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AT&T CEO takes $2M pay cut over T-Mobile deal

AT&T Inc.’s board cut CEO Randall Stephenson’s 2011 pay by $2.08 million because he engineered the failed deal to buy T-Mobile USA, according to a regulatory filing Tuesday.

By Peter Svensson, AP; The Seattle Times ~ Feb 21, 2012

NEW YORK — AT&T Inc.’s board cut CEO Randall Stephenson’s 2011 pay by $2.08 million because he engineered the failed deal to buy T-Mobile USA, according to a regulatory filing Tuesday.

Opposition from federal antitrust regulators forced the Dallas-based phone company to give up on the $39 billion deal in December. That meant it had to hand over $4.2 billion in cash and spectrum rights to T-Mobile as a so-called “break-up fee” to compensate T-Mobile for the failure.

Looking at that $4.2 billion charge, AT&T’s board cut Stephenson’s cash bonus by 25 percent, and cut his stock award by 6 percent, for a total of $2.08 million.

That left Stephenson’s 2011 total pay package at $18.7 million, according to the Associated Press formula. His compensation was down from $20.2 million in 2010.

It’s unusual for company boards to cut CEO compensation for specific missteps. But the cost of the failed T-Mobile deal was exceptional. It’s standard practice to offer break-up fees to get acquisition targets to sign on to a deal, but the one AT&T promised was unusually large.

The AP’s compensation formula includes Stephenson’s salary, bonus, perks, above-market returns on deferred compensation and the estimated value of stock options and awards granted during the year.

The calculations don’t include changes in the present value of pension benefits, and they sometimes differ from the totals that companies list in the summary compensation table of proxy statements filed with regulators.

For all of 2011, AT&T earned $3.9 billion, or 66 cents per share, on $126.7 billion in revenue. That compares with net income of $19.9 billion, or $3.35 per share, on $124.3 billion in revenue in 2010.

GOP senators push for Medicare cuts

By Alexander Bolton; The Hill ~ Feb 16, 2012

Sens. Richard Burr (R-N.C.) and Tom Coburn (R-Okla.) are pushing for major reductions in Medicare spending, even though they know the idea probably won’t be popular with GOP colleagues in an election year.

Burr and Coburn announced their plan, which is expected to reduce Medicare spending by between $300 billion and $1 trillion in the next decade, at a news conference Thursday.

Some Republicans wonder about the political wisdom of rolling out a major Medicare-reform bill less than a year before a presidential election.

“They’re probably going to be pretty nervous, but I think the one thing we’ll take the responsibility for is to educate our colleagues why we feel this sense of urgency,” Burr said.

The North Carolina Republican said he expects different reactions from members of the Senate GOP conference.

“We’ll have some that probably think healthcare is not on their interest [list] but they’re willing to engage and watch, and we’ll have some that are politically less risky who will say, ‘How in the world could you do this?’” he added.

Republicans took a political hit last year after House Budget Committee Chairman Paul Ryan (R-Wis.) offered a budget that would have replaced the traditional Medicare system with government subsidies for people to use to purchase insurance. Congressional Democrats and President Obama went on the attack, and Republicans ended up losing in a New York special election for a House seat where Medicare was the major issue.

Ryan this year has signaled his budget will not include the same proposal, and instead could include a measure he has co-sponsored with a Democratic senator that would preserve traditional Medicare as an option.

Burr and Coburn are proposing keeping the current fee-for-service government program but requiring it to compete with private plans, introducing a premium-support plan in 2016.

They would increase the Medicare eligibility age to 67 for people born after 1959 and raise Medicare premiums by 3 percent of the overall program’s costs each year until a 9 percent adjustment is reached by 2016.

The plan would increase the cap on out-of-pocket costs for individuals earning more than $85,000 a year and couples earning more than $170,000. For example, individuals making between $85,000 and $107,000 would see out-of-pocket costs capped at $12,500.

It would require that millionaires pay the full cost of Parts B and D premiums and have higher deductibles than other seniors.

Coburn said a conservative estimate is that the proposed reforms will save $300 billion to $500 billion over the next decade, and that the proposed changes could save as much as $1 trillion over 10 years.

Burr and Coburn said they will not let the issue drop, even if Democrats use their plan to craft political attacks.

“Our colleagues know us well enough to know we’re not going away,” Burr said. “This is going to be an issue that we stay on top of. We’ve already made the commitment we’re going to introduce it as a bill. We look forward to that process.”

Airwaves Sales Sought by AT&T, Verizon on Verge of Clearing U.S. Congress

By Todd Shields; Bloomberg ~ Feb 17, 2012

AT&T Inc. (T) and Verizon Wireless moved a step closer to obtaining additional airwaves needed to meet surging consumer demand for smartphones as U.S. lawmakers passed a measure that authorizes sales of wireless spectrum.

The airwaves auctions are part of a broad accord reached yesterday by House and Senate members to sustain a payroll tax cut. The sales would raise at least $15 billion for the U.S. Treasury, Representative Greg Walden, an Oregon Republican, said in an interview. Both houses of Congress approved the legislation today, sending it to President Barack Obama for his expected signature.

“By freeing up airwaves to be used to build the next generation wireless networks, this package will support massive job creation and untold technological breakthroughs,” Representative Fred Upton, a Michigan Republican who heads the Energy and Commerce Committee, said in an e-mailed statement.

The auctions proposed by the Obama administration would sell rights to airwaves voluntarily surrendered by television stations. TV companies would keep a portion of the proceeds. Participating broadcasters could leave the business or transmit using other airwaves. Wireless companies would use the airwaves to support mobile phones, tablets and other devices.

The package also would allocate $7 billion and airwaves for a nationwide network for emergency workers, said an e-mailed release from Senator Jay Rockefeller, the West Virginia Democrat who chairs the Commerce Committee. More spectrum for emergency workers was a recommendation of the 9/11 Commission that investigated the 2001 attacks in New York and Washington, when police and firefighters had trouble communicating by radio.

“This agreement will allow us to build a nationwide, interoperable communications network that is as reliable as the first responders that protect us,” Rockefeller said in an e- mailed statement. “It will quite literally save lives.”

Spending on the new network may benefit antenna-building companies American Tower Corp. (AMT), Crown Castle International Corp. and SBA Communications Corp., Paul Gallant, a Washington-based analyst with Guggenheim Partners, said in a Feb. 15 note.

Airwaves sales may spur investment and job creation, the High Tech Spectrum Coalition, a group with members including Apple Inc. (AAPL), Alcatel-Lucent, Intel Corp. (INTC) and Cisco Systems Inc., said in an e-mailed statement yesterday.

“Congress has made a great decision that will result in significant investment in mobility and will have a meaningful impact on the creation of jobs with private investment,” Rhod Shaw, executive director of the High Tech Spectrum Coalition, said in an e-mailed statement.

Broadcasters have said they’re concerned TV station owners may face added costs and lose audience if forced to switch airwaves. The legislative measure provides $1.75 billion to compensate for the costs of relocating.

