Stefan Lopatkiewicz Dorsey & Whitney LLP

1. Wireless Regulatory Issuesfor MunicipalitiesWireless Community and Mobile User ConferenceMonterey, CaliforniaJune 3, 2004 Stefan Lopatkiewicz Dorsey & Whitney LLP

2. Role of Federal Communications Commission • Established in 1934 as independent agency of Executive Branch to regulate interstate and international communications by wire and radio and to promote a rapid, efficient, nation-wide wire and radio communication service • Differing legal regimes relative to different communications technologies • Wireline • Cable • Wireless

3. Wireline and Cable Regulation Shared regulatory regimes Wireline – FCC certificates interstate and international common carrier lines of communication as in the public interest and convenience Enforces local and long-distance competition provisions of 1996 Telecoms Act States certificate the operation of wireline local and long-distance carriers operating within their territories Cable – FCC enforces specific technical, financial and competition standards embodied in Communications Act, as amended States, local governments retain franchising authority

4. Wireless Regulation • FCC exercises exclusive jurisdiction nation-wide over licensing of radio spectrum • Satellite • Microwave • LMDS (Local Multipoint Distribution Service) • Voice, data, video distribution • Above 25 GHz range • MMDS (Multipoint Multichannel Distribution Service) • “Wireless Cable” • 2.5/2.7 GHz

5. A Tradition of Unlicensed Spectrum • In contrast to most national telecommunications administrators, FCC has long followed a tradition of permitting use of some frequencies on unlicensed basis • Beginning in 1938, FCC created Part 15 of its rules, governing devices operating in designated bands at low power levels that would not cause interference • ISM (Industrial, Scientific and Medical Bands), immunity to interference and low probability of intercept • 2.4-2.483 GHz • 5.725-5.825 GHz • U-NII (Unlicensed National Information Infrastructure) • 1997 – short range, high-speed digital communications • 5.15-5.35 GHz

6. Importance of “Smart” Radiosfor Unlicensed Use • Unlicensed does not mean unregulated • Use of unlicensed frequencies is non-exclusive, not protected from interference • Consequently, focus has shifted to technical capabilities of radios operating in these frequencies • Emission standards • Digital modulation controls • FCC has adopted regulation of transmitter in place of regulation of licensee

7. Growth of UnlicensedSpectrum for WLAN • November 2003, FCC approved Wi-Fi Alliance petition for additional 255 MHz of unlicensed band in 5 GHz range • Harmonized U.S. allocation with international allocation • April 2004, NPRM proposes permitting wireless broadband use for 3650-3700 MHz band on either licensed or unlicensed basis • May 2004, NPRM to allow unlicensed broadband devices in unused portions (“white spaces”) of broadcast TV spectrum • Below 1 GHz

8. Greater Flexibility in Use of Unlicensed Devices • September 2003, FCC NPRM to permit use of more advanced antenna technologies in 2.4 and 5 GHz unlicensed bands • Permit broader use of spread spectrum devices under part 15 • Modify replacement antenna restrictions • Expressly intended to support manufacturers and users of unlicensed devices for wireless networks, particularly in rural areas

9. FCC Policy Objectives • May 5, 2004, FCC formed inter-bureau wireless broadband access task force to develop policies • FCC asked for comments so that task force can produce recommendations on how to advance deployment of WISPs by October 2004 • At least two objectives identified • Encourage creation of competitive delivery systems to wireline (DSL), cable • Help deploy broadband to rural areas to reduce “digital divide”

10. Congressional Support for WLAN • 2003 Jump Start Broadband Act • 2003 Spectrum Commons and Digital Dividends Act • Encourages reallocation of 1700-1800 MHz for wireless broadband and payment for relocation of existing users • 2003 Rural America Digital Accessibility Act • Authorizes Secretary of Commerce to make grants and guarantee loans to facilitate deployment by private sector of broadband telecommunications networks to underserved, rural areas

