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July 12, 2001, 9:00 AM ET, Alert No. 225.
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4th Circuit Rules Against Henrico Open Access Requirement
7/11. The U.S. Court of Appeals (4thCir) issued its opinion in MediaOne v. County of Henrico, affirming the District Court's ruling that the County of Henrico's open access requirement is preempted by federal law. The Appeals Court held that "Henrico County violated § 541(b)(3)(D)" of the Communications Act "when it conditioned the transfer of control of MediaOne's cable franchise by requiring MediaOne to unbundle its Road Runner service and provide open access to its telecommunications facilities, that is, its cable modem platform. Because the open access provision is inconsistent with the federal Communications Act, it is preempted."
Facts. MediaOne is a cable company with a license from Henrico County (i.e., Richmond, Virginia). AT&T acquired MediaOne in 1999. AT&T and MediaOne applied to Henrico for approval of the transfer of control of MediaOne's license. Henrico conditioned its approval with an open access requirement. It required that AT&T and MediaOne "shall provide any requesting Internet Service Provider (ISP) access to its cable modem platform (unbundled from the provision of content) on rates, terms, and conditions that are at least as favorable as those on which it provides such access to itself, to its affiliates, or to any other person." (Parentheses in original.)
Trial Court. AT&T and MediaOne filed a complaint in U.S. District Court (EDVa) seeking a declaratory judgment that the open access condition violates the First Amendment and the Commerce Clause, is preempted by federal law, and is void under Virginia law. AT&T and MediaOne moved for summary judgment on the grounds that the open access requirement is preempted by the Communications Act of 1934, and is unenforceable under Virginia law. The district court granted AT&T and MediaOne's motion for summary judgment on the grounds that the open access condition was preempted by several provisions of the Communications Act. (See, MediaOne v. Henrico, 97 F. Supp. 2d 712 (E.D. Va. 2000).)
Section 541(b)(3)(D). § 541(b)(3)(D) of the Communications Act provides that "a franchising authority may not require a cable operator to provide any telecommunications service or facilities, other than institutional networks, as a condition of the initial grant of a franchise, franchise renewal, or a transfer of a franchise."
4th Circuit Holding. The Court held that Henrico's open access provision required MediaOne to provide telecommunications facilities in violation of § 541(b)(3)(D). However, the Court did not rule on the specific regulatory classification of MediaOne's Road Runner service. The Court merely reasoned as follows: "MediaOne's Road Runner service combines the use of a cable modem platform with access to the Internet. Road Runner's cable modem platform, separated from its Internet service component, is a telecommunications facility because it is a pipeline for telecommunications, that is, for "the transmission . . . of information of the user's choosing, without change in the form or content." Id. § 153(43) (defining "telecommunications"). As a condition for approving the change in control of the MediaOne franchise, the County required MediaOne to provide its "cable modem platform (unbundled from the provision of content)" to "any requesting Internet Service Provider." The provision unbundles Road Runner's Internet access service from its cable modem platform and compels MediaOne to offer the platform to unaffiliated ISPs for use as a transmission pipeline for their services. The open access provision therefore requires MediaOne to provide "telecommunications ... facilities ... as a condition of ... a transfer of a franchise" in violation of § 541(b)(3)(D)."
FCC NOI Re Internet Access Over Cable. The Court also noted that FCC has issued a Notice of Inquiry [PDF] that seeks comment on whether cable modem technology should be classified as a cable service, a telecommunications service, or an information service, and the implications of adopting any particular classification. (See, GN Docket No. 00-185.) The Court then concluded that "we do not have to reach the question of whether MediaOne's bundled Road Runner service is a cable service, a telecommunications service, or an information service. For the time being, therefore, we are content to leave these issues to the expertise of the FCC."
The three judge panel was composed of Judges Blane Michael, William Wilkins and Emory Widener. Judge Michael wrote the opinion of the court, in which Judge Wilkins joined. Judge Widener wrote a concurring opinion. He concurred in the result, but not the analysis. He wrote that it was unnecessary to decide the federal preemption issue, because Henrico's action was barred by Virginia state law.
