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October 24, 2001, 9:00 AM ET, Alert No. 293.
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Powell Outlines FCC's Agenda
10/23. Federal Communications Commission (FCC) Chairman Michael Powell gave a major address in the FCC's Commission Meeting Room titled "Digital Broadband Migration Part II". It was a follow up to his December 8, 2000, speech titled "The Great Digital Broadband Migration". He stated that "breakthroughs in technology would drive an exodus from existing analog optimized architecture to digital optimized architecture" and that "the notion of migration was that the transition would be long, and perhaps arduous, but was nonetheless essential for survival."
He stated that the purpose of his speech was "to articulate the next installment of this vision and outline the five specific areas that will guide the Commission’s agenda." The five areas which he covered in the speech were broadband deployment, competition policy, spectrum allocation policy, re-examination of the foundations of media regulation, and homeland security. For each of these five areas, he listed a set of policy objectives, and a list of actions to be taken by the FCC, such as studies, reviews, and rule making proceedings.
He stated that he wants to achieve universal availability of broadband services, move towards a market oriented spectrum allocation policy, and extend universal service goals to advanced services. He also stated that facilities based competition is the ultimate objective of the FCC's competition policy. He was asked about the status of the NextWave negotiations. However, he declined to provide details, but stated that he wants to maintain "auction integrity".
Several telecom entities released statements commending Powell's address. See, statement by Walter McCormack (USTA P/CEO), statement by Russell Frisby (CompTel President), and statement by Herschel Abbott (BellSouth VP for Governmental Affairs).
Powell Outlines Competition Policy
10/23. FCC Chairman Powell stated his four competition policy objectives for the FCC. First, he said that "Facilities based competition is the ultimate objective." He elaborated that "I believe that other methods of entry are useful interim steps to competing for local service, but Commission policy should provide incentives for competitors to ultimately offer more of their own facilities." Second, he stated that "Competition in the digital broadband world should come from many platforms." Third, he said that he favored "Simplified, Enforceable Interconnection Rules." Finally, he stated that "Universal service should be preserved in a manner that provides meaningful opportunities for competition."
Powell Addresses Universal Service and Internet Services
10/23. Powell stated that the goals of universal service remain to make service "as widely available as possible" and "as affordable as possible". He said that subsidization in the telephony context "was an extraordinarily successful policy." However, he added that it "was a policy optimized for the monopoly environment. And when Congress choose to change the directions in a competitive environment, some of its objectives there were frustrated, not by the goal of universal service, but the method in which it was applied."
He continued that "there is a bigger set of questions about the next chapter of advanced services. There are going to be many different characteristics of that service. There are going to many different cost dynamics. And, I want to be a voice that says, 'Take a deep breath before we rush into this, and really think about achieving universal service goals in a way that is not nearly as heavily regulated, or it requires less intervention, or will be more consistent with economic principals, so that we don't get to the end of it, and we are having this same discussion about, 'Oh gosh, where is all the broadband competition, and why didn't it occur. And, we all sit around and saying, 'It is because we put the cart before the horse in terms of the way we regulated." He made these comments during the question and answer portion of his address.
Powell Outlines FCC Broadband Policy
10/23. Chairman Powell outlined five principal broadband policy objectives for the FCC. First, "The Nation should commit to achieving universal availability of broadband." He stressed that the goal should be "availability" rather than "adoption". Second, "Broadband service should exist in a minimally regulated space." He elaborated that "Substantial investment is required to build out these networks and we should limit regulatory costs and regulatory uncertainty. We should guard against regulatory creep in order to encourage investment by avoiding the threatening overhang of future regulation." However, he did not state which existing rules or proposals he opposes.
Third, "There should be multiple broadband platforms." Fourth, "Promote universal service objectives in economically sound ways." And fifth, "Do not let definitional battles define regulatory treatment."