11. Telecommunications Act Preserves Local Government Regulation of Rights of Way • Section 253(c): “Nothing in this [Act] affects the authority of a State or local government to manage the public rights-of-way or to require fair and reasonable compensation from telecommunications providers, on a competitively neutral and nondiscriminatory basis….” • Applicable equally to laying of copper wire and fiber optic line and to placement of wireless transmitters

12. Local Government as Regulator and Competitor • Telecoms Act interpreted to permit • Establishment of conditions to placement of facilities • Charging of reasonable fees • Unless reasonably related to management of public rights-of-way, states and local governments have been curtailed from exercising authority over service provider • Interpreted to permit municipality, or its utility, even to compete with private provider of telecommunications service, as long as no deliberately unfair terms or outright prohibition • Section 253(a): “No State or local statute or regulation…may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service.”

13. State Law Governs Scope of Local Government’s Ability to Compete • March 2004, Supreme Court resolved dispute over ability of states to regulate municipalities’ provision of telecommunications services; held cities are not “any entity” under Section 253(a) Nixon v. Missouri Municipal League • Four states prohibit outright – Missouri, Nebraska, Texas, Virginia • Other states effectively disallow by prohibiting competition with private sector enterprise, unless is only for municipal consumption (e.g., Iowa) • Public policy concerns with unfair competition, improper role of government, burden on taxpayers • Telecommunications industry has lobbied at state level against such local authority

14. California – No Outright Prohibition Found • State constitution recognizes procedures for counties and municipalities to operate on “home rule” basis • Provision of telephone service has long been determined a state-wide concern • Regulated by Public Utilities Commission • Examples of municipalities providing telecommunications services and systems • Long Beach public/private initiative to create Airport and Downtown Wireless Internet Districts • San Bruno owns its own cable system and offers high-speed Internet access through commercial vendor • Quality of service, consumer protection remain in hands of state PUC

15. Federal Policy Promotes Access to “Advanced Services” Section 254(b)(2): “Access to advanced telecommunications and information services should be provided in all regions of the country.” Section 254(b)(3): “Consumers in all regions of the Nation, including low-income consumers and those in rural, insular and high cost areas, should have access to…advanced telecommunications and information services, that are reasonably comparable to those services provided in urban areas and that are available at rates that are reasonably comparable….” Section 706(b): Directs FCC to conduct periodic inquiries to determine if advanced telecommunications capability is being deployed to all Americans in a reasonable and timely manner and, if not, to take action to accelerate such deployment.

16. Federal Policy Promotes Access to “Advanced Services” (cont’d) • “Advanced telecommunications services” are defined in the Act as “high-speed, switched, broadband telecommunications capability that enables users to originate and receive high-quality voice, data, graphics and video telecommunications using any technology.” • State universal service rules that are more extensive than federal ones are not preempted.

17. Universal Service Standards Could Potentially Serve as Platform to Protect Local Government Systems from Preemption • FCC has found that several demographic groups remain vulnerable to lack of access to advanced services • Rural Americans • Native tribes • Low-income consumers • Inner-city residents • Municipalities might argue they need to provide services where private sector fails to do so • Boston, Portland, Ore. sponsor Wi-Fi in public housing

18. Airport Hot Spots FCC Petition • Industrial Telecommunications Association petition to FCC to preempt airports’ efforts to control tenants’ provision of Wi-Fi services (January 2004) • Airports claim need to avoid “spectrum interference,” but are clearly offering service to public for a fee • Airports’ position impacts not only coffee houses, restaurants, but potentially airlines • Airlines are deploying RFID systems for baggage control using Wi-Fi frequencies • Potential impact on municipally operated airports, utilities or other municipal regulations of Wi-Fi

19. STEFAN M. LOPATKIEWICZ Dorsey & Whitney LLPSuite 400 South 1001 Pennsylvania Avenue NW Washington, DC 20004-2533 Phone: (202) 442-3553 Fax: (202) 442-3199 lopatkiewicz.stefan@dorsey.com