Tech Law Journal Daily E-Mail Alert
July 18, 2001, 9:00 AM ET, Alert No. 229.
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Senate Holds Hearing on Media Concentration
7/17. The Senate Commerce Committee held a hearing on the 35% national television broadcast ownership cap and the newspaper broadcast cross ownership rule. Sen. Ernest Hollings (D-SC), the Chairman of the Committee, said in his prepared statement [PDF] that "the rules are under attack from an insatiable industry that is unsatisfied with the tremendous consolidation that has already taken place, in the courts from judges who appear to be ignoring Supreme Court precedent about the government's strong interest in preserving a 'multiplicity of information sources' in the marketplace, and, most importantly, at the FCC, from a Commission that seems intent on relaxing or eliminating many of the existing ownership rules ..."
Sen. Hollings also stated that he intents to introduce a bill, along with Sen. Daniel Inouye (D-HI) and Sen. Byron Dorgan (D-ND). "Our bill, which we may introduce today, requires FCC licensees to alert the Commission when they acquire a newspaper that creates a cross ownership situation. The FCC is then directed to review the appropriateness of the acquisition, and determine whether any action is needed to bring the licensee in compliance with the rule."
Sen. John McCain (R-AZ), the ranking Republican, did not agree. He said in his prepared statement [PDF] that "In the digital era, insight and commentary on matters of public policy will no longer be dominated by Cronkite, Brinkley, the Times and the Post. In their place have arisen CNN, CNBC, MSNBC, Salon, Wired, Slashdot and innumerable other sources of information and news. This new mass media market is dominated, not by broadcasters and newspapers, but by multichannel mass media entities like cable TV, direct broadcast satellite TV, wireless cable, and, of course, the Internet. These new media are not only powerful economic competitors; they are also driving all forms of media to become more interactive. ... In the face of these new competitors, new technologies and new market demands, ownership restrictions on traditional media have not only become unnecessary, they have become anticompetitive."
See also, prepared testimony in PDF of witnesses: Mel Karmizan (Viacom), Jack Fuller (Tribune Publishing Company Alan Frank (Post-Newsweek Stations), William Baker (WNET), Gene Kimmelman (Consumer’s Union), and Eli Noam (Columbia Business School). Karmizan, who opposes the rules, stated that "a worldwide technological tsunami has crashed upon the world, flooding the broadcast industry with competition in unprecedented proportions. Broadcast radio now competes head-to-head with Internet radio" and "As for broadcast television, it competes directly with cable ... That service, subscribed to by nearly 70% of the country’s households, has developed into a multi-channel video programming distribution platform that not only carries hundreds of cable networks but serves as a high-speed gateway to the Internet ..." In contrast, Kimmelman argued that "consumers' interests will best be served if the Federal Communications Commission (FCC) is instructed to maintain previous media ownership rules ..."
FCC Authorizes MSS Systems in 2GHz Band
7/17. The FCC's International Bureau (IB) authorized eight new mobile satellite services (MSS) systems in the 2 GHz band. The systems will be capable of providing mobile voice, data, Internet access and other new satellite communications services. The authorizations were issued to Boeing, Celsat America, Constellation Communications Holdings, Globalstar, ICO Services, Iridium, Mobile Communications Holding, and TMI Communications.  See, FCC release.
The FCC's IB also stated that each of the "systems will be authorized to operate in an equal, 3.5 megahertz segment of spectrum in each of the 1990-2025 MHz and 2165-2200 MHz bands. ... The Bureau is delaying full implementation of the 2 GHz MSS licensing order with regard to an incremental .38 megahertz of spectrum per licensee in each band until the Commission has the opportunity to fully consider various pending proposals related to the 2 GHz frequencies."
Newly appointed FCC Commissioner Michael Copps released a separate statement praising the action.
The Cellular Telecommunications Industry Association (CTIA) is not happy. CTIA P/CEO Tom Wheeler stated that "we hope the Commission will revisit soon whether 70 MHz of spectrum needs to be locked up for this use at all." On July 12, the CTIA sent a letter [PDF] to the FCC in which it stated that "It is reasonable to expect that most – and perhaps all – of the current MSS applicants will ultimately not launch and provide service in that band. Given increasing spectrum needs for other services, the track record of underutilized MSS spectrum in other bands, the financial condition of numerous MSS companies, and the claims made by New ICO that MSS is not viable without terrestrial flexibility, the Commission should consider whether it is in the public interest to license an additional 70 MHz for MSS." See also, CTIA release.