“Tens of millions of Americans rely every day on local TV broadcasters for news, entertainment, sports and life-saving weather warnings,” Gordon Smith, president of the Washington- based National Association of Broadcasters, said in a statement.

“We look forward to working with Congress and the FCC to implement an incentive auction program that does not jeopardize that service,” said Smith, whose group’s members include CBS Corp. (CBS), Comcast Corp.’s NBC, the Walt Disney Co. (DIS)’s ABC and News Corp.’s Fox.

Language in the package may make it harder for the Federal Communications Commission to limit participation in the auctions by Verizon, the largest U.S. wireless company, and No. 2 AT&T, Jeffrey Silva, a Washington-based analyst for Medley Global Advisors LLC, said in an interview.

“They wouldn’t have the artistic freedom they’ve had before,” Silva said. “When this started the FCC had carte blanche.”

Under the proposal, the FCC can’t exclude wireless carriers as part of an auction proceeding, Jim Cicconi, AT&T’s senior executive vice president-external affairs, said in an e-mailed statement.

“It could only make such a decision through a separate public rulemaking,” Cicconi said. “This provides procedural safeguards, and also an opportunity for a court challenge.”

Cicconi on Jan. 13 said he was “troubled” that FCC Chairman Julius Genachowski wanted his agency to keep its power to set terms for the auctions.

Genachowski said yesterday the agency has sought to develop “fair, effective mechanisms for providing all carriers an opportunity to obtain spectrum.”

“Congress has recognized the vital importance of freeing up more spectrum for mobile broadband, both licensed and unlicensed, although the legislation could limit the FCC’s ability to maximize the amount and benefits of recovered spectrum,” Genachowski said in an e-mailed statement.

AT&T and Verizon were the biggest winners in the FCC’s 2008 auction of airwaves suitable for smartphone use, spending a combined $16 billion. In 2010, the companies objected after the agency restricted their ability to lease airwaves from a company that is now Philip Falcone’s proposed LightSquared Inc. wireless service.

AT&T in December abandoned a $39 billion merger with T- Mobile USA Inc. after resistance from the FCC and Justice Department, which said the combination would lessen competition. In January AT&T Chief Executive Officer Randall Stephenson in an earnings call said availability of spectrum is the “No. 1 issue for us.”

AT&T and Verizon combined had 60.3 percent of wireless subscribers in 2010, according to data compiled by Bloomberg. Verizon Wireless is owned by Verizon Communications Inc. (VZ) and Newbury, England-based Vodafone Group Plc.

Sprint Nextel Corp. (S), the third-largest U.S. mobile carrier, said in an e-mailed statement that the legislative proposal “preserves the FCC’s ability to promote competition as it conducts future wireless spectrum auctions.”

“Sprint agrees with the Federal Communications Commission that all wireless carriers — small, regional and large –should have a meaningful chance to participate in wireless spectrum auctions,” Vonya McCann, Sprint’s senior vice president for government affairs, said in the statement.

The auctions will help “meet Americans’ voracious appetite for mobile Internet,” Steve Largent, president of CTIA-The Wireless Association, a trade group, said in an e-mailed statement yesterday.

“Mobile data usage is expected to grow by a factor of 16 over the next five years,” Largent said. “The spectrum made available by this legislation is key to meeting that demand.”

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

To contact the editor responsible for this story: Michael Shepard at mshepard7@bloomberg.net

Medicare physician pay frozen until 2013

But the temporary delay of the sustainable growth rate cut would set up a roughly 32% cut in January.

By Charles Fiegl; American Medical News ~ Feb 17, 2012

Washington — Congress has deferred steep physician payment cuts under the Medicare program until 2013 but has left in place a pay formula that will slash physician rates by an estimated 32% next year.

A 27.4% cut was set to hit doctor pay on March 1, but federal lawmakers adopted legislation that continues current Medicare payment rates to physicians and other health professionals under Part B for the remainder of 2012.

The legislation had been drafted by a congressional conference committee that was created to craft a longer-term solution after lawmakers agreed only to a two-month delay of the Medicare doctor pay cut in December 2011. The newly passed bill also includes extensions of other health provisions, such as higher pay to physicians practicing in low-cost areas and exceptions to coverage caps on outpatient therapy services.

The House approved the measure on Feb. 17 by a vote of 293-132, and the Senate followed suit the same day with a 60-36 vote. President Obama said he will sign the package, which also extends a payroll tax cut for 160 million working Americans and preserves some extended unemployment insurance to those out of work for long periods.

The conference committee had debated allocating unspent overseas war funds to cover the more than $300 billion cost to repeal the SGR altogether, but lawmakers could not find enough support for the idea, which some dismissed as a budget gimmick.

The temporary payment patch will lead to deeper cuts next year. The Congressional Budget Office has projected that simply freezing Medicare pay rates in 2012 would cause the scheduled reduction to deepen to 32% in 2013.

The American Medical Association and other physician organizations opposed the temporary approach because it failed to replace the payment formula. The patch costs nearly $20 billion but would increase the future cost of a permanent fix by $25 billion, said AMA President Peter W. Carmel, MD.

“We are deeply disappointed that Congress chose to just do another patch — kicking the can, growing the problem and missing a clear opportunity to protect access to care for patients,” Dr. Carmel said in a statement before the congressional votes. “Shortly after the coming elections, access to care for seniors and military [families] will again be threatened by an even larger cut, and members of Congress will need to take swift action to end the broken formula.”

The 10-month Medicare pay patch also left many of those voting for the bill displeased with the situation. Rep. Dave Camp (R, Mich.), who was co-chair of the conference committee, preferred a House bill that included a two-year payment fix that was fully offset by cuts elsewhere in the health system.

“If I had my way, the bill passed by the House in December would be law,” Camp said. “That was the only bill that extended these programs through the end” of 2013.

The temporary doctor pay freeze in the approved package is paid for by a $5 billion reduction to a federal prevention fund set up under the health system reform bill, reduced payments to hospitals for patients’ bad debt and pay cuts to clinical laboratories.

House Minority Whip Steny Hoyer (D, Md.) said he would vote against the conference report because it also raised pension contribution requirements for federal workers to help pay for the package’s other provisions. But he also criticized his colleagues for not addressing the SGR permanently, calling the 10-month extension a “silly little game.”

AT&T Hunts Spectrum

By Gina Chon, Anton Troianovski & Anupreeta Das; The Wall Street Journal ~ Feb 16, 2012

The collapse of a $39 billion acquisition isn’t stopping AT&T Inc. from exploring other wireless deals.

Barely two months after the phone giant’s offer to buy T-Mobile USA fell apart amid objections from regulators, AT&T is already studying new deals that could increase its access to the airwaves, including potential transactions with Leap Wireless International Inc., Dish Network Corp. or MetroPCS Communications Inc., people familiar with the matter said.

The companies declined to comment.

