Tech Law Journal Daily E-Mail Alert
April 17, 2001, 8:00 AM ET, Alert No. 167.
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Insider Trading
4/16. A grand jury of the U.S. District Court (NDCal) returned an indictment [PDF] against Malcolm Wittenberg charging two counts of insider trading in violation of 15 U.S.C. 78j and 17 C.F.R. 240.10b-5. Wittenberg is the head of the patent department in the San Francisco office of the law firm of Crosby Heafey Roach & May. The indictment alleges that he twice made purchases of stock of a software company (Forte Software) that was a client of the firm, and that was about to be acquired by Sun Microsystems, based upon material non public information that he acquired in the course of his representation of that client. The indictment alleges that Wittenberg learned of the impending transaction when lawyers for Sun and Forte asked him to provide information regarding Forte's intellectual property. The complaint further alleges that his gross proceeds from the transactions was $54,687.44. Otherwise, the five page indictment is short on details. John Hemann is the Assistant U.S. Attorney who is prosecuting the case. Wittenberg is represented by Doug Young, who handles white collar crimes at the law firm of Farella Braun & Martel. See, USAO release of April 16. See also, Sun release of August 23, 2000, regarding its acquisition of Forte.
4/16. The FCC released a Second Order on Reconsideration [PDF] in its CALEA proceeding (CC Docket No. 97-213). Congress passed the Communications Assistance for Law Enforcement Act in 1994 to enable law enforcement authorities (LEAs) to maintain their existing wiretap capabilities in new telecommunications devices. It provides that wireline, cellular, and broadband Personal Communications Services carriers must make their equipment capable of certain surveillance functions. The FBI and Justice Department have since aggressively sought to expand their CALEA authority through interpretation and implementation.
In the present matter, the FBI asked the FCC reconsider its previous orders implementing the CALEA by further imposing "more effective personnel security obligations" upon carriers. The FCC declined to impose new requirements, stating that carriers were capable of ensuring security "without micro-management oversight by law enforcement or the Commission." The FBI also asked the FCC to require carriers to generate an automated message that would permit LEAs "to confirm periodically that the software used to conduct an interception is working correctly and is accessing the equipment, facilities, or services of the correct subscriber." The FCC declined this request also. However, the FCC did make minor revisions to 64.2103 and 64.2104 of its rules to clarify the arrangements telecommunications carriers subject to CALEA must make to ensure that LEAs can contact them when necessary, and the interception activity that triggers a record keeping requirement.
Computer III
4/16. Monday, April 16, was the deadline to file comments with the FCC in response to its notice requesting comments to "update and refresh the record" on issues raised in its Computer III Further Notice of Proposed Rulemaking, originally issued on January 30, 1998. Computer III established nonstructural safeguards for the provision of enhanced services by the Bell Operating Companies (BOCs). eVoice, which provides voice mail services which allow users to access their messages via the Internet, submitted a comment [PDF]. It urged the FCC "to continue all of the existing Computer III and ONA safeguards". It also argued that the BOCs have repeatedly violated the existing Computer III and ONA safeguards, and hence, additional safeguards and enforcement efforts are necessary. See, CC Dockets 95-20 and 98-10. The FCC's notice was published in the Federal Register, March 15, 2001, Vol. 66, No. 51, at Pages 15064 - 15065.
New Documents
PPI: report on online privacy, 4/16 (PDF, PPI).
USDC: indictment of Malcolm Wittenberg, 4/16 (PDF, USAO).
FCC: Second Order on Reconsideration of CALEA orders, 4/16 (PDF, FCC).
3G Spectrum
4/16. Monday, April 16, was the deadline to file comments with the FCC regarding its Final Report [101 pages in PDF] on the possible use of spectrum in the 2500-2690 MHz band for Third Generation (3G) wireless systems. See, notice requesting comments published in the Federal Register, April 11, 2001, Vol. 66, No. 70, at Pages 18740 - 18741. The Final Report, dated March 30, 2001, is titled "Final Report: March 30, 2001: Spectrum Study of the 2500-2690 MHz Band: The Potential for Accommodating Third Generation Mobile Systems". It concluded that this spectrum is already heavily licensed throughout the country, that it would be technical difficult to segment or share the spectrum, and that relocation could cost between $10.2 and 30.4 Billion. See also, executive summary of Final Report.
Incumbent users of spectrum in the 2500 to 2690 MHz band filed comments commending the Final Report, and urging the FCC not to place 3G services in this band. The National ITFS Association submitted a comment in which it stated that "The Final Report effectively precludes any rational argument that the ITFS/MDS bands can or should be made available for 3G services. It's time to take these bands off the table so that ITFS/MDS licensees and their partners can move forward with the roll out of fixed wireless broadband services, which are critical to the educational and commercial well being of this country." The American Association of School Administrators submitted a comment in which it stated that "we urge that the ITFS spectrum no longer be considered a viable option for 3 rd Generation Cellular rollout."
Clearwire, which is a provider of wireless high speed Internet access, and equipment for two-way fixed wireless Internet access in the 2500 to 2690 MHz band, submitted a comment in which it argued that "The Final Report confirms that there is no room in the 2500-2690 MHz band for 3G services, and no way to make room. All parties agree that spectrum sharing will not work. There is not enough in-band spectrum for segmentation, and not enough elsewhere for relocation. Even if spectrum could be found, either segmentation or relocation would entail costs in the tens of billions of dollars. The Commission must place 3G services elsewhere in the spectrum." Sprint submitted a comment in which it stated that "MDS/ITFS services can neither share the band nor be reallocated to other spectrum without great disruption of service and prohibitive cost."