Reaction. NCTA P/CEO Robert Sachs said in a release that "The Fourth Circuit's decision in the Henrico case offers the strongest judicial affirmation yet that public policy decisions regarding cable modem services are not within the jurisdiction of local governments. Today's court decision will further encourage the rapid deployment of high speed cable Internet services to consumers."
§ 271 InterLATA Services Means Both Data and Voice
7/11. The FCC published in the Federal Register a notice of its final rule in "Implementation of the Non- Accounting Safeguards of Section 271 and 272 of the Communications Act of 1934," CC Docket No. 96-149. The FCC ruled that the term "interLATA service" used in § 271 encompasses interLATA information services as well as interLATA telecommunications services. See, Federal Register, July 11, 2001, Vol. 66, No. 133, at Pages 36206 - 36208.
Background. Section 271 of the Communications Act of 1934 provides that the Bell companies may not provide "interLATA services" until they have satisfied the FCC that they have opened up their local networks to competitors. In a previous Non- Accounting Safeguards Order, the FCC concluded that the term "interLATA services" as used in section 271 encompasses interLATA telecommunications services and interLATA information services. The predecessor companies of Verizon and Qwest petitioned for judicial review. However, because their arguments had not been raised in the administrative proceeding, the U.S. Court of Appeals (DCCir) remanded this matter. The present rule is the reconsideration on remand.
FCC Delays Spectrum Auction
7/11. The FCC's Wireless Telecommunications Bureau announced that the auction of licenses in the 747-762 and 777-792 MHz bands (Auction No. 31), previously scheduled to begin on September 12, 2001, have been delayed to an unspecified date.
Tom Wheeler, P/CEO of the Cellular Telecommunications & Internet Association, praised the postponement. He stated that "Today’s decision by the Wireless Bureau was a good one for the wireless industry, the U.S. Treasury, and most importantly, for wireless consumers. While the industry indeed faces a spectrum shortage, this delay reflects the facts on the ground: no one today can predict how or when this spectrum will be available or how it will fit into a national, long-term spectrum policy. Until other, related proceedings are concluded, this spectrum’s full potential value cannot be realized. This delay will allow government and industry to review their long-term spectrum needs, give greater clarity to the spectrum allocation process and ensure this spectrum earns its market value." See, CTIA release.
FCC Appointments
7/1. David Sappington joined the FCC as Chief Economist. He was previously an economics professor at the University of Florida. He replaces Gerald Faulhaber, who is returning to his position as Professor of Public Policy and Management at the Wharton School of the University of Pennsylvania. See, FCC release [PDF].
7/1. Jonathan Levy, who has been with the FCC since 1980, was appointed Deputy Chief Economist. He has specialized in economic analysis of mass media, cable television, and satellite television issues. Levy has also assisted in the design and implementation of the FCC's spectrum auctions, in particular the DBS and MMDS auctions.
Court Limits Discovery Regarding Identity of Anonymous Posters
7/11. The Superior Court of New Jersey, Appellate Division, issued its opinion in Dendrite International v. John Doe, a case regarding discovery requests for the identity of anonymous posters to message boards. The Court established a three part test that must be met before the trial court may issue an order compelling discovery from an ISP regarding the identity of an anonymous poster to one of its message boards who has been sued for defamation or other claims based on the content of his posting.
Background. An anonymous poster, known in this litigation as John Doe 3, posted messages on a Yahoo message board critical of Dendrite International, a business which provides software products and support services for the pharmaceutical industry. Dendrite filed a complaint in Superior Court of New Jersey against John Doe 3, and other John Doe defendants, alleging various claims for breach of contract, defamation and other actionable statements on Yahoo's message board. Dendrite then sought pre-trial discovery from Yahoo regarding the identities of the anonymous defendants. The trial court denied a motion to compel discovery. This appeal followed.
