Monday, November 28, 2011

LightSquared Gets Real: Signs First Deal with an ILEC 11/28/2011 San Francisco - LightSquared LLC today announced its first wholesale wireless services deal with an incumbent local exchange carrier.   The signed agreement with Louisiana based EATEL demonstrates that LightSquared, the ambitious privately held national broadband venture of Harbinger Group chief Philip Falcone, has crossed an important threshold of business credibility.

According to a LightSquared release of this morning, the two firms “announced that they have entered into a wholesale agreement that will allow EATEL to offer its subscribers high-speed wireless data and voice services using LightSquared’s nationwide 4G-LTE network.”

While Lightsquared has previously announced a plethora of other distribution agreements with a variety of retail sales channel partners, none of them have been with a traditional regulated operating telephone company. 

EATEL is, according to rural telco funding experts JSI Capital Advisors, the thirty-eighth largest telco in the United States.  JSI’s Phone Lines 2011 directory, the bible of American telecom independent operating companies (IOCs), lists EATEL with 11,542 broadband subscribers and 28,854 access lines as of December 2010.

“LightSquared’s network not only allows EATEL to offer our existing customers wireless broadband services, it also gives us a critical competitive advantage as we expand our services into new markets,” stated John D. Scanlan, EATEL president, in today’s release.

Who cares about a rural telco with less than 30,000 access lines, or a seemingly star-crossed national wireless start-up that engenders more conservative conspiracy theories than the Federal Reserve Bank? 

Anyone who cares about the future health of the independent rural telecom sector should care. Rural incumbent carriers face a continuing decline in access line customers, looming changes in Universal Service Fund subsidies for rural high cost operations, and then growth of wireless services in and near their service footprints.  They typically lack access to licensed spectrum or the economies of scale to bring up and wireless offering.

Taken together, these factors mean that many rural carriers don’t have the quadruple play – voice telephone, Internet access, video services AND a wireless offering – to compete against new entrant cable operators and overbuilders. “EATEL, founded in 1935, is the incumbent local phone carrier in the Ascension and Livingston Parishes of Louisiana where it provides innovative products including high-speed Internet, phone and television service over a fiber-to-the home (FTTH) network,” according to the LightSquared statement.

“With LightSquared, EATEL will be able to offer its growing customer base world-class wireless service that will enable EATEL to build on its long heritage of providing local communities with cutting-edge connectivity.”

Rural rate of return carriers, many of which are USDA legacy borrowers paying down loans from the Broadband and Telecom Loan Programs of the Rural Utilities Service (RUS), are prudent operators. For one of the larger such ILECs in the nation to sign with Lightsquared must be seen as a stamp of approval from the sector for the oft-criticized venture.
“EATEL is exactly the type of company that LightSquared is building its wholesale network to serve,” said Sanjiv Ahuja, chairman and chief executive officer of LightSquared.

“We believe EATEL and the many other ILECs around the country provide critical and valuable communications services to their communities, and their customers deserve the benefits including ubiquitous connectivity and lower prices enabled by partnering with LightSquared,” concluded Mr. Ahuja.

Friday, November 25, 2011

BayWEB Contract Documents Show $50 Million Stimulus Project at Risk of Cancellation

No Bid Procurement Contract for BayWEB Network, Negotiated in Secret, 
Released Here 11/25/2011 San Francisco - Key documents relating to the controversial $50 million stimulus-funded public safety wireless project called BayWEB demonstrate that the project is at high risk of funding cancellation by the U.S. Department of Commerce. 

BayWEB is one of only a handful of 700 MHz LTE public safety regional interoperable wireless systems to be funded to date by the federal government. It is the only such network funded by a federal agency -- the National Telecommunications and Information Administration (NTIA) of the Department of Commerce -- under which the grantee is a private sector company rather than a governmental body.

Since the fourth quarter of 2010, the project's grantee, Motorola Solutions, Inc. (NYSE: MSI), joined by an ever-changing array of public entities slated to benefit from the project, have been holding non-public bilateral negotiations. Terms under discussion include equipment pricing, build out scheduling, eventual ownership conditions, operating subscriber costs, and the network design topology itself.

In simple terms, the key no-bid procurement contract for a $50 million federal grant-funded model wireless system has been negotiated in secret for a year. Earlier this week this publication launched its third round of requests, both informal and under provisions of the California Public Records Act (CPRA), to secure the current draft of the negotiated instrument called the Build, Operate, Own and Maintain Agreement (BOOM Agreement). 