Background information: 3G is intended to bring broadband Internet access to portable devices, but needs spectrum allocated for its use. Two spectrum bands were identified by the International Telecommunication Union (ITU) 2000 World Radiocommunication Conference (WRC-2000) for possible 3G use. One is the 1710 to 1885 MHz band, which is currently being used by federal agencies, especially the Department of Defense. It is subject to NTIA jurisdiction. The DOD adamantly opposes locating 3G systems in this band. The other is the 2500 to 2690 MHz band, which is currently being used for MMDS and ITFS, and which is subject to FCC jurisdiction. As the comments quoted above indicate, incumbent users of this are likewise hostile to the use of this band by 3G services.
4/16. The Progressive Policy Institute, a Democratic party think tank, released a report [PDF] titled Online Privacy and a Free Internet Striking a Balance, which was authored by Shane Ham and Robert Atkinson. The report reviews the three major online privacy bills introduced in the 106th Congress, and endorses the bill sponsored by Sen. John McCain (R-AZ) and Sen. John Kerry (D-MA). Their bill requires specific notice mandates, an opt-out mandate, and strong state preemption. See also, PPI release and S 2928 (106th), the Consumer Internet Privacy Enhancement Act.
4/16. The George Washington University Virginia Campus held a symposium titled "Privacy in the Information Age." See, agenda.
More News
4/16. Winstar, a competitive local exchange carrier (CLEC) which provides local and long distance voice, Internet access, and data transport, stated that it "is considering all appropriate actions, including the possibility of a reorganization under Chapter 11 of the U.S. Bankruptcy Code ..." Winstar also stated that "did not make aggregate interest payments of approximately $75 million on its senior debt securities, which were due on April 16, 2001. Under the terms of this debt, the Company has 30 days from the payment date to make the required payment in order to cure this default. Additionally, Lucent Technologies has declared a default under the terms of the Company's facility with Lucent, which Winstar disputes." See, release.
4/16. The FCC's International Bureau published a notice [PDF] requesting public comments to assist it in preparing its annual report to various Congressional committees regarding the progress being made under the ORBIT Act in promoting competition in satellite communications services, and in privatizing INTELSAT and Inmarsat.
4/16. President Lagos of Chile met in Washington DC with US President Bush. The two held a joint press conference at which Bush stated that "I'm confident that by the time this year is over we will conclude a free trade agreement with Chile." He also stated that "I'd certainly like to have what they call fast track authority. ... It's important for the President to fight for the right to be able to negotiate trade agreements without amendment. I believe we're making progress toward regaining that power for the President." See, transcript.
FCC Approves Verizon LD Application
4/16. The FCC approved Verizon's Section 271 application to provide in-region interLATA long distance service in Massachusetts. This is the fifth state for which the FCC has allowed the regional bell operating company to enter the long distance phone service market. The others are New York, Texas, Oklahoma, and Kansas. See, FCC release and Verizon release. Chairman Michael Powell supported the decision, along with Commissioners Harold Furchtgott-Roth and Susan Ness. See, separate statements of Powell, HFR, and Ness. The FCC wrote in its Memorandum Opinion and Order [MSWord, 142 pages plus voluminous appendices] that it commends Verizon for "all of the work that it has undertaken to open its local exchange market to competition in Massachusetts. For example, Verizon states that competitive local exchange carriers (competitive LECs) serve more than 513,000 lines on a facilities basis in Massachusetts ..." (FCC Docket No. CC 01-9.)
Commissioner Gloria Tristani dissented. She wrote in her statement that "The availability of unbundled network elements (UNEs) at cost-based rates is an essential ingredient of a primary strategy for entering the residential market in Massachusetts. ... Based on the evidence in the record, I cannot conclude that Verizon has demonstrated that its switching rates are based on the forward-looking, total element long run incremental cost (TELRIC) of providing that network element."
USTA President Gary Lytle said in a statement that "We anticipate several long distance applications from other Bell companies this year. The FCC should act quickly to approve those applications and give consumers across the country real choices in telecommunications services." BellSouth Vice chairman Jere Drummond said in a prepared statement that "We anticipate a series of applications, starting with Georgia, which we plan to file soon."
Some criticized the FCC's decision. The Consumer Federation of America and the Massachusetts Consumers' Coalition released a joint statement in which they asserted that "Allowing Verizon to sell long distance service before it has opened its monopoly service areas to alternative local service providers snuffs out any hope that a vigorously competitive telephone market will develop." Similarly, AT&T VP for Federal Government Affairs Len Cali said in a prepared statement that "The FCC afforded Verizon far too much latitude in approving its application to offer long distance services in Massachusetts. Verizon's wholesale rates do not comply with the requirements of the Telecom Act, and do not permit meaningful competition."
Deadline to file reply comments with the FCC regarding its Public Notice [PDF] regarding rules for location privacy for mobile devices. The CTIA filed a petition [PDF] with the FCC on Nov. 22, 2000, requesting a rule making proceeding. In response, the FCC issued a Public Notice [PDF] on March 16, 2001 requesting comments on the CTIA's petition. At issue are privacy rules for cell phones, PDAs, in car map and traffic services, wireless tollbooth collection systems, Blackberry e-mail pagers, Bluetooth enabled devices, and anything else which can be embedded with a GPS chip, or other technology, capable of generating location data. On April 6 the FCC received a dozen comments. See, WT Docket No. 01-72.
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