At stake for AT&T and other carriers is a limited supply of wireless spectrum licenses that are key to building out their networks, as smartphones and tablets drive a sharp increase in mobile data use. Congress has complicated matters with halting progress toward putting more wireless licenses up for auction.

The spectrum needs became more pronounced this week after regulators rejected a plan for a new broadband network by start-up LightSquared Inc., taking away one potential source of wireless capacity for now. And the federal spectrum auctions that Congress is considering are likely more than a year away.

Although AT&T is actively engaged in discussions with some of the parties, there are no deals yet on the table, and it would likely be months before any come to pass, people familiar with the matter said.

Government agencies that would have to approve any transactions remain concerned about declining competition in the cellphone market, and election-year politics could complicate things further.

The talks between AT&T and other wireless providers show the pressure AT&T is under to line up spectrum. Its larger competitor, Verizon Wireless, said in December it would pay $3.6 billion to buy one of the last large swaths of unused airwaves in the U.S. from several cable companies. That deal still needs approval from the Federal Communications Commission.

AT&T Chief Executive Randall Stephenson last month expressed frustration with the FCCs reviews of mergers and acquisitions as wireless companies wait for the government to put more spectrum up for auction. “To meet customer demand, we have to continue our push to add spectrum in the open market,” Mr. Stephenson said on the conference call with analysts.

AT&T and the FCC also have scuffled over how the agency determines when a company has too much spectrum and what restrictions it can impose on future auctions.

AT&T was counting on the acquisition of T-Mobile, which would have merged the country’s second and fourth largest cellphone providers, to help solve its spectrum constraints. But the Justice Department and the FCC said the deal would lead to higher prices and less innovation.

AT&T insists it needs new spectrum, though the company says it has enough access to the airwaves to deploy its fourth-generation mobile broadband network this year and next.

A fresh source of spectrum could be federal auctions of spectrum currently used by television broadcasters. Such an auction would be authorized by Congress in legislation that was still being hammered out on Wednesday to extend the payroll-tax cut.

Acquiring Leap Wireless, which operates the Cricket brand of prepaid service and is the nation’s sixth-largest wireless carrier, is one possibility AT&T is studying, the people familiar with the matter said.

The two sides have been engaged in talks about a potential deal, which could give AT&T access to spectrum in dozens of markets valued by J.P. Morgan Chase & Co. analysts at about $2.1 billion. Leap’s market capitalization is $686 million.

The two parties had positive talks last year when AT&T was looking to sell off some assets to try to gain regulatory approval for the T-Mobile transaction, people familiar with the matter said.

As a result, AT&T sees a Leap deal as more possible than some of its other options, the people said. However, Leap’s spectrum holdings are relatively small and don’t cover the whole country, meaning AT&T would likely need more to satisfy its long-term needs, the people added.

AT&T is also exploring how it might gain access to spectrum controlled by satellite TV operator Dish, people familiar with the matter said. Dish has indicated to AT&T that it doesn’t want to sell spectrum outright and wants to build out a high-speed wireless broadband network of its own, the people said.

Dish still could pursue joint ventures or network sharing agreements, whether with AT&T or another party such as T-Mobile, the people said. Dish could also decide not to pursue any deal.

Last year, Dish bought two satellite operators, DBSD North America and TerreStar Networks, out of bankruptcy for $2.8 billion. Dish is awaiting an FCC ruling on whether it can use the satellite operators’ spectrum to support devices that only connect to terrestrial networks.

Trying to acquire prepaid wireless carrier MetroPCS, the country’s fifth-largest cellphone operator, is also an option AT&T is considering, but is seen as less of a possibility because the relationship between the two companies has soured in recent months, the people familiar with the matter said.

MetroPCS openly opposed the T-Mobile deal, and discussions with AT&T about possibly buying assets that would have been divested had the deal happened didn’t go well, partly because of demands made by MetroPCS, the people said.

Both MetroPCS and Leap are providers of cheap, no-contract cellphone service that’s popular in some urban areas and among young people. Unlike T-Mobile, the companies don’t have any of the contract-based cellphone subscribers that are AT&T’s bread and butter—making an integration with AT&T tricky.

Write to Gina Chon at gina.chon@wsj.com, Anton Troianovski at anton.troianovski@wsj.com and Anupreeta Das at anupreeta.das@wsj.com

Tentative deal reached on payroll tax, unemployment

By Manu Raju & Jake Sherman; Politico ~ Feb 14, 2012

Congressional leaders broke an impasse Tuesday that threatened both the finances of millions of Americans and further damage to an institution that couldn’t sink much lower in public esteem.

A tentative deal reached by senior House and Senate leaders, which appears poised to pass absent a last-minute snag, would prolong a payroll tax cut that benefits 160 million Americans, extend unemployment benefits and forestall rate cuts to doctors who treat Medicare patients.

Under the plan, a 2-percentage point payroll tax cut would be extended until the end of the year — and the $100 billion cost would be added to the deficit. Unemployment benefits would be extended for the next 10 months and doctors who treat Medicare physicians would avoid seeing their payments cut. Those two provisions would cost about $50 billion and be paid for with cuts elsewhere in the federal budget.

Democrats were generally pleased with the deal, given that President Barack Obama has made extending the payroll tax cut central to his reelection campaign.

Despite concerns from rank-and-file Republicans at a closed-door House GOP Conference meeting Tuesday night, it appeared that the $150 billion-package would make it to Obama’s desk within days — amounting to a rare breakthrough for a dysfunctional Congress.

Rep. Dave Camp (R-Mich.), the Ways and Means Committee chairman, who was central to the negotiations, told House Republicans at a private meeting that “given where we were, I believe this framework can work.”

Negotiators have identified several spending cuts to pay for the extension of unemployment benefits and so-called “doc fix”. One is a pay freeze for federal workers. Another is cutting by $5 billion a fund — created by the Obama health care law and championed by Sen. Tom Harkin (D-Iowa) — aimed at promoting healthy living and curtailing chronic diseases.

Benefits would be spared to Medicare recipients, including high-earners, but cuts would be made to clinical lab reimbursements that receive funding under the entitlement program. Spectrum auctions aimed at expanding wireless broadband service and raising revenue would be part of the deal as well.

And sources said the two sides were nearing an agreement to reduce the length of jobless benefits.

Republicans have pushed for unemployment benefits to be reduced from 99 weeks to 59 weeks, but the Obama administration has called for a 79 weeks as a compromise. Under the deal that’s now in the works, the length of jobless benefits would vary depending on a state’s unemployment rate.

For states with a high jobless rate, benefits for the hardest hit states would be reduced to 75 weeks. The change would kick in after a transition period set out by the legislation.

The deal would drop language called for by Republicans allowing states to drug test potential recipients of jobless benefits and calling for the unemployed to be in a GED program if they have not finished high school. The proposal would include language mirroring a Georgia program giving states the option to create a voluntary training program to jobless benefit applicants.