House Holds Hearing on IPR and Government R&D
7/17. The House Government Reform Committee's Technology and Procurement Policy Subcommittee held an oversight hearing titled "Toward Greater Public-Private Collaboration in Research and Development: How the Treatment of Intellectual Property Rights Is Minimizing Innovation in the Federal Government?" Subcommittee Chairman Tom Davis (R-VA) said in his opening statement that "three-fourths of the country's top 75 information technology companies will not do research for the Government, citing both difficulty in contracting with the Government and the treatment of intellectual property in R&D contracts. Thus, at the same time that Government is no longer driving technological innovation, many commercial firms that invest billions in R&D every year are refusing to do business with the Government. This has serious implications for the well being of the United States."
See, prepared testimony of witnesses: Jack Brock (General Accounting Office), Deidre Lee (Department of Defense), Eric Fygi (Department of Energy), Richard Carroll (Digital Systems Resources), Richard Kuyath (3M Corporation), and Christopher Hill (George Mason University).
NCTA Writes Report on Cable Telephony
7/17. The National Cable Telecommunications Association (NCTA) released a report [PDF] on cable telephony. See also, NCTA release. The report reviews cable companies' ongoing research and testing of Voice over Internet Protocol telephony. However, it continues that cable companies' initial forays into residential telephony have been through traditional circuit switched technology, although this technology has been updated to provide digital, rather than analog service. There are now 1.3 million cable telephony access lines.
The report continues that "only facilities based competitors are likely to provide sustainable long term competition. Such competitors are less dependent on incumbents to provide needed inputs into the provision of the competitive service. Even so, incumbent phone companies have often done much to frustrate facilities based competition. They have attempted to impose onerous interconnection terms and conditions, delayed connecting facilities, processing orders, and porting numbers, and generally placed barriers in the way of competitors."
The report also addresses the regulatory environment of cable telephony. "Cable companies have also faced difficulty in persuading regulators of the importance of promoting facilities based competition over the less viable resale and unbundled network element (UNE) competitive entry strategies envisioned by the Telecommunications Act of 1996. The reality is that it is difficult to implement a business model that relies heavily on purchasing essential inputs from one's fiercest competitor. A far more reliable approach is to make capital investments in one's own infrastructure and to decrease reliance on the ILECs as much as possible."
NCTA CEO Sachs Addresses Open Access
7/17. NCTA P/CEO Robert Sachs gave a speech at the NARUC conference in Seattle, Washington. He stated that the Telecom Act of 1996 has been a great success in spurring the deployment of broadband services over cable. See also, NCTA release.
He also addressed open access. He stated that "some of the RBOCs and large ISPs, have sought to have the government require that cable share its facilities with all ISPs. This regulatory effort has been variously known as "open access" or "forced access", or the term I prefer "government mandated access." While only a handful of the more than 30,000 local cable franchising authorities have passed ordinances to mandate access to cable's facilities, the federal courts have rejected such efforts -- invalidating mandated access ordinances in Portland, Oregon; Broward County, Florida; and, just last week, in Henrico County, Virginia."
He also stated that "States too have been skeptical -- at least twenty-three of them considered legislation in 1999 and 2000 -- but not one passed such legislation -- in fact, not one bill even made it out of committee in a single state. And NARUC, I'm pleased to say, has wisely chosen not to endorse mandated access to cable facilities. I say "wisely", because the market is addressing this issue. About a year and a half ago cable companies began to announce that they would voluntarily carry multiple ISPs ..."
Goodlatte and Boucher Introduce Net Tax Moratorium Bill
7/17. Rep. Bob Goodlatte (R-VA) and Rep. Rick Boucher (D-VA) introduced the Internet Tax Fairness Act of 2001, a bill to make permanent the existing moratorium on multiple and discriminatory Internet taxes, and taxes on Internet access. The bill would also limit the imposition of business activity taxes (BATs) on electronic and other interstate commerce by state and local taxing authorities. The bill does not address sales taxes.
Reps. Goodlatte and Boucher spoke at a press conference announcing the introduction of the bill. Rep. Boucher stated that this bill "will encourage the growth of electronic commerce by extending the moratorium on Internet taxes and by setting forth concrete guidelines for the collection of taxes by States and localities for business activities with their jurisdiction."
Congress passed the Internet Tax Freedom Act (ITFA) in 1998, creating the existing three year moratorium, which expires on October 21 of this year. The Goodlatte Boucher bill would make permanent the moratorium contained in the ITFA.