Holding. The appeals court affirmed the denial of the motion to compel discovery. The appeals court articulated a set of standards for reviewing such requests. The appeals court wrote that "The trial court must consider and decide those applications by striking a balance between the well- established First Amendment right to speak anonymously, and the right of the plaintiff to protect its proprietary interests and reputation through the assertion of recognizable claims based on the actionable conduct of the anonymous, fictitiously- named defendants." In addition, the appeals court listed three requirements. First, the plaintiff must make efforts to notify the anonymous defendant of the discovery request, including by posting to the message board involved in the case. Second, the trial court must determine that the plaintiff has plead a prima facie cause of action and produced evidence in support. Third, the trial court must balance the interests of the parties.
Notice to Anonymous Defendants. The appeals court wrote that "the trial court should first require the plaintiff to undertake efforts to notify the anonymous posters that they are the subject of a subpoena or application for an order of disclosure, and withhold action to afford the fictitiously- named defendants a reasonable opportunity to file and serve opposition to the application. These notification efforts should include posting a message of notification of the identity discovery request to the anonymous user on the ISP's pertinent message board."
Prima Facie Case and Evidence. The appeals court wrote that "The court shall also require the plaintiff to identify and set forth the exact statements purportedly made by each anonymous poster that plaintiff alleges constitutes actionable speech. The complaint and all information provided to the court should be carefully reviewed to determine whether plaintiff has set forth a prima facie cause of action against the fictitiously- named anonymous defendants. In addition to establishing that its action can withstand a motion to dismiss for failure to state a claim upon which relief can be granted ..., the plaintiff must produce sufficient evidence supporting each element of its cause of action ..."
Balancing Test. The appeals court wrote that "the court must balance the defendant's First Amendment right of anonymous free speech against the strength of the prima facie case presented and the necessity for the disclosure of the anonymous defendant's identity to allow the plaintiff to properly proceed."
Public Citizen and the American Civil Liberties Union Foundation of New Jersey, which participated as amici curiae, praised the decision, and called it "a tremendous victory for free speech." See, PC release.
Senate Committee Holds Hearing on Online Privacy
7/11. The Senate Commerce Committee held a hearing on Internet privacy issues. See, opening statement [PDF] of Sen. Ernest Hollings (D-SC), the new Chairman of the Committee: "Clearly we need legislation that requires notice, affirmative consent, reasonable access, and reasonable security to protect individuals online." See also, opening statement [PDF] of Sen. John McCain (R-AZ), the ranking Republican. See also, prepared testimony in PDF of witnesses: Marc Rotenberg (EPIC), Fred Cate (Indiana University School of Law), Paul Schwartz (Brooklyn Law School), Paul Misener (Amazon), Hans Brondmo, Les Seagraves (Earthlink), Ira Rubinstein (Microsoft), Jason Catlett (Junkbusters).
House Holds Hearing on Export Administration Act
7/11. The House International Relations Committee held its third hearing on S 149, The Export Administration Act. The Senate Banking Committee approved the bill on March 22. It would ease restraints on the export of most dual use products, such as computers and software.
See, opening statement of Rep. Henry Hyde (R-IL), Chairman of the Committee. See also, prepared testimony of witnesses: John Bolton (Under Secretary for Arms Control and International Security, Department of State), David Tarbell (Deputy Under Secretary of Defense for Technology Security Policy) , Stephen Bryen (Jefferson Partners) and Larry Christensen (Vastera).
Federal Chief Information Officer
7/11. The Senate Governmental Affairs Committee held a hearing on S 803, a bill to establish a Federal Chief Information Officer within the Office of Management and Budget. See, prepared testimony of witnesses: Sean O'Keefe (OMB), Anne Altman (International Business Machines), Costis Toregas (Public Technology, Inc.), Aldona Valicenti (National Association of State Chief Information Officers), Greg Woods (Department of Education), Sharon Hogan (University of Illinois at Chicago), Barry Ingram (ITAA), Patricia McGinnis (Council for Excellence in Government), Joseph Wright (Terremark Worldwide). See also, testimony [PDF] of David McClure (GAO).