Despite an effort by Senate Democrats, it appeared increasingly unlikely that incentives for renewable energy would be included in the final package.

Also in question is whether the plan will be approved as a single package or passed as two separate bills.

House Speaker John Boehner will have to rely heavily on Democrats to pass the plan.

“I think you’ll see a fair number of dissenters” among House Republicans, said Rep. Dennis Ross (R-Fla.) after referring to a closed-door party meeting as a “little heated.”

Rep. Phil Gingrey (R-Ga.) was among the loudest opponents, calling the proposal a “welfare payment” and vowing to vote against it.

The preference for Republicans and Democrats, according to sources involved, would be that the House-Senate conference committee produce a proposal, allowing it to move through Congress on a fast track. The outlines of a deal came after talks between House and Senate tax writers, Sen. Max Baucus (D-Mont.) and Camp, along with Boehner and Senate Majority Leader Harry Reid (D-Nev.).

“I would rather have the conference committee do it,” Reid told reporters. “If the conference committee does it, it is a non-amendable item. If we get a free-standing bill, it is amendable 1,000 times.”

House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) said it appears the conference committee will produce a comprehensive bill “with all of the issues included.”

“There’s a couple of ‘I’s that need to be dotted and a couple ‘t’s that need to be crossed,” Upton said, “but we’re very, very close.”

One of the most sensitive issues in the final negotiations was the question of how much Medicare should compensate hospitals for the bad debt accumulated when patients don’t provide their required co-pays for care. The debt issue has become a greater problem as the number of elderly on Medicare and Medicaid, the so-called dual-eligible’s, has increased, and there are conflicts with state Medicaid rules governing such co-pays.

Medicare currently compensates hospitals for 70 % of their loss and the House proposed to cut this to 55%— saving more than $10 billion over 10 years. But this puts a heavy burden on inner city hospitals that have more poor patients, and ironically would impact the same Catholic hospitals that Republicans were defending last week against the administration’s proposed rules on contraception coverage.

To provide some relief, a compromise was floated over the weekend that would have reduced the “bad debt” cut by almost half and substitute instead a White House-back proposal to save about $5 billion from Medicaid by directing states to compensate durable medical equipment providers at the lower reimbursement rates set by Medicare.

But Boehner—who has strong ties to the durable medical equipment industry in Ohio, objected, Democrats said. And while the final compromise still lowers the bad debt cut to about $7 billion, it will still be a blow to hospitals with low income patients.

The breakthrough on the overall package came a day after Boehner and other GOP leaders reversed themselves and said they’d allow the payroll tax cut to be extended without corresponding budget cuts.

The fast-changing developments signaled that Republicans were eager to move away from an issue the White House has seized upon in Obama’s re-election bid.

But some Republicans were dismayed by House leaders’ decision to abandon the principle that the tax cut extension be paid for.

“I don’t like it,” said Sen. John Thune (R-S.D.), No. 4 in the Senate GOP leadership.

But Thune said political reality — namely a Feb. 29 deadline that had many in the party fearing they’d be blamed for allowing a tax hike on 160 million workers — forced the party to shift tactics.

“I think in the bigger scheme of things, there are battles that we want to fight where government spending is involved,” Thune said.

Exacerbating the GOP’s public relations problems, Democrats capitalized on the GOP argument that extending Bush-era tax cuts for all income levels and capital gains and dividends do not need to be offset by corresponding spending cuts. If that principle applies to the very wealthy, Democrats said, why shouldn’t middle class Americans get the same treatment?

Many Republicans believe extending the payroll tax cut won’t be a boon to the economy. And though administration officials say the proposal is structured so it would not deplete the Social Security trust fund, many Republicans and some Democrats think otherwise.

Most, but not all, Democrats were on board with not offsetting the cost of the tax cut extension. But Reid heard some grumbling from members of his conference during a party lunch about adding even more to the deficit.

“That’s even worse,” Sen. Joe Manchin (D-W.Va.) said of the GOP idea.

“My preference was to use fairness in paying for it, and therefore not adding to the deficit without hurting the economy,” said Sen. Ben Cardin (D-Md.), a conferee.

But Democratic leaders were giddy that Republicans backed down from their demands to pay for the payroll tax cut.

“The payroll tax cut is political candy,” said Sen. Jim DeMint (R-S.C.). “Once you hand it out, it’s hard to take it back.”

Earlier in the day, Rep. Andy Harris (R-Md.) said he was fine with allowing the pricey tax cut to be signed into law without offsets.

“It’s all make-believe payment methods,” Harris said before the deal was announced. “So I’m just as comfortable passing it this way and just saying, ‘Look it’s a straight tax cut. Republicans are for tax cuts. This seems to fit the bill.’”

Still, it was clear that the new GOP position had put some of their colleagues in a political bind.

Senate Minority Leader Mitch McConnell repeatedly refused to say whether he backed the House GOP leadership’s move.

“I don’t have a view on it right now,” he said, “but I certainly understand their feeing of frustration that this conference doesn’t seem to be getting anywhere.”

Sen. John McCain (R-Ariz.) grew testy with reporters when asked if he’d support the GOP’s call for a $100 billion proposal to be added to the deficit, repeatedly saying, “I respect whatever they want to do.”

David Rogers, Seung Min Kim and Scott Wong contributed to this report.

AT&T Must Give Beastie Boy a Vote on Net Neutrality, SEC Decides

By Jesse Hamilton; Bloomberg Businessweek ~ Feb 14, 2012

Feb. 14 (Bloomberg) — The U.S. Securities and Exchange Commission has told AT&T Inc. and other telecommunications companies they must include a resolution supporting wireless net-neutrality in annual shareholder votes.

In a letter posted on the SEC website, the agency asserted that net neutrality — the idea that Internet service providers must treat traffic equally — has become a “significant policy consideration” and can no longer be excluded from shareholder ballots. AT&T, Verizon Communications Inc. and Sprint Nextel Corp. must now grant shareholder requests for votes this year on resolutions that would support net neutrality.

“In view of the sustained public debate over the last several years concerning net neutrality and the Internet and the increasing recognition that the issue raises significant policy considerations, we do not believe that AT&T may omit the proposal from its proxy materials,” the SEC said in the Feb. 10 letter.

The shareholder resolution would recommend each company “publicly commit to operate its wireless broadband network consistent with network neutrality principles,” the letter said. The companies should not discriminate based on the “source, ownership or destination” of data sent over their wireless infrastructure.

“It allows shareholders to come to the table for the first time on an issue that we think is really of preeminent importance,” said Farnum Brown, an investment strategist at Boston-based Trillium Asset Management LLC, which led the multi- year charge of shareholder groups. “Persistence pays, I guess is the moral of the story.”

The Democrat-led Federal Communications Commission approved a regulation in 2010 that bars land-line Internet-service providers from blocking or slowing online content sent to homes and businesses, while still allowing mobile-phone companies to put limits on Internet traffic. Verizon sued the FCC in federal court, arguing the regulator lacks authority to regulate how companies provide Internet service.