The bill would prohibit several Internet related BATs, including taxes on "The use of the Internet to create or maintain a World Wide Web site accessible by persons" in the taxing jurisdiction. The bill would also prohibit BATs on the use of an ISP, on-line service provider, internetwork communication service provider, or other Internet access service provider, or web hosting service. It would also prohibit BATs on the "use of any service provider for transmission of communications, whether by cable, satellite, radio, telecommunications, or other similar system." Also, the bill would prohibit BATs based on the "presence or use of intangible personal property ... including patents, copyrights, trademarks, logos, ... electronic or digital signals, and web pages ..."
With respect to BATs generally, the Goodlatte Boucher bill provides that no state or local taxing authority may impose a BAT unless the taxed entity "has a substantial physical presence" in the jurisdiction. The bill further prohibits BATs on the leasing or owning of property in the jurisdiction for less than 30 days, and on the assigning of employees, representatives or agents in the jurisdiction for less than 30 days. Finally, the bill prohibits BATs based on contracts, licenses, permits, loans, deposits, and securities.
Zoellick Addresses New Trade Round and Antitrust
7/17. USTR Robert Zoellick released a statement  in which he advocated a new round of multilateral trade negotiations. Zoellick also focused on antitrust law enforcement. Bush administration officials have expressed concerns that the EU is employing antitrust enforcement, not to protect competition and benefit consumers, but to protect EU companies from non-EU competition. Zoellick's statement was diplomatic: "In competition policy, U.S. trade and antitrust authorities recognize the significance of the issue. Therefore, we are working to understand more clearly what the EU seeks, and are discussing with the EU how it can accommodate the concerns of the United States and other countries. The United States can see merit in adherence to core competition principles of transparency, non-discrimination, and procedural fairness. We also can support consultative and capacity building efforts to help countries develop modern competition policy that promotes efficient, effective, and dynamic markets."
Bush Addresses Trade Issues
7/17. Bush gave a speech in Washington DC in which he advocated free trade, trade promotion authority, and a new round of multilateral trade negotiations.
Free Trade. He stated that a goal of free trade "is to ignite a new era of global economic growth through a world trading system that is dramatically more open and more free. One of the most important objectives of my meetings with other G-7 leaders in Italy will be to secure their strong endorsement for a launch of a new round of global trade negotiations later this year."
Trade Promotion Authority. Bush stated that "one of my most important legislative priorities will be to secure from Congress trade promotion authority that five other Presidents have had -- an authority necessary so that when our United States enters into agreement, the countries with whom we've agreed to will understand we mean business. It's time for Congress to act." He also addressed the debate over inclusion of labor and environmental issues: "Legitimate concerns about labor standards, the environment, economic dislocation should be, and will be, addressed.  But we must reject a protectionism that blocks the path of prosperity for developing countries. We must reject policies that would condemn them to permanent poverty."
Bush on Cyberterrorism
7/17. President Bush also touched on cyberterrorism in his speech on world trade. He stated that "The United States and her allies will pursue a balance of world power that favors human freedom. This requires a new strategic framework that moves beyond Cold War doctrines and addresses the threats of a new century such as cyberterrorism, weapons of mass destruction, missiles in the hands of those for whom terror and blackmail are a very way of life."
Privacy Coalition Lobbies FTC for Stricter Privacy Enforcement
7/17. Members of the Privacy Coalition met with, and presented a letter to, FTC Chairman Timothy Muris. The letter list nine things that the group wants the FTC to do with respect to privacy. The group wants the FTC to make public more information about privacy related complaints, and FTC investigations.
The group also wants the FTC to interpret the Federal Trade Commission Act (FTCA) and FTC rules in a manner that would greatly expand its authority. First, it wants the FTC to "Increase enforcement of the Telemarketing Sales Rule and the Telephone Consumer Protection Act not only for cases of fraud but also for invasions of privacy."
The Privacy Coalition also wants the FTC to "Revise the interpretation of an "unfair and deceptive practice" and take into account the principles of Fair Information Practices when examining or endorsing industry practices, such as the NAI proposal to limit online profiling by means of a mandatory cookie or the unilateral revision of privacy policies by companies." Former FTC Chairman Robert Pitofsky expressed the opinion on several occasions that the FTC does not have this authority. However, he recommended that the Congress pass new legislation expanding its authority to regulate online privacy.
USPTO Issues HP Molecular Electronics Patent
7/3. The USPTO issued U.S. Patent No. 6,256,767, which discloses a demultiplexer for a molecular wire crossbar network. This may facilitate molecular based computing. The inventors are Philip Kuekes and Stanley Williams; the assignee is Hewlett Packard (HP).