Powell also discussed actions to be taken by the FCC. He said that the FCC will continue to study broadband issues in its annual Section 706 reports. He also stated that the FCC "needs to consider expeditiously how to classify the various forms in which these services are provisioned and consider what the access obligations will be for them." He also referenced three proceedings that "will be used as a vehicle for clarifying regulatory treatment of broadband infrastructure and service". These are "The New Networks Proceeding", "The Cable Open Access Proceeding", and "The 3G Spectrum Proceedings".
Appeals Court Denies Rehearing for Trans Union
10/23. The U.S. Court of Appeals (DCCir) issued its opinion in Trans Union v. FTC, denying Trans Union's petition for rehearing. On April 13 the Appeals Court issued its original opinion in favor of the FTC. This proceeding is a petition for review of an FTC cease and desist order regarding the sale of consumer reports by credit reporting agencies for marketing purposes. On April 13 the Appeals Court upheld the FTC's order that Trans Union (TU) must stop selling target marketing lists for purposes not listed in the Fair Credit Reporting Act (FRCA). The Appeals Court also upheld the constitutionality of the FRCA.
Petitition for Rehearing. TU argued in its petition for rehearing that the Appeals Court incorrectly applied the opinion of the Supreme Court in Dun & Bradstreet v. Greenmoss when it applied only intermediate scrutiny to TU's target marketing lists. In denying this petition for rehearing the Appeals Court stated that these lists comprise speech of purely private concern, read by only TU and a few of its customers.
Trans Union. TU is one of the three large credit reporting agencies. It compiles credit reports about individuals from credit information that it collects from banks, credit card companies, and other lenders. Its databases contain information on 190 Million people. It then sells these credit reports to lenders, employers, and insurance companies. This practice is not at issue. However, TU also sells target marketing products to direct marketers. These consist of lists of names and addresses of individuals who meet specific criteria, such as possession of an auto loan, a department store credit card, or two or more mortgages. This practice at issue.
Fair Credit Reporting Act. The FTC has responsibility for enforcing the FCRA. This statute protects the privacy of credit information by prohibiting credit reporting agencies from selling "consumer reports", except under the circumstances enumerated in the Act. The FRCA lists whether to approve an application for credit, employment, or insurance -- but not direct marketing. The FRCA defines a "consumer report" as any information provided "by a consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer's eligibility for (A) credit ..."
Earlier Proceedings. The FTC has been trying to stop this practice for a decade. The FTC instituted a proceeding against TU in 1992. The FTC first issued a cease and desist order in 1994. However, the Court of Appeals granted TU's petition for review, on the grounds that the FTC had failed to provide evidence that TU's target marketing products were used by marketers in the issuance of credit. See, Trans Union Corp. v. FTC, 81 F.3d 228 (DCCir 1996). So, the FTC conducted extensive discovery, held a month long administrative trial, and documented this contention. It again ordered TU to stop. TU then filed this petition for review.
April 13 Opinion. The Court of Appeals denied the petition for review in its April 13 order. First, TU argued that the FTC again failed to provide substantial evidence in support of its findings. The Appeals Court this time held that the FTC had provided substantial evidence that the target marketing lists being sold by TU to marketers were being used as a factor in granting credit, and hence, are "consumer reports" within the meaning of the FRCA. Second, TU argued that the FRCA is unconstitutionally vague under the due process clause of the Fifth Amendment, and that it is an unconstitutional restraint on free speech. TU sought application of the strict scrutiny standard. The Appeals Court upheld the FRCA's constitutionality, applying the reduced constitutional protection standard for commercial speech articulated by the Supreme Court in the Dun & Bradstreet case.
Powell Discusses Spectrum Policy and 3G
10/23. FCC Chairman Michael Powell stated in his October 23 address that "our Nation's approach to spectrum allocation is seriously fractured. There have been dramatic changes in spectrum requirements and technology and services that use spectrum since 1934. Yet, while we have made some major strides in how we assign spectrum (principally through auctions), allocation policy is not keeping pace with the relentless spectrum demands. The spectrum allocation system is not effectively moving spectrum to its highest and best use in a timely manner."