Trillium, with the Benedictine Sisters of Mount St. Scholastica Inc. and the Nathan Cummings Foundation, had been seeking access to company ballots for at least four years.

Trillium is representing three individual AT&T investors — Michael Diamond, better known as Mike D of the hip-hop band Beastie Boys; his wife Tamra Davis, director of films including “Billy Madison” and “Half Baked”; and John P. Silva, of Silva Artist Management, which represents recording artists Foo Fighters and Beck.

AT&T argued the proposal ‘‘would directly interfere with its network management practices and seriously impair its ability to provide wireless broadband service to its customers,’’ David B. Harms, a lawyer at Sullivan & Cromwell LLP, wrote in a letter to the SEC on behalf of the company. Mike Balmoris, a company spokesman, didn’t immediately respond to a request for comment on the response.

The SEC’s Division of Corporation Finance had found in past years that similar net-neutrality proposals fell under the category of day-to-day business operations and that companies could exclude them from shareholder voting. With the agency changing its position, the previous exclusion no longer applies.

‘‘We received word last week that the SEC declined,” said John B. Taylor, a spokesman for Sprint, in an e-mail. “We understand other companies in our industry received similar guidance. Sprint is reviewing the information received from the SEC and potential next steps.”

Bob Varettoni, a spokesman for New York-based Verizon, declined to comment. His company had argued that this latest shareholder proposal didn’t offer “any new information that would indicate that ‘net neutrality’ has emerged as a consistent topic of widespread public debate,” according to a Dec. 22 letter to the SEC from Mary Louise Weber, an assistant general counsel at Verizon.

Companies whose requests are declined by the SEC can challenge the regulator’s findings in court.

–With assistance from Todd Shields and Tom Schoenberg in Washington. Editors: Maura Reynolds, Anthony Gnoffo

To contact the reporter on this story: Jesse Hamilton in Washington at jhamilton33@bloomberg.net.

To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net.

Bloomberg Businessweek ~ Feb 14, 2012

AT&T Wireless Bandwidth Throttling: The Backlash Has Begun

AT&T has begun throttling its biggest bandwidth hogs. Now (big surprise) customers are tearing into AT&T with complaints.

By Damon Brown; PCWorld ~ Feb 14, 2012

AT&T has begun throttling bandwidth speeds for its “unlimited” wireless data customers who gobble excessive amounts of data on their smartphones – just as it promised it would back in June. Now that the unlimited wireless bandwidth party is over, some AT&T customers are not happy, speaking up, and crying foul.

Despite AT&T’s assertion that throttling will only affect a tiny top five percent of data users some customers claim the clampdown on wireless bandwidth appears to be impacting a larger portion of AT&T’s 17 million wireless customer base. Of those believed throttled, some claim AT&T bandwidth restrictions are worse than other carriers’ that already throttling wireless bandwidth hogs. They also complain AT&T isn’t being clear about its throttling policy and that they are getting hosed by a new pricing scheme.

AT&T isn’t unique when it comes to moving away from all-you-can-eat data plans and pushing customers toward tiered service plans. Verizon, T-Mobile, and others in the wireless industry have ditched unlimited plans as well. They have also faced customer backlashes.

For the record, AT&T has stated in the media if you use more than 2GB of wireless data a month you are part of the five percent of its customers who could be subject to throttling. An AT&T representative confirmed the limit but says exceeding 2GB of data is no guarantee you’ll be throttled. AT&T told The New York Times actual slowing of wireless data speeds is dependent on individuals and their usage patterns and the immediate availability of network capacity or spectrum.

Unfortunately, AT&T does not make the above clear on its site leaving many in the dark. We did find a footnote to the old Unlimited plan on the AT&T site but it directed us to new data plans instead of a new policy. When we called customer support an AT&T spokesperson said she didn’t have any information about what new limits the Unlimited plan and directed us back to the AT&T site.

By comparison Verizon offers guidance of its throttling policy as do wireless carriers such as T-Mobile.

AT&T’s existing Unlimited customers are grandfathered into their $30-a-month Unlimited plan and limited (theoretically) to 2GB of wireless data transfers. After that speeds are significantly reduced, according to user feedback.

Separately, AT&T offers a $30-a-month plan for 3GB of data downloads. That has some griping: “that’s one gigabyte more than the ‘unlimited plan’ allows before AT&T considers you among the top five percent of its ‘heavy users’ subject to a punishing speed throttle.”

No way around it, it doesn’t seem fair to charge two groups of users the same amount for two different data caps (even if one isn’t technically a cap). The only silver lining might be is that Unlimited customers won’t face nasty surprise “overage fees”.

If pricing and policy issues weren’t enough, now a growing chorus of AT&T customers insist they are seeing data throttling before they hit a 2GB limit. AT&T customers have been chiming in at popular blogs such as John Cozen’s and the site Cult of Mac. Commenters at both sites insist they are seeing throttling of their AT&T wireless speeds after as little as 1.5GB of data consumption.

Of course, without independently verifying the above claims it could be a case of sour grapes.

Lastly, not all phone carriers limit user data. Sprint famously allows unlimited data without restrictions. Yes, it is pretty much fourth among the big four carriers, but it still makes AT&T, T-Mobile, and Verizon seem like cheapskates.

What Obama’s Budget Would Mean for Seniors

By Howard Gleckman; Forbes ~ Feb 13, 2012

In his 2013 budget released today, President Obama has proposed cutting $250 billion out of Medicare and $65 billion out of Medicaid over the next 10 years. Nursing homes, hospitals, and other providers would be paid less, while some Medicare beneficiaries would have to pay more out of pocket. At the same time, federal spending for other critical senior services programs would be frozen–in many cases for the third year in a row.

Here is a quick summary of some of Obama’s major budget initiatives and how they’d effect seniors. He has proposed some of these changes in the past but there is little doubt that they are a major priority for a White House looking to reduce the budget deficit.

Medicare: One-quarter of Medicare beneficiaries would pay higher, income-related premiums for Medicare Part B and D (the drug benefit). Starting in 2017, new beneficiaries would pay a surcharge for Medigap policies that pick up Medicare copays and other “first dollar” costs. In that same year, they’d also be charged a $100-per-episode fee for home health care and a $25 increase in the Part B deductible. Many of these changes are aimed at encouraging more seniors to enroll in Medicare Advantage managed care plans

At the same time, Medicare would reduce payments to nursing homes for post-acute care. It would also cut Medicare payments that pick up some of the cost of patients’ bad debts.

For years, skilled nursing facilities have been paid generously by Medicare for post-acute and rehabilitation services but lost money on Medicaid payments for their long-stay residents. Now, the Adminstrationwould cut those Medicare reimbursements–a step likely to force some facilities to abandon their money-losing Medicaid beds. That may not be a problem in areas where there is overcapacity of long-stay nursing home beds. But where there is a shortage, it may create some real challenges for those who are unable to continue to live at home.

