Is the Sprint Lawsuit a Spectrum Play?

Verizon Wireless has found a source of exciting play dates with cable operators via a deal at the beginning of December with Comcast, Time Warner Cable and Bright House Networks and, last week, with Cox Communications. The need to reach out and make new cable friends clearly doesn’t extend to Sprint, however. Bloomberg and other sites are reporting that the telephone company has filed suit against Cable One and three of Verizon Wireless’s new friends over VoIP patents that they say were infringed upon. The stories point out that Sprint won a suit against Vonage Holdings over the same patents in 2007. Vonage paid $80 million in licensing fees as a result. The news raises a group of interesting questions. Why, for instance, has Sprint waited until now to sue? Nothing has changed in the use of VoIP for a few years, other than cable’s position growing stronger. But it has been a significant player in the sector for well more than a decade. Another question: Why are only cable companies targeted? Though the answer is pretty obvious (that’s where the money is), for cosmetic reasons it may have been helpful for Sprint to throw in a non-MSO VoIP provider. The suit comes as wireless carriers prepare for the data deluge brought by the emergence of LTE. One reaction is the aforementioned deals between cable operators and Verizon Wireless, which will help the carrier add spectrum. The second was the acquisition of T-Mobile by AT&T, which also was driven by spectrum concerns. The deal’s demise isn’t good news for AT&T from this perspective. Writes Cecilia Kang at The Washington Post: Some analysts, including Kevin Smithen at Macquarie Capital, worry about the future of AT&T, as it now has to deal with a data deluge on its network without the prospect of more spectrum in the pipeline. It is possible that the Sprint suit and its timing — and the inclusion of an operator, Washington Post Company subsidiary Cable One, which usually isn’t grouped with the big players — also has a spectrum angle. This is from The Washington Post’s 10-K report for fiscal year 2008: In December 2006, Cable ONE purchased in the FCC’s Advanced Wireless Service auction approximately 20 MHz of spectrum in the 1.7 GHz and 2.1 GHz frequency bands in areas that cover more than 85% of the homes passed by Cable ONE’s systems. This spectrum can be used to provide a variety of advanced wireless services, including fixed and mobile high-speed Internet access using WiMAX and other digital transmission systems. Licenses for this spectrum have an initial 15-year term and 10-year renewal terms. Two things should be noted. Wired comments that the spectrum is not as desirable as that bought by Verizon Wireless in the first deal announced this month. At the same time, however, it is in the same area as that sold to the wireless carrier by Cox. Thus, it has value: The Cox/Verizon transaction is obviously not as grand in scale as the AT&T/T-Mobile deal. And the AWS zone, way up there in the 1.7 to 2.1 GHz region, should not be confused with the coveted 700 MHz sector. The “beachfront broadband” licenses to this area of the spectrum were auctioned off in 2008 to the tune of $19.6 billion, and Cox is apparently keeping its share of that treasure. Could it be, then, that Sprint is trying to make the cable operators more amendable to a spectrum sale along the lines of the Verizon Wireless deals? Lawsuits can be good bargaining chips and — if they are decided in the wireless carriers’ favor — a good form of compensation.