"With new emerging uses, the Commission must not only evaluate and react to the new services, it must also deal with the conflicting set of legacy allocation decisions. New services are forced to demonstrate demand for the service to justify modification of the allocation table. Lack of proof, however, makes it hard to do so and unleashes a highly politicized process. Existing users move to block new uses and line up support for their position, and the new providers are forced to do the same. The ultimate decision is reached as a result of a politicized reactive process."
While Chairman Powell was bluntly critical of existing methods of allocation, he was vague on what changes he favors. He said that there should be a move towards "a paradigm of market oriented allocation policy", but did not provide specifics. Moreover, he reiterated that spectrum is a "public resource". And, he did not comment on the role of the NTIA, other than to mention that he will work with Nancy Victory, its chief. The NTIA manages spectrum allocated for military and government users.
He outlined four broad spectrum policy objectives for the FCC: "market oriented allocation policy", "interference protection", "aggressively promote spectral efficiency", and "reserve and protect spectrum for public safety." As for planned actions, he said that the FCC would study existing spectrum use, map current use of spectrum, and strengthen the FCC's technical capability.
During the question and answer session he elaborated somewhat about market oriented spectrum allocation. He stated that "a lot of, particularly economists, argue that you can't completely achieve this, but you would increase efficiency and optimization of spectrum, if the license had, were like a drivers license ... that you could not preordain what it could be used for. ... Why is that more efficient? Because if I am an incumbent that has spectrum, right now I have really no cost, no ability to truly measure the cost of just using it, or using it inefficiently, or not using it at all, because I am not really able to make the transfer to someone who might value it more highly.
Powell continued: "So, if a broadcaster had spectrum which he doesn't value highly, but there is a new innovative data application that values it very highly, a market would say, facilitate the mission to let that person buy it from that person. And, much of allocation policy kind of impedes and restricts the ability to do that. That would allow spectrum to have more liquidity, and move more efficiently to new and innovative uses, as opposed to what has to happen now."
He concluded: "Here is what happens now. The wireless industry comes to the government and says, 'We need 3G spectrum. So, get it for us.' We have to then go through an extraordinary exercise about who to take it away from. Surprise. They never want to do so. Not only do you have to take it away, you usually have to find a place to put them, and you have to pay to put them there. It would be a very different environment -- if a private participant could come to them and say, 'we will buy you out', as opposed to extraordinary government projects."
NCTA Chairman Addresses State of Cable Industry
10/23. Michael Willner, Chairman of the NCTA, gave a speech regarding the state of the cable industry. He stated that "the result of the Telecommunications Act of 1996 Act is impressive but not perfect. In our core business, satellite provides service to 23% of the multichannel video market -- up from nearly nothing when the Act was passed. Consumers have choices in Internet connectivity, deciding between dial-up, broadband, DSL and satellite options, all competing in the marketplace. And the deployment of broadband is now widespread. Nearly two thirds of Americans today have access to broadband connectivity to the Internet."
He added that "There remains one challenge in bringing competition to all telecommunications services. The entrenched local Bell monopolies continue to enjoy near universal market share. But that too is changing."
Willner is the P/CEO of Insight Communications, the 8th largest cable operator in the U.S., with about 1.4 Million subscribers. He spoke in Washington DC to the Washington Metropolitan Cable Club.
EPIC Restates Complaint Against Microsoft Windows XP
10/23. A group of interest groups, led by the Electronic Privacy Information Center (EPIC), sent a letter to Federal Trade Commission (FTC) Chairman Timothy Muris, and to the Chairmen and Ranking Members of the House and Senate Commerce Committees, restating their complaint that the soon to be released Windows XP operating system will adversely affect the privacy of users, and violate the Federal Trade Commission Act ban on unfair and deceptive trade practices.