District Court Issues Order in Napster Case
7/11. The U.S. District Court (NDCal), Judge Marilyn Hall presiding, issued an order in A&M Records v. Napster requiring Napster to block all copying of infringing music files. Judge Hall also held a closed meeting with the parties. Napster CEO Hank Berry issued a statement in which he said that "The Judge issued an order prohibiting Napster from enabling file transfers unless Napster reaches 100% success. The Court delegated to the technical expert further examination and testing of the Napster system. The Court's ruling today that Napster must block all file transfers threatens all peer-to-peer file sharing over the Internet and is at direct odds with the 9th Circuit's ruling. While we are disappointed by this ruling, we will work with the technical expert to enable file transfers as soon as possible and we are continuing full steam ahead toward the launch of our new service later this summer." RIAA P/CEO Hillary Rosen had this reaction: "Judge Patel's decision today that Napster should not resume operations until it can show that it can comply with the court's modified preliminary injunction was inevitable given its failure to comply with the court's order for so long."
More News
7/11. President Bush issued a Memorandum for the Heads of Executive Departments and Agencies regarding government reform. It states, among other things, that "Each agency head shall designate a Chief Operating Officer ... [who] shall report directly to the agency head and shall ... advance e-government, apply information policy and technology policies ..."
7/11. The House Commerce Committee's Subcommittee on Commerce, Trade and Consumer Protection held a hearing titled "The Potential for Discrimination in Health Insurance Based on Predictive Genetic Tests."
7/11. The U.S. Court of Appeals (5thCir) issued its opinion in USA v. Hill. Defendant, Hill, used an AOL account to send image files containing child pormography to 108 recipients, including an undercover law enforcement officer. He was charged with, plead guilty to, and sentenced for two counts of distributing child pormography and two counts of receiving child pormography, in violation of 18 U.S.C. §§ 2252(a)(2) and 2252(b)(1). The appeal only concerned sentencing issues. Affirmed.
Lofgren Bill Would Ban Sending Unmarked E-Smut Spam to Kids
7/11. Rep. Zoe Lofgren (D-CA) introduced the "Protect Children from E-Smut Act of 2001", a bill to ban the sending of unmarked sexually explicit e-mail advertisements to children. It would make it a federal crime to create and/or forward unmarked sexually explicit material to a minor's e-mail account. It would also create a private right of action. The bill also would direct the National Institute of Standards and Technology (NIST) to help create a universal electronic mark that must be affixed to sexually explicit e-mails. Parents would then be able to set their children's e-mail service to block e-mails containing such a mark or designation. See, Lofgren release.
Thursday, July 12
9:30 AM. The Federal Communications Commission will hold a meeting to announce decisions in several matters, including a Fourth Report and Order concerning the collocation obligations of incumbent local exchange carriers. (See, Deployment of Wireline Services Offering Advanced Telecommunications Capability, CC Docket No. 98-147). Location: FCC, Portals II, 445 12th Street, SW, Room TW-C305.
10:00 AM. The Senate Banking Committee will hold a hearing on several pending nominations, and vote on several other nominations. The agenda includes votes on the nominations of Roger Ferguson to be a member of the Board of Governors of the Federal Reserve System, Donald E. Powell to be Chairman of the FDIC, and Donald Rosenfeld to be President of the Government National Mortgage Association. Location: Room 538, Dirksen Senate Office Building.
10:00 AM. The Senate Judiciary Committee will hold an executive business meeting. The agenda includes mark up of S 407, a bill to amend the Trademark Act of 1946 to provide for the registration and protection of trademarks used in commerce, in order to carry out provisions of certain international conventions. Location: Room 226, Dirksen Senate Office Building.
10:00 AM - 12:00 NOON. The American Enterprise Institute (AEI) will host a panel discussion titled Broadband Access - Competition, Regulation, and Consumer Welfare. The speakers will be Harold Furchtgott-Roth, James Glassman, Thomas Hazlett, and Christopher DeMuth. See, online registration page. Location: AEI, 1150 17th Street, NW, Washington DC.