"We have a strategy to reinvent the integrated circuit with molecular rather than semiconductor components," said Williams in an HP release. "We've received two key patents and have several more pending that we believe will eventually enable computers to be millions of times more efficient than they are today." See also, U.S. Patent No. 6,128,214, issued on October 3, 2000.
People and Appointments
7/17. The Software & Information Industry Association (SIIA) announced the election of officers for the 2001 - 2002 term. Michael Morris, SVP, General Counsel and Secretary of Sun Microsystems, will be Chairman of the Board. Graham Beachum, Ch/CEO of Edge Technologies, will be Vice Chairman. Glenn Goldberg, SVP for Corporate Affairs of McGraw-Hill, will be Secretary. Daniel Cooperman, SVP, General Counsel and Secretary of Oracle, will be as Treasurer. See, release.
7/17. Microsoft name Skip Pizzi to head up a new position within its Microsoft TV Group as TV standards and regulatory affairs manager. Pizzi will be based in Washington, D.C., See, release.
Senate Committee Holds Hearing on Security Risks for e-Consumers
7/16. The Senate Commerce Committee's Science, Technology, and Space Subcommittee held a hearing on security risks for the e-consumer. Sen. Ron Wyden (D-OR), said in his prepared statement [PDF] that "Law enforcement can provide the tools to track down attackers and the consequences that will discourage them". Also, "government can encourage education and incentivize research and development of security services. Government can also facilitate information sharing that might not otherwise occur in the private sector, fostering discussions to identify the best practices that might better serve the public Internet wide." See also, prepared testimony in PDF of witnesses: Vinton Cerf (WorldCom), Harris Miller (ITAA), and Bruce Schneier (Counterpane Internet Security).
Internet Caucus Hosts Debate on Internet Taxes
7/17. The Congressional Internet Caucus Advisory Committee hosted a panel debate on taxes on Internet and other remote sales, business activity taxes, and the existing moratorium on new and discriminatory Internet taxes and Internet access taxes.
Rep. Goodlatte, who is a Co-Chair of the Internet Caucus, called for a permanent extension of the existing moratorium, and legislation regarding business activity taxes (BATs). Rep. Spencer Bachus (R-AL) advocated Congressional legislation permitting state and local sales taxes on remote sales, including Internet sales. He stated that "our public schools are being annihilated today because they depend on the sales tax for funding."
Currently, Quill v. North Dakota, 504 U.S. 298 (1992), provides that state and local taxing authorities are barred under the Commerce Clause from requiring remote sellers without a substantial nexus to the taxing jurisdiction to collect sales taxes for sales to persons in the jurisdiction; however, the Court added that Congress may extend such authority. Congress has passed no such legislation. However, there are several bills pending in the Congress that would provide this authority. See, for example, HR 1410 and S 512.
Two panelists at the Internet Caucus debate advocating giving state and local governments authority to tax remote sales -- Jeff DeBoer (Real Estate Roundtable) and Frank Shafroth (National Governors Association). They argued that there is currently an unlevel playing field that favors Internet retailers and other remote sellers. Michael Mazerov (Center on Budget & Policy Priorities) advocated ending "abusive tax avoidance" practices by corporations with respect to BATs. Three panelists defended online commerce -- Adam Thierer (Cato Institute), Frank Julian (Federated Department Stores), and Art Rosen (Coalition for Responsible & Fair Taxation). Bill Whyman (The Precursor Group) moderated.
Adam Thierer stated, "don't blame the Internet for the problems with the sales tax." He said that local governments' tax collection problems are the fault their own tax policies. "The sales tax system in America is the most unlevel playing field you can possibly find. We play more politics with the sales tax in America than any other tax code. And the fact is, that is what is eroding the sales tax base, not the Internet." He pointed out that online sales account for less than 1% of aggregate retail sales. In contrast, state and local governments exempt from their sales taxes such things as services, agriculture, food, and clothing. He concluded that only 42% of consumption in America is subject to sales taxes.
Wednesday, July 18
10:00 AM. The Senate Judiciary Committee will hold a hearing on Federal Bureau of Investigation management reform issues. Location: Room 226, Dirksen Building.
10:00 AM. The House Judiciary Committee will hold a mark up session. The agenda includes HR 2047, the Patent and Trademark Office Authorization Act of 2002. Location: Room 2141, Rayburn Building.
10:00 AM - 12:00 NOON. The U.S. International Telecommunication Advisory Committee Telecommunication Development Sector (ITAC-D) will hold a public meeting. 48 hour pre-clearance is required. See, notice in Federal Register, July 16, 2001, Vol. 66, No. 136, at Pages 37086 - 37087. Location: Room 2533A, Department of State, 2201 C Street, NW, Washington DC.