This morning the draft BOOM Agreement dated November 21, and its existing Exhibits were released to this publication pursuant to our CPRA. The releasing agency is that of a county government which is a public member of the new entity, called BayRICS, which now manages the project along with MSI. The first draft of the BOOM Agreement, dated September 24, 2010 had been previously released by the former managing public agency, the Bay Area UASI, under a CPRA request made by the Office of Mayor Chuck Reed, of the City of San Jose.

The three documents are attached below. 

The most recent BOOM Agreement draft demonstrates that the BayWEB project remains at high risk of project cancellation by NTIA, given the scope of critical portions of the contract still under negotiations, and the tight project deadlines required by federal stimulus timelines.

We publish the documents here now, to be followed by our analysis, and by commentary from public parties to the negotiations, and from the industry. We publish now, given the significant industry concern expressed about the secret negotiations, lack of transparency around the process, and confidential criticism of the negotiations that have reached us from communications agency professionals here in the Bay Area.

BayWEB Draft BOOM Agreement - 11-22-2011
Draft BOOM Agreement 11-22-2011 - BayWEB Project

BayWEB Draft BOOM Agreement Exhibits - 11-22-2011
Draft BOOM Agreement - BayWEB Project - Exhibits 11-22-11

BayWEB Draft BOOM Agreement - 09-24-2010
Draft BOOM Agreement - BayWEB Project - 09-24-2010

The BayWEB Examination is our compendium of information on the project. We believe it is the most comprehensive such collection available. We have assembled links to all media coverage of the issue, to online documents secured by us from confidential and open sources, to documents secured by others and by this publication under federal and state public records filings, and to our own published reporting.

Note on awardee identification: The project grant was applied for by, and subsequently awarded to, the entity Motorola, Inc., formally traded as (NYSE: MOT). Motorola, Inc. was split into 2 new and separate companies, which both began trading on January 5, 2011.  The network infrastructure side of the business, all public safety equipment lines, and the network integration / management services divisions became Motorola Solutions, Inc. (NYSE: MSI). We have retroactively re-tagged our BayWEB stories with the MSI ticker symbol.

Thursday, November 24, 2011

AT&T Withdraws Merger Application, Reserves Right to Come Back 11/24/2011 San Francisco - AT&T, Inc. and Deutsche Telekom AG yesterday withdrew their application to the Federal Communications Commission for approval of AT&T's $39 billion takeover of T-Mobile USA.

Will T-Mobile get the $4 billion breakup fee?
The two wireless carriers reserved their rights to both defend their position in the ongoing antitrust suit of the U.S. Department of Justice against the deal, and to pursue new filings with FCC for a possible different approach to the acquisition.

AT&T stated in its press release of this morning that it and DT "are continuing to pursue the sale of Deutsche Telekom's U.S. wireless assets to AT&T and are taking this step to facilitate the consideration of all options at the FCC and to focus their continuing efforts on obtaining antitrust clearance for the transaction from the Department of Justice either through the litigation pending ....or alternate means.  As soon as practical, AT&T Inc. and Deutsche Telekom AG intend to seek the necessary FCC approval."
 AT&T will take a pretax accounting charge of $4 billion in 4Q 2011 to cover possible breakup fees due to DT if the deal does not go through. 

 The withdrawal notice was issued via the Commission's electronic filing system (WT Docket No. 11-65) yesterday, and was first reported in a joint company release of this morning.

As of this story posting, the filed withdrawal statement has not been posted on the FCC site. (Updated: The letter was posted by FCC staff on 11/25, and is copied, below.)

The move followed by one day the announcement by the Commission that Chairman Julius Genachowski launched procedural moves that guarantee FCC disapproval of the AT&T acquisition. The FCC proceeding began with a Commission Notice of  April 14th this year.  

This Tuesday FCC senior staff told the media that Commission Chairman Julius Genachowski placed two draft Orders with fellow Commissioners that strongly signal an eventual denial of approval of the deal by the federal regulatory body. In the non-transparent continuing practice of FCC, those draft Orders were placed "on circulation" with Commissioners and selected staff while withheld from public view.

AT&T - T-Mobile Merger Withdrawal 

Tuesday, November 22, 2011

DHS - FBI Say No Cyber Intrusion at Illinois Water Utility 11/22/2011 San Francisco - By John McNabb *

Federal authorities today issued a statement that they found no credible evidence that a previously reported incident of cyber hacking against a public water treatment facility in Illinois had occurred. The statement, issued at 5:30 pm (ET) today reads verbatim, as follows:

John McNabb of Infrastructure Security Labs

After detailed analysis, DHS and the FBI have found no evidence of a cyber intrusion into the SCADA system of the Curran-Gardner Public Water District in Springfield, Illinois.