Top ZTE officials to testify vs GMA

Two executives of ZTE Corp., the largest telecommunications equipment company in China, will be among the witnesses of the Ombudsman against Pampanga Rep. Gloria Macapagal-Arroyo, now facing graft charges before the Sandiganbayan for her alleged role in the $329-million national broadband network (NBN) anomaly. ZTE vice president Yu Yong and Fan Yang, one of the firm’s directors, are expected to testify against the former president, her husband Jose Miguel Arroyo, former elections commissioner Benjamin Abalos, and former Department of Transportation and Communications (DOTC) secretary Leandro Mendoza during trial. Both Chinese executives were listed as main witnesses in the three separate criminal complaints filed by the Office of the Ombudsman on Wednesday, along with other key personalities who claimed to have knowledge of how the NBN-ZTE deal was overpriced due to alleged commissions and kickbacks. The STAR sources said Yu Yong and Fan Yang have already been asked to testify before the Sandiganbayan on the graft cases filed by former Ombudsman Merceditas Gutierrez against Abalos and former National Economic and Development Authority (NEDA) director general Romulo Neri in May 2010, also in relation to the NBN deal. The Office of the Special Prosecutor (OSP) has sent to the ZTE officials the letters signed by Justice Secretary Leila de Lima and translated into Chinese, requesting their participation in the court hearings since they were the executives who allegedly held meetings with the respondents discussing the details of the contract. Sources said there are several options to pursue, including the possibility of having prosecutors, defense lawyers, and a Sandiganbayan clerk of court fly to China to conduct a deposition, an out-of-court oral testimony of a witness that is reduced to writing. If such an arrangement cannot be made, government lawyers plan to first secure the sworn statements or affidavits of Yu Yong and Fan Yang and have the anti-graft court summon them through the Mutual Legal Assistance Treaty (MLAT). Also listed as witnesses against the Arroyos, Abalos, and Mendoza are former House speaker Jose de Venecia Jr. and his son Jose “Joey” de Venecia III, NBN-ZTE deal whistleblower Rodolfo Lozada Jr., Dante Madriaga, and representatives of DOTC and the Wack Wack Golf and Country Club. The first graft case filed by the Ombudsman against Arroyo accuses her of violating Section 3(i) of the Anti-Graft and Corrupt Practices Act for allegedly having personal interest for personal gain in the contract “despite knowledge of the irregularities and anomalies that attended its approval.” The second graft case against her and her husband, Abalos, and Mendoza is for alleged violation of Section 3(g) of the same law which penalizes acts of entering into any contract or transaction that is “manifestly and grossly disadvantageous to the government.” The third case filed against Arroyo accuses her of violating Republic Act 6713 or the Code of Conduct and Ethical Standards for Government Officials and Employees for playing golf and having lunch with ZTE executives in Shenzhen, China while the NBN deal was still pending final approval. Lawyer Gabriel Villareal, Abalos’ legal counsel, said he could not comment yet on the case filed against his client since he has not seen or read the actual complaint. OSP will handle trial Unlike in the case of former Ombudsman Simeon Marcelo during the plunder trial of former President Joseph Estrada, Ombudsman Conchita Carpio-Morales has no plans of actually participating in Arroyo’s trial. Assistant Ombudsman Asryman Rafanan, the anti-graft agency’s spokesman, said Morales is not keen on joining the prosecutors who will handle the case at the Sandiganbayan. “The OSP will be handling the prosecution of the cases,” he said, adding that it will be up to the prosecution team to strategize and “explore the possibility or the viability and the means with which to pursue or to secure the listed witnesses,” including the ZTE officials. Rafanan said the Office of the Ombudsman will not pick the lawyers to handle the Arroyo cases and will just follow the OSP’s system of assigning cases to its bureau. When the cases were filed last Wednesday, representatives of the Office of the Ombudsman did not go through the OSP and instead filed the complaints directly with the Sandiganbayan. “I think there is no express rule under the Office of the Ombudsman that all information would have to pass through the OSP since the OSP is under the Office of the Ombudsman,” Rafanan explained. When Ombudsman Morales held her first and only press conference after assuming her post, Special Prosecutor Wendell Sulit, who has a rank equal to a deputy ombudsman, was curiously absent from the presidential table even though other officials were present. Rafanan said the graft complaints against the Arroyos, Abalos, and Mendoza would be raffled off to a division of the Sandiganbayan “and under the rules, the court will have to determine probable cause for the issuance of warrant of arrest.” “The office of the Ombudsman weighed the evidence and so far as meeting the required quantum of evidence, it has sufficiently met the level of probable cause and that the crimes were committed and that respondents probably committed the crime and should be hailed to court,” he said when asked how strong the cases are. Rafanan also dismissed claims that the Office of the Ombudsman erred in finding reason to indict the respondents after previously being cleared of the same accusations. “It was discussed (in the resolution) that the Office of the Ombudsman had the power to conduct another investigation over the case and that there is no res judicata on that case even after the previous investigation conducted by the previous ombudsman,” he said. Presidential Adviser for Political Affairs Ronald Llamas expects more lawsuits to be filed against Arroyo. Llamas said there are other cases that had not yet been filed at the Office of the Ombudsman, like the fund anomaly at the Overseas Workers Welfare Administration. Meanwhile, lawyer Salvador Panelo accused the Office of the Ombudsman of filing flawed graft complaints against Arroyo and Abalos. Panelo said Abalos could not be charged for violating Section 3(g) of the Anti-Graft and Corrupt Practices Act because he did not enter (into a contract or transaction) on behalf of the government in the NBN deal. “He was not a signatory to the contract,” Panelo, a former spokesman for Abalos, said, believing that the Office of the Ombudsman’s case is weak. Panelo said the NBN-ZTE deal that was cancelled “was not disadvantageous to the government.” As to the graft cases filed against Arroyo, he said Section 3(g) of the Anti-Graft and Corrupt Practices Act presupposes that there is no contract yet, “there is no such animal precisely because it has been cancelled.” “Also, assuming there is a contract, there is absence of injury to the government as ruled upon by a previous investigating panel,” he stressed. As to Section 3(i), Panelo asked, “how could the Ombudsman file a graft case under such provision when the panel ruled that there is no proof that money, assuming there is one which is impossible to prove, passed on to GMA?” “That is precisely why it did not file a plunder case against GMA. There is a contradiction in the stand of the panel,” he said.