Text Box: Legal and Regulatory Update Text Box: Page 4 ò Return to Page 1 Text Box: STC LINES—April 2006 Text Box: By MARTHA BUYER LAW OFFICES OF MARTHA BUYER, PLLC Martha Buyer is the STC’s Regulatory Attorney In telecom circles, there are all sorts of jokes about the continuing soap opera of our industry. “As the Rotary Dial Turns” used to be my favorite, although I’m now partial to “The Young and the Wireless.” In any case, the incredible variety of issues and subsequent teeth gnashing that occurs at the FCC, state commissions and in consultant offices is always chock full of interesting circumstances and an unending supply of drama. Most recently, the hot topics are the merger discussions between Lucent and Alcatel, and the merger discussions between AT&T/Bell South and Cingular. Also of particular interest has been the FCC’s relaxation of the rules governing Verizon’s obligations with respect to some large end-users and CLEC customers. With the FCC having only four sitting commissioners (two Republicans and two Democrats), Republicans have been jockeying to get Robert McDowell (a telecommunications attorney whose interests have always been on the CLEC side of the house) approved as the 5th commissioner. However, as recently as March 28, 2006, a Senate hold has been placed on the nomination, not because of any personal issues with the nominee, but because Senator Jay Rockefeller would like assurances that previous inconsistencies in the management of the Universal Service Fund (relating to Text Box: fraud, not accounting) have been resolved. The longer the FCC remains politically deadlocked, the less likely it will be to tackle thorny political issues, including net-neutrality and traditional telephone and cable deregulation. While it’s the mega-mergers that attract almost all of the media attention in areas of telecommuni-cations, there are other recent acti-vities in the telecommunications world that, while lower profile, still warrant a closer look. Maintenance Plan Scrutiny A case that received little media attention was decided in January by the U.S. District Court in the Northern District of Illinois, Eastern Division. United Asset Coverage, Inc. v. Avaya, Inc. (No. CIV.A. 05C4350) provides an interesting view into the rationales and strategies used by large telecom-munications equipment vendors as they sell their wares to end users. This case wasn’t about the income generated by the equipment sales, however, but rather about revenues from ongoing maintenance agreements. In this case, United Asset Cov- erage (UAC) requested a prelim-inary injunction to prevent Avaya from changing its policies regard-ing access to software used to main- tain Avaya’s embedded equipment. Here we see a case serving to shine a bright light into the sales and pricing practices of not only Avaya, but also other large equipment makers. Text Box: At the time the case was filed, UAC provided maintenance to Avaya customers (and custo-mers with other installed telecom-munications equipment) on a time and materials (T&M) basis. While those who choose a T&M agreement, whether provi-ded by the original vendor, or by a third party maintenance contrac-tor, may or may not save money, consultants have long known that customers who opt for T&M maintenance programs will be at the bottom of the list when it comes time for service. In this case, UAC was in the business of buying T&M time from licensed Avaya maintenance providers and then reselling it to Avaya customers at a discount over the T&M rates charged directly by Avaya maintenance providers. UAC purchased T&M time in bulk, thus taking advan-tage of a volume discount. When Avaya began limiting access to software which was designed for use by only licensed Avaya service providers and customers, and which UAC had had at least minimal legal access to prior to this change in Avaya policy, UAC was no longer able to access Avaya’s proprietary software and thus serve its custo-mers in the best way possible. UAC hoped to prevail based upon the theory that the manufac-turer (Avaya) had used “its con-trol over an essential input as a means to monopolize the after-market for servicing its equipment and to crush competing service providers.” Continued on Page 5 ò