There is no evidence to support claims made in the initial Fusion Center report - which was based on raw, unconfirmed data and subsequently leaked to the media - that any credentials were stolen, or that the vendor was involved in any malicious activity that led to a pump failure at the water plant.  In addition, DHS and FBI have concluded that there was no malicious traffic from Russia or any foreign entities, as previously reported.

Analysis of the incident is ongoing and additional relevant information will be released as it becomes available.”

In the initial reporting on this incident, an unidentified alleged foreign hacker had ostensibly damaged a pump at the Illinois water utility. This reported incident, and the subsequent hacking of a South Houston wastewater facility to show how easily it could be done, resulted in dozens of news stories, blogs, and commentary worldwide.

This wide scale reporting, although now factually proven incorrect by the competent federal agencies, brought needed attention to the vulnerability of public drinking water facilities to attacks by malicious hackers.  Just because this Illinois incident was not the real thing does not diminish the fact that drinking water facilities are vulnerable to cyber attack. Far more needs to be done, both by government and industry, to properly secure this critical infrastructure.

             * John McNabb is Principal of Infrastructure Security Labs, which researches security of critical infrastructures. He was an elected Water Commissioner for a small New England drinking water utility for 13 years. His current research focuses primarily on security of drinking water infrastructure. He has presented papers at Defcon 18 (Cyberterrorism and the Security of the National Drinking Water Infrastructure), Defcon 19, Black Hat, and ShmooCon. Among his works is a chapter on drinking water security in the book Weapons of Mass Destruction and Terrorism, 2nd Edition (McGraw-Hill, 2012). He can be reached at

FCC: "'AT&T - T-Mobile Deal Would Mean Massive Job & Investment Loss" 11/22/2011 San Francisco - Federal Communications Chairman Julius Genachowski has begun a process which will result in the official rejection by the Commission of the proposed $39 billion acquisition of wireless carrier T-Mobile by AT&T.

FCC Staff Finds Jobs & Investment Loss in Deal 
"The record clearly shows that -- in no uncertain terms -- this merger would result in a massive loss of US jobs and investment," said a senior official of the Commission in the only direct quote released to media by Commission staff this afternoon.

The move is a clear signal that Genachowski and his two Democratic colleagues on the Commission will vote against approval of the controversial merger, when the actual item eventually moves before the Commission following both an administrative hearing and antitrust action in the federal courts.

Official sources at the Federal Communications Commission this afternoon held an on background briefing with media including this publication. Chairman Genachowski today put "on circulation" to his fellow Commissioners and staff 2 proposed Orders. The first argues for a finding of facts that the AT&T - T-Mobile merger would not be in the public interest. The second deals with the proposed $1.9 million acquisition by AT&T of Qalcomm's nationwide wireless spectrum in the heavily sought 700 MHz frequency range.  

Details from the media briefing confirmed the Chairman's call for an administrative hearing on the merger proposal, as first reported this afternoon by the Wall Street Journal's technology policy reporter, Amy Schatz. An administrative hearing held befoere an adminsitative law judge  (ALJ) of the Commission is triggered when staff and Commissioners reach a finding of fact that a proposed aqusition of radio spectrum licenses would not be in the public interest. The ALJ essentially conducts a civil trial at which AT&T would argue in favor of the acquisition, while oppents marshal facts against the deal. 

Qualcomm 700 MHz Spectrum Order
Senior Commission officials conducting the media call on background stated that no details relating to Genchowski's draft Oder on the AT&T - Qualcomm spectrum deal would be released until Commissioners had a chance to deliberate on the issue. Previous reports, and the Commission proceding on the issue, have identified the 700 MHz spectrum as covering upwards 300 million Americans.

Friday, November 18, 2011

FCC Releases Universal Service Fund Reform Order 11/18/2011 San Francisco - The Federal Communications Commission today released its much anticipated Order reforming the Universal Fund and Intercarrier Compensation system. Taken together, the two complex systems of charges and funding support the operations of the vast majority of rural telecom carriers in the nation. 

In a move guaranteed to allow their private sector colleagues in the federal communi- cations bar to bill beaucoup hours over the weekend, Commission staff released the 759 page document at just past 6:00 PM this evening, Washington time.

The Commission adopted the Order at its meeting of October 27 by unanimous vote, but waited until today to release the full document as staff refined final text in the interim.

The Order launches the new Connect America Fund (CAF), first announced in the Commission's National Broadband Plan of last year. CAF is intended by the Commission to fund the build-out of extended broadband networks to rural areas, with a special emphasis on mobile broadband deployed by carriers eligible for funding.  

FCC-11-161A1 - Order
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