12:15 PM. The Federal Communications Bar Association's Mass Media Practice Committee will host a brown bag lunch with Roy Stewart and the FCC's Mass Media Bureau's front office. RSVP to Tami Smith of Sidley & Austin at 202-736-8257. Location: FCC, Second Floor South Conference Room, 445 12th Street, SW, Room TW-C305, Washington DC.
2:00 PM. The House Judiciary Committee will hold a hearing on HR 1410, the Internet Tax Moratorium and Equity Act. Location: Room 2141, Rayburn Building.
Thursday, July 19
10:00 AM. The Senate Banking Committee will hold a hearing on the nomination of Harvey Pitt to be Chairman of the Securities and Exchange Commission. Location: Room 538, Dirksen Building.
10:00 AM. The Senate Judiciary Committee will hold a business meeting. The agenda includes many items, including consideration of the nomination of Ralph Boyd to be Assistant Attorney General for the Civil Rights Division, and the nomination of Robert McCallum to be Assistant Attorney General for the Civil Division. The agenda also includes mark up several bills, including S 407, the Madrid Protocol Implementation Act, a bill to amend the Trademark Act of 1946 to provide for the registration and protection of trademarks in order to carry out provisions of certain international conventions. Location: Room 226, Dirksen Building.
2:00 PM. The Senate Appropriations Committee will hold a business meeting to mark up the Commerce, Justice, and State, the Judiciary, and related agencies appropriation bills. Location: Room S-128, U.S. Capitol Building.
Senate Finance Committee Delays Approval of Jordan FTA
7/17. The Senate Finance Committee met to mark up SJRes 16, approving the U.S. Vietnam Trade Agreement, and S 643, approving the U.S. Jordan Free Trade Agreement. Both agreements were negotiated by the Clinton administration. The Committee approved the Vietnam agreement, but postponed action on the Jordan FTA over disputes about labor and environmental laws.
There was no dispute that an FTA with Jordan is appropriate for political reasons. However, this FTA includes labor and environmental (L&E) paragraphs that are controversial. They provide that neither party "shall fail to effectively enforce its" L&E laws. Trade with Jordan is minimal, and neither Jordan nor the U.S. cares about the other's L&E records. Rather, the Clinton administration insisted on these provisions with the idea that this FTA would serve as a model for future FTAs. Hence, this FTA is a vehicle for debate over what future FTAs and other trade agreements should contain.
The Jordan FTA, which was signed on October 24, 2000, is also a model on intellectual property rights and electronic commerce. However, this is not controversial. The FTA addresses patents, trademarks, copyright, and enforcement of IPR. Jordan agreed to ratify and implement the WIPO's Copyright Treaty and WIPO Performances and Phonograms Treaty within two years. The FTA also provides that "each Party shall seek to refrain from: (a) deviating from its existing practice of not imposing customs duties on electronic transmissions; (b) imposing unnecessary barriers on electronic transmissions, including digitized products; and (c) impeding the supply through electronic means of services ...".
More News
7/17. The U.S. Copyright Office (CO) published a notice in the Federal Register announcing new rules for group registration of photographs. The new regulations permit submission of groups of published images in a variety of formats as deposit copies, together with an application and filing fee. This option applies to groups of works created by an individual photographer that are published within one calendar year. The CO will accept deposits on CD-ROM in either JPEG, GIF, TIFF, or PCD formats. See, Federal Register, July 17, 2001, Vol. 66, No. 137, at Pages 37142 - 37150.
7/17. The Recording Industry Association of America (RIAA) and the International Federation of the Phonographic Industry (IFPI), released a Request for Information on Audio Fingerprinting Technologies [PDF].
7/17. The NTIA posted a reminder in its web site regarding the deadline for submitting responses to the Request for Quotations regarding the .us top level domain. The notice stated: "On June 13, NTIA issued a Request for Quotations (RFQ) for management and coordination of the usTLD. On July 16, responses to all questions received in response to this solicitation were posted as Amendment 1. On July 17, an amended answer to Question 36 in Amendment 1 was posted as Amendment 2. The RFQ as well as Amendments 1 and 2 are available at The final date for responses to the RFQ remains July 27."
7/13. The SEC filed a civil complaint in U.S. District Court (DColo) against William Brotherton and International Business Consortium, a business founded by Brotherton, for perpetrating a fraudulent and unregistered securities offering over the Internet. (Civil Action No. 01-WM-1340.) See, SEC release.
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