Finally, Obama has again proposed to penalize nursing facilities whose post-acute Medicare patients are readmitted to the hospital for conditions that could have been avoided, such as falls or infections.

Medicaid: Obama would make it tougher for states to game the Medicaid system by taxing providers such as nursing homes and using the money to increase payments to those facilities. This practice effectively shifts Medicaid costs to the federal government and the change would reduce the amount of money available to state Medicaid programs. The White House would also reduce payments to vendors of durable medical equipment such as wheelchairs.

Other spending. Funding for the National Institute for Aging would be effectively frozen. Most other spending on long-term care services is funded by the Department of Health and Human Services. The Obama budget would freeze funding for the Administration on Aging. Thus, the budgets for nutrition services such as Meals on Wheels, caregiver supports, respite care, and aging network services would all be held at 2012 levels. Funding for aging and disability resource centers would be cut by more than one-third. Alzheimer’s Disease demonstrations would get $6 million more and adult protective services would get $8 million.

The Department of Housing and Urban Development would receive $475 million for Section 202 housing programs for the elderly.

Keep in mind, the Obama’s budget is very likely the high water mark for spending on these programs. If Congress passes a budget this year–which is unlikely at best–many of these programs would be cut even more deeply. And long-term spending for many of these programs would be in even more serious jeopardy, especially given major spending reductions being proposed by all of the Republican presidential candidates.

Senate Highway Bill Would Tap Into Individual’s Retirement Money

By John D. McKinnon; The Wall Street Journal ~ Feb 07, 2012

The Senate Finance Committee is expected to pass a highway bill that boosts revenues with a series of narrow tax increases, including raising taxes on money saved for retirement.

Specifically, the Senate committee would curb what are known as “stretch” IRAs and 401(k)s.

The path to a final deal with House Republicans on the contentious transportation-funding issue remained unclear, and the House bill doesn’t contain the IRA tax change. But the proposal signaled that Senate leaders are likely to continue targeting personal retirement accounts.

Under current law, owners of IRAs can stretch the life – and increase the value – of tax-deferred IRAs by passing them along to children or grandchildren at death. That’s because required annual minimum distributions typically are calculated using life expectancy tables; younger people get smaller payouts, so when they inherit an IRA, the money lasts longer and typically grows more.

The Senate Finance bill would require taxes to be paid on the account as if it were fully distributed within five years of the account holder’s death. There would be hardship exceptions for certain beneficiaries, including special-needs children. The proposal would raise about $4.6 billion over the next decade.

Highway funding renewal faces a March 31 deadline. Lawmakers are trying to maintain funding levels despite the long-term erosion of fuel taxes as a revenue source. The bill was pulled together by Finance Chairman Max Baucus (D., Mont.) from proposals by lawmakers of both parties.

Appeals court rules that seniors receiving Social Security can’t reject Medicare eligibility

The Associated Press – Washington Post – Feb 7, 2012

WASHINGTON — A federal appeals court ruled Tuesday that seniors who receive Social Security cannot reject their legal right to Medicare benefits, in a rare case of Americans suing to get out of a government entitlement.

Former House Majority Leader Dick Armey is among the five senior citizens who sued to stop their automatic eligibility for Medicare. But the appeals court ruled in a split decision that the law gives them no way to opt out of their eligibility if they want to keep their Social Security benefits.

Armey, a Texas Republican, and his co-plaintiffs say their private insurers limit their coverage because they are eligible for Medicare, but they would prefer the coverage from their private insurers.

“We understand plaintiffs’ frustration with their insurance situation and appreciate their desire for better private insurance coverage,” Judge Brett Kavanaugh wrote in a majority opinion joined by Douglas Ginsburg, both Republican appointees. But they agreed with the Obama administration that the law says those over age 65 who enroll in Social Security are automatically entitled to Medicare Part A, which covers services including hospital, nursing home care, hospice and home health care.

The case is being funded by a group called The Fund For Personal Liberty, which says its purpose is to take on burdensome government regulations. Attorney Kent Brown, who argued the case for the plaintiffs, say they want to keep their Social Security because they believe they earned it, but none of them want Medicare Part A.

“To say that you can’t decline Medicare Part A and not opt out of Social Security is outrageous,” Brown said in a telephone interview from his office in Lexington, Ky. He said Congress never intended that and vowed to appeal the ruling.

Besides Armey, the plaintiffs include two other former federal employees who were covered under the Federal Employees Health Benefits Program — retired Housing and Urban Development employee Brian Hall of Catlett, Va., and retired Navy civilian engineer John J. Kraus of Plymouth Meeting, Pa. — who argue that private insurance covers more than Medicare. The two other plaintiffs are wealthy individuals — E(asterisk)Trade board member Lewis Randall of Whidbey Island, Wash., and Rabbit Semiconductor founder and retired CEO Norman Rogers of Miami — who have high deductible private insurance and prefer to pay for their health care.

The plaintiffs found an ally in Judge Karen LeCraft Henderson, a nominee of George H.W. Bush, who wrote that Congress did not authorize the Social Security Administration to penalize an individual who wants to decline Medicare.

Why AT&T Didn’t Die After Losing iPhone Exclusivity

By Lindsay Welnick; Channel Partners ~ Feb 09, 2012

AT&T is not only doing better than predicted after losing its iPhone exclusivity early last year, it’s beating the competition.

AT&T activated 3.3 million more iPhones than Verizon did in the fourth quarter of 2011 and 5.8 million more than Sprint.

The carrier was much more prepared for losing exclusivity of the iPhone than people gave them credit for, AT&T Mobility CMO David Christopher said in an interview with FierceWireless. Christopher said the company focused on launching more Android devices than expected, improving the activation process, and simplifying the pre-order process. However, there is more to AT&T’s competitive edge.

Christopher cited studies that say the iPhone is faster on AT&T’s network. He also pointed out how users can talk and download data at the same time, and that the company has worked hard to make the activation process customer-friendly.

The company has also focused on keeping their prices competitive, Christopher told Fierce. AT&T did this by giving people 50 percent more data for an additional $5 and also allowed users with unlimited messaging to call any mobile phone in the U.S. free of charge.

Christopher also said that AT&T supports developers and aims to be the most open carrier, which allows developers to increase their capabilities and gives users one-click billing for mobile apps.

Congress Eyes New Rules For Inherited IRAs

By Kelly Greene; The Wall Street Journal ~ Feb 10, 2012

A surprise proposal in Congress to drum up tax revenue from inherited IRAs is raising eyebrows—and making some financial advisers nervous.

A Senate Finance Committee proposal floated this past week as part of a highway-funding bill would give heirs five years to empty inherited individual retirement accounts or 401(k)s, which would typically trigger income-tax payments. The rule change could raise some $4.6 billion in income taxes over the next decade, according to a statement by Sen. Max Baucus (D., Mont.), chairman of the Senate Finance Committee.

