” The lawsuit seeks actual or
statutory damages from each of the defendants. While an attorney for two of the defendants termed Liberty’s argument as “novel,”
officials of Liberty offered no comment.
Hutchison Strikes $1.7 Billion Deal For Orange Austria
Hong Kong-based telecommunications conglomerate Hutchison Whampoa solidified its presence in Europe with an agreement to
acquire wireless provider Orange Austria (OA) in a deal valued at €1.3 billion (U.S. $1.7 billion). Owned by private equity firm Mid
Europa Partners and France Telecom (FT), which hold stakes of 65% and 35%, respectively, OA was established in 2008 and ranks as
the third-largest wireless carrier in Austria with a 20% share of the national market. A spokesman for Hutchison—which already
controls 3Austria, the fourth-largest mobile phone service provider in the country—confirmed his company’s intention to combine OA
and 3Austria and thus boost significantly Hutchison’s nationwide footprint and revenue potential. The transaction adds to Hutchison’s
growing stable of European assets that span Great Britain and Italy in addition to Austria. The deal also furthers FT’s strategy of
disposing non-core wireless assets in mature European markets to boost shareholder value and enable FT to sharpen its focus on higher
growth markets in Africa and the Middle East. Last month, FT struck an agreement to sell its Swiss wireless subsidiary, Orange
Switzerland, to Apax Partners, and FT is also reported to be seeking a buyer for its wireless assets in Portugal. Contingent upon receipt
of regulatory approvals, the parties aim to complete the transaction by mid-year. Predicting that the deal will generate cost and other
synergies of at least €500 million, Hutchison described the transaction as one that “creates a strong and competitive top three player in
the Austrian market.”
Sprint, Orange Join Forces On Global M2M Services
Multinational corporate customers of Sprint will soon gain seamless worldwide access to machine-to-machine (M2M) data services
under a partnership forged by Sprint and France Telecom’s Orange Business Services unit on Tuesday. M2M facilitates wired or
wireless communications among a range of devices that support point of sale, telematics, smart grids, product shipments, healthcare,
automotive, and other functions. Manufacturers are increasingly building M2M-capable cellular modules into a wide range of
industrial devices, thereby providing wireless network operators with another key source of revenue. Owing to Orange’s global IP
network that supports 2.5 million M2M connections in 220 nations, the partnership will enable Sprint to offer its domestic and global
corporate customers worldwide M2M connectivity without having to negotiate separate service agreements with wireless operators in
each country. Sources say the partnership will also provide Sprint customers with (1) a single, dedicated entity for managing global
PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP 3
M2M connectivity, (2) faster project deployment and more efficient cost control, and (3) a one-stop shop and M2M support process for
each country in which the customer operates. Noting that his company “recognizes that its customers compete in the global economy
and . . . expect their processing, monitoring, diagnostic and distribution applications to work seamlessly wherever their business takes
them,” Yijing Brentano, the vice president of international wholesale for Sprint, said: “we look forward to working with Orange . . . as
a vital partner as we equip U.S. business customers with a strong global M2M capability.”
Mexico Rejects Proposed Joint Venture Between Televisa And Iusacell
Grupo Televisa—a dominant player in Mexico’s cable, broadcast, and satellite TV markets—will likely be forced to alter its plan to
acquire a 50% stake in Mexican mobile phone carrier Grupo Iusacell, as Mexican regulators confirmed that they had rejected the
proposed joint venture on grounds that it would create “grave risks” for competition in the national market for broadcast advertising.
Although members of Mexico’s Federal Competition Commission (MFCC) voted 3-2 against the $1.6 billion deal on January 24, the
agency’s ruling was not announced officially until Tuesday. Officials of Televisa and Iusacell, meanwhile, confirmed that they were
notified of the decision last week. Although regulators agreed with Televisa’s contention that the deal will promote competition and
lower prices in Mexico’s market for wireless telephony, they concluded that the transaction would reduce competition in the nation’s
broadcast television market, thereby boosting advertising rates and, with them, the prices of consumer goods. (Though a minor player
in Mexico’s mobile phone market with a 4% share of that sector, Iusacell controls TV Azteca, which is surpassed only by Televisa as
the nation’s top-ranked broadcaster.) Noting that neither company had offered commitments to resolve competitive concerns, the
MFCC decreed that “benefits in one market cannot be used to justify harming competition in other markets.” The MFCC stipulated,
however, that it would be willing to reconsider its decision if Televisa and Iusacell propose remedies to address the agency’s concerns.
While a spokesman for Iusacell affirmed that his company is reviewing the ruling, Televisa said it would consider all “viable options.”
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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
(No. 2012-6)