11:00 AM. The House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property will hold a hearing titled The Whois Database: Privacy and Intellectual Property Issues. Location: Room 2141, Rayburn House Office Building.
1:45 PM. The House Ways and Means Committee will meet to mark up following:
 • HJRes 50, disapproving the extension of the waiver authority contained in § 402(c) of the Trade Act of 1974 with respect to the People's Republic of China.
 • HJRes 55, disapproving the extension of the waiver authority contained in § 402(c) of the Trade Act of 1974 with respect to Vietnam.
 • HR 1954, the ILSA Extension Act of 2001.
Location: Room 1100, Longworth House Office Building.
2:00 PM. The House Financial Service Committee's Oversight and Investigations Subcommittee will hold a hearing on Internet gambling. Location: Room 2128, Rayburn House Office Building. See, release. The scheduled witnesses are:
 • John Suarez (New Jersey Division of Gaming Enforcement).
 • Sebastian Sinclair (Christiansen Capital Advisors).
 • Keith Whyte (National Council on Problem Gambling).
 • Valerie Lorenz (Compulsive Gambling Center).
 • Frank Fahrenkopf (American Gaming Association).
 • Bill Saum (National Collegiate Athletic Association).
 • Mark MacCarthy (VISA).
 • Sue Schneider (Interactive Gaming Council).
 • Penelope Kyle (Virginia Lottery).
 • Greg Avioli (National Thoroughbred Racing Association).
Friday, July 13
12:30 PM. FCC Commissioner Gloria Tristani will address the Alliance for Community Media on public, educational, and governmental access channels in an era of consolidation and technological change in the cable industry. Location: Renaissance Hotel, 999 Ninth St, NW, Washington DC.
House Subcommittee Approves TEACH Act
7/11. The House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property approved S 487, the Technology, Education, and Copyright Harmonization (TEACH) Act of 2001, unanimously and without amendment. Rep. Howard Coble (R-NC) and Rep. Howard Berman (D-CA) emphasized that the Senate bill was the product of a carefully negotiated compromise between educators, copyright holders, and others, and should not be amended. Rep. Rick Boucher (D-VA), who introduced a competing version of the bill, HR 2100, did not attend the mark up session.
This bill, which passed the Senate on June 7 by unanimous consent, extends the distance learning exemption to infringement contained in Section 110 of the Copyright Act to Internet technologies.
Rep. Zoe Lofgren (D-CA) had raised concerns at the Subcommittee's June 27 hearing about the anti circumvention provision of the bill. It requires that educational institutions "not engage in conduct that could reasonably be expected to interfere with technological measures used by copyright owners to prevent such retention or unauthorized further dissemination". At the July 11 mark up she stated that she would be satisfied by language in the committee report that clarifies that it is the intent of Congress not to limit the academic work of math professors, and that the conduct prohibited by the bill is "transmission specific."
House Subcommittee Approves HR 1992
7/11. The House Science Committee's Subcommittee on 21st Century Competitiveness amended and approved HR 1992, the "Internet Equity and Education Act of 2001," a bill to make it easier to obtain student loans for Internet based education, and other distance learning. The bill is sponsored by Rep. Johnny Isakson (R-GA).
The bill would remove the burden of the "12-hour rule" for non-traditional programs. This rule requires educational institutions to keep voluminous attendance records to demonstrate that their students attended certain types of work sessions. The bill also makes exceptions to the 50% requirement by allowing a limited number of institutions to offer more than 50 % of their courses by telecommunications, or to serve more than 50 % of their students through telecommunications courses. The bill also addresses incentive compensation provisions.
The Subcommittee approved an amendment in the nature of a substitute offered by Rep. Isakson, as amended by by an amendment offered by Rep. David Wu (D-OR). The Wu amendment requires the Education Department to prepare annual reports for the House and Senate on the effectiveness of the provisions of the bill. Rep. Patsy Mink (D-HI), the ranking Democrat on the Subcommittee, unsuccessfully opposed the bill. She argued that it would remove safeguards against fraud and abuse in the student loan program.
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