“IRAs are intended for retirement,” Sen. Baucus said at a committee hearing on Tuesday. “They are being used by some taxpayers to give tax-free benefits to second, third, maybe even fourth generations.”

Today, if you inherit an IRA or 401(k), you can stretch withdrawals across your life expectancy, meaning the assets could continue to increase in value, tax-deferred, for decades while you withdraw a relatively small portion each year. Income tax is due on distributions unless the inherited account is a Roth IRA.

The strategy is especially beneficial to younger heirs. A 10-year-old grandchild, for example, could spread out those withdrawals—and any taxes—for almost 73 years, according to an Internal Revenue Service life-expectancy table.

The proposed Senate measure would apply to accounts whose owners die after 2012. It exempts several types of heirs, including children with special needs, spouses and beneficiaries who are within 10 years of the original account-holder’s age.

The proposal isn’t in the House version of the bill, and Sen. Baucus has said he is willing to look for other revenue sources. But even if inherited IRAs don’t get clipped now, it could happen down the road. “Perhaps this is a provision that can be taken up in tax reform,” Sen. Baucus told the committee.

“Congress sees gold in these IRAs, and they’re looking to corral some of that money,” says Ed Slott, an IRA consultant in Rockville Centre, N.Y.

A handful of accountants and lawyers who deal regularly with inherited IRAs say it makes sense to simplify distributions. But they also worry that a five-year deadline could dump big distributions on some heirs too fast, bumping them into higher tax brackets or allowing them to blow through an inheritance.

Another problem with the shorter payout: Once the assets are out of the IRA, they are no longer sheltered from creditors in bankruptcy, says Seymour Goldberg, a lawyer and CPA in Woodbury, N.Y. If the five-year deadline is enacted, Mr. Goldberg says, he would advise setting up trusts to manage IRA proceeds for such heirs, despite steep administration costs. His firm, for example, charges at least $3,500 to set up such a trust.

The proposal could have unintended consequences. The short-term tax gain could backfire, Mr. Slott says, if it slows the rate of conversions to Roth IRAs. He says he has seen retirees in their 60s and 70s convert traditional IRAs to Roths and pay income tax on tax-deferred holdings in order to secure future tax advantages for their grandchildren.

If Congress does wind up shrinking the “stretch,” there are still a number of ways to transfer money to your children, though they are more complicated and have costs, Mr. Slott says:

Withdraw the IRA assets you don’t think you will need, pay the tax and buy life insurance for them. You could use the policy to fund a trust on their behalf to remove the assets from your estate.

Leave your IRA to a charitable remainder trust that pays your beneficiaries and still gives you a tax deduction.

Name your spouse, rather than your children or grandchildren, as your IRA beneficiary to prolong the withdrawal period.

At the moment, it is good to be aware that Congress has IRAs on its radar, “but there’s no need to do anything now because this might become law,” says Barry Picker, a CPA and certified financial planner in Brooklyn, N.Y. “We’ll have to deal with it later, client by client.”

Signs Your Pension Plan Is in Trouble

These Four Red Flags Can Help Retirees Prepare for—and Prevent—Benefit Cuts

By Ellen E. Schultz; The Wall Street Journal ~ Feb 10, 2012

If your pension plan is underfunded, you could be at risk of losing some of your benefits. That isn’t news. But did you know that your pension can be at risk even if the plan is relatively healthy?

Something as seemingly innocuous as having a lump-sum payout provision, or even having a religious affiliation, could mean your benefits are vulnerable. Here are some red flags to look for, and some ways to protect yourself.

Two years ago, the musicians at the San Francisco Symphony Orchestra got a rude shock when management, concerned about endowment losses, told the symphony board they should freeze the musicians’ pensions.

Sound familiar? This is happening in workplaces around the nation, but in many cases managers who want to freeze pension plans are choosing financial assumptions that make the pension look like a bigger burden than it actually is.

The musicians hired an actuary, who challenged the assumptions that management was using and determined the pension wasn’t that costly after all. As a result, management backed off.

“You have to push back,” says Dave Gaudry, a viola player on the musicians’ negotiating committee. “Don’t believe what anybody says.”

Many plans allow departing workers to take their pension benefits as a one-time payout instead of a monthly payment in retirement. It doesn’t necessarily hurt the plan if a lot of people take their money out at once. All things being equal, when the plan pays out $100 million in lump sums, the obligation also falls by $100 million, so it’s a wash.

It’s a different story, though, if the company offers early retirement or separation incentives paid with plan assets, as opposed to using general corporate funds. If that is the case, a pension plan can quickly become underwater.

And this can affect your own ability to take a lump sum later on. If the plan’s funding falls below 80%, federal law limits lump sums to 50% of the benefit. If the funding falls below 60%, lump sums are prohibited and the plan is automatically frozen, meaning your pension stops rising.

So keep a close eye on your plan’s health if your employer begins a big downsizing push that includes enhanced pension payouts.

Your pension plan might be fat and happy, but if another company takes over your employer—and your pension—it can legally use the assets in your plan to top off an underfunded plan of its own. This strategy, though legal, is one of the quickest ways for your pension to go from healthy to distressed.

Similarly, if your company spins off or sells your division, plan for the worst. Many companies spin off underperforming divisions, loading them up with retirees but without adequate assets to pay their promised benefits. Most retirees of Delphi, General Motors’s auto-parts spinoff, lost between 20% and 40% of their pensions when their plan was terminated in bankruptcy.

When Motorola was planning to spin off its mobile-device business in 2010, it planned to leave its pension plan, covering 87,000 people, behind in the old business. The Pension Benefit Guaranty Corp.—the quasifederal agency that insures pension plans—raised concerns, and early last year the company agreed to put $100 million into the plan over five years. A Motorola spokeswoman says the contribution was on top of the normal funding requirement.

Over the past decade, more than 100 employers—including hospitals, schools, nursing homes, universities, clinics and religious charities—have been claiming their pension plans are actually “church plans,” a largely unregulated pension category that generally covers clergy and lay employees of churches, synagogues, mosques and other houses of worship.

Church plans are exempt from federal pension rules, including those that require employers to fund the plans and insure them with the PBGC. This puts participants at tremendous risk.

Employees at Augsburg Fortress, a publisher in Minneapolis that sells books published for the Evangelical Lutheran Church in America, lost 30% to 60% of their pensions when the publisher, which claimed the pension was a church plan, terminated it in 2010. Augsburg didn’t respond to requests for comment.

Last fall, the Internal Revenue Service said employers must notify their employees and retirees if they are seeking church-plan status. But the rule isn’t retroactive, so if your plan has converted already, your employer doesn’t have to notify you. If you are worried, ask your plan administrator if your pension is protected by the PBGC.

What if you are a priest, pastor, rabbi or other employee and are in a genuine church plan? Pray for the best, because your employer isn’t required to fund the plan, disclose much about its health or purchase insurance.

What to make of AT&T’s vanishing spectrum crisis

By Tim Farrar; Gigaom ~ Feb 11, 2012

Is AT&T failing to keep its story straight about the need for more spectrum, or is it just that the popping of the spectrum bubble has taken them by surprise as well? Recently the nation’s second largest operator has seemed to back off from some of its more aggressive claims about how fast data traffic was growing.

As Dave Burstein of Fast Net News first highlighted in late January, AT&T’s senior management told investors on two separate occasions last month that “The base increase of data consumption right now is growing 40 percent a year,” and “LTE does give us a 30 percent to 40 percent lift in network efficiency, but at current growth rates, that equates to only about a year’s increase in traffic”. Remarkably that 40 percent figure is not only far less than the growth rates projected by Cisco and assumed in the FCC’s October 2010 working paper (which argued that 300MHz of additional spectrum was needed by 2014), but it also contrasts dramatically with the figures AT&T itself presented when it announced the planned takeover of T-Mobile in March last year.

In that March 2011 presentation AT&T projected that data volumes would grow by 8 to 10 times between the end of 2010 and the end of 2015, based on an expectation that volumes would roughly double in 2011 and then increase by a further 65 percent in 2012. However, if we instead project out the current 40 percent increase in data consumption that AT&T is seeing then volumes would only increase by 5-6 times by 2015. Ironically, if that rate of growth was applied to the FCC’s October 2010 model, all of this data traffic would easily be accommodated for the rest of this decade by existing spectrum allocations under the FCC’s own assumptions of new cell site deployments and spectrum efficiency gains from new technologies.

Why might AT&T’s data volumes have fallen so far short of the growth expected less than a year ago? Two obvious explanations stand out: it seems that offload to Wi-Fi is becoming far more successful than many expected, and AT&T is now cracking down on the top 5 percent of users of its unlimited iPhone data plans.

With those “power users” consuming on average 12 times more data than other customers, and doing bizarre things like turning off Wi-Fi to save battery life while watching Netflix movies, it’s pretty easy to see how even a modest effort should reduce AT&T’s network loading significantly.

Of course, going forward AT&T would still find it much easier to increase the capacity of its LTE network by using additional spectrum rather than going through the messy process of refarming PCS or 800MHz spectrum from GSM to LTE. Now that AT&T has handed over much of its AWS holdings to T-Mobile as part of the break fee for that deal, AT&T would need look elsewhere for this spectrum.

So it’s hardly surprising that AT&T has been vocally proclaiming its opposition to the FCC placing any restrictions on participation in future auctions or on other potential acquisitions. However, with plenty of near term headroom on its new LTE network, the primary focus is likely to be on AT&T’s spectrum needs in 2015 and beyond. A time frame that will include its potential build out of an LTE-Advanced network.

Ultimately, as many (including myself) have been speculating, it therefore probably does make most sense for AT&T to end up in bed with DISH Network and use its relatively clean 2x20MHz of satellite spectrum for LTE Advanced. This assumes the FCC allows this spectrum to be repurposed for terrestrial services in the near future.

It could be argued that if demand growth is slower than previously expected, then AT&T might hold off on a decision for another year or more to see what happens with other spectrum bands (such as broadcast TV and AWS-3). On the other hand, if DISH’s alternative plan could potentially bring together other players like MetroPCS and even perhaps DirecTV to create a rival 4G network, AT&T may believe that now is the time to cement its dominant position alongside Verizon in the wireless industry. Thus ensuring that no-one else will ever be able to come close to the spectrum holdings and network coverage of these two players.

Tim Farrar is President of Telecom, Media and Finance Associates, a consulting and research firm in Menlo Park, CA, which specializes in technical and financial analysis across the satellite and telecom sectors.

AT&T, Cloudscaling Open New Cloud Strategy

By Carol Wilson; Light Reading ~ Feb 09, 2012

Cloudscaling , a consultancy which has been helping service providers and enterprises launch their own cloud services, is now launching a cloud service of its own, an open cloud infrastructure that has the rapid scalability of an Amazon Web Services LLC cloud.

Cloudscaling will formally announce its new service next week and will name AT&T Inc. (NYSE: T) as a customer. The companies will take the stage together at Light Reading’s Carrier Cloud Forum.

This marks a shift for both companies — Cloudscaling is now focused on building cloud infrastructure products in addition to services, and AT&T will now sell massively scalable commodity cloud services alongside its existing cloud offers. (See AT&T Cloud Offer Rains Apps, Cloud Chronicles: AT&T, and AT&T’s Cloud Strategy: Bigger Is Better.)

Like other major telecom players, AT&T has had almost an anti-commodity cloud message, selling cloud services enhanced by security, tailored to specific industries and in some cases tied to transport services.

What Cloudscaling has been preaching — and deploying, in the case of customers such as Korean service provider KT — is the need for massively scalable cloud services that can help enterprises in new ways, rather than simply outsourcing and virtualizing existing IT services. (See Mgmt World: KT Puts Commodity Spin on Cloud.)

For service providers, massively scalable and cost-effective cloud infrastructures will be a core requirement for delivering new applications, particularly in the mobile arena, with the potential for explosive growth to millions of endpoints.

“In this transition, we have been working closely with AT&T,” says Cloudscaling CEO Michael Grant. “At CES, AT&T announced open APIs for their network to give mobile developers access to AT&T’s network of services. The project we have done with AT&T is essentially the cloud infrastructure model we are talking about, sitting underneath those apps. ”

This moves Cloudscaling out of the custom cloud business, to selling products based on key components which remain the same:

OpenCloud OS, software “built around OpenStack to deliver a core set of key capabilities required to deploy, manage, and will operate OpenStack in production at scale, adding key capabilities we have learned are necessary to successfully run and manage a cloud,” says Grant.
Hardware blueprints: Cloudscaling won’t specify manufacturers but will be specific about the hardware requirements and certify compliant vendors while spelling out how compute, storage and networking equipment should be configured.
CloudBlocks: These are defined modular cloud building blocks that incorporate the Open Cloud OS and hardware specs.

The Cloudscaling news advances the agenda that Randy Bias, Cloudscaling founder, chairman and CTO, has been pushing for some time now: Massively scalable clouds are required for delivering next-gen IT services and are necessary for service providers that want to compete in cloud services. (See Cloudscaling’s Bias: Telcos Show Cloudy Thinking.)

“Many people have interpreted that to mean a cheaper cloud,” Bias says. “That’s not us. The next-gen apps require a very different type of system, and that is what we are trying to deliver.”

The Cloudscaling approach also fits into the emergence of the hybrid cloud strategy: using private clouds which are controlled by the customer and sit behind a firewall, for some applications, and public clouds, which are more truly commodity, for apps that don’t have the same security and control needs.

Shameless plug: It’s not too late to hear more from Cloudscaling and AT&T on this topic: you can still register for the Carrier Cloud Forum, which is co-located with Cloud Connect.

— Carol Wilson, Chief Editor, Events, Light Reading