On July 26, 2001, these groups submitted a complaint [PDF] to the FTC. The complaint states that "Microsoft has engaged, and is engaging, in unfair and deceptive trade practices intended to profile, track, and monitor millions of Internet users. Central to the scheme is a system of services, known collectively as ".NET," which incorporate "Passport," "Wallet," and "HailStorm" that are designed to obtain personal information from consumers in the United States unfairly and deceptively." The complainants asked the FTC to investigate Microsoft, and then order Microsoft to "revise the XP registration ..." However, the FTC has taken no action against Microsoft.
The signatories to the latest letter are the Center for Digital Democracy, Center for Media Education, Computer Professionals for Social Responsibility, Consumer Action, Consumers Union, EPIC, Electronic Frontier Foundation, Junkbusters Corp., Media Access Project, NetAction, Privacy Rights Clearinghouse, and U.S. PIRG.
The Association for Competitive Technology (ACT) responded to the letter. It stated that "While claiming to defend consumers, EPIC seems more concerned with taking away their choices. As Microsoft improves Passport based on consumer feedback, EPIC's continued ranting demonstrates that they just don't like the idea of a 'single logon.' Rather than voicing those concerns in the marketplace of ideas, however, they are trying to manipulate government into taking the choice away from consumers. Contrary to EPIC's continued misstatements, Passport is a choice and anyone who has concerns can use a different 'single logon' solution or none at all."
Antitrust News: Newport News Shipbuilding
10/23. The Department of Justice filed a complaint in U.S. District Court (DDC) to block the proposed acquisition of Newport News Shipbuilding (NNS) by General Dynamics. NNS makes nuclear powered aircraft carriers and submarines for the U.S. Navy, and services ships for the U.S. Navy.
"This merger would give General Dynamics a permanent monopoly in nuclear submarines and would substantially lessen competition in surface combatants," said Charles James, Assistant Attorney General in charge of the Antitrust Division. "Our armed forces need the most innovative and highest quality products to protect our county. This merger to monopoly would reduce innovation and, ultimately, the quality of the products supplied to the military, while raising prices to the U.S. military and to U.S. taxpayers." See, DOJ release.
NNS stated that it "was notified by the Department of Defense (DOD) of its decision to recommend to the Department of Justice (DOJ) approval of the Northrop Grumman ... offer to acquire Newport News Shipbuilding and its decision to recommend not approving the merger agreement between Newport News Shipbuilding and General Dynamics ...". See, NNS release.
Antitrust News: Pillsbury
10/23. The Federal Trade Commission (FTC) stated that it "met today in closed session to consider an enforcement action against the proposed acquisition by General Mills, Inc. of The Pillsbury Company from Diageo plc. The Commission considered whether to direct staff to formulate a proposed consent agreement incorporating the latest settlement terms offered by the parties. The Commission's 2-2 vote resulted in no action being taken at this time. The Commission also considered whether to authorize staff to seek a preliminary injunction. Again, the Commission's 2-2 vote resulted in no action being taken at this time." See also, statement of Commissioner Anthony, statement of Commissioner Thompson, and statement of Commissioners Swindle and Leary. See also, FTC release.
Antitrust News: Rum
10/23. The Federal Trade Commission (FTC) announced that it authorized its staff to seek a preliminary injunction to block Diageo plc's and Pernod Ricard S.A.'s joint acquisition of Vivendi Universal S.A.'s Seagram Wine and Spirits business." See, FTC release.
House Debates Anti Terrorism Bill
10/23. The U.S. House debated, but did not vote on, HR 3162, late on Tuesday, October 23. This bill is the conference report on the anti terrorism bill. The bill was considered under suspension of rules, meaning that it can not be amended, and requires a two thirds majority to pass. The vote is scheduled for Wednesday, October 24. The House passed an earlier version of the antiterrorism bill, HR 2975, the PATRIOT Act, by a vote of 337 to 79 on Friday, October 12.
Wednesday, Oct 24
House. The House is scheduled to meet at 10:00 AM for legislative business. The House may vote on HR 3162, the anti terrorism bill, and take up HR 3090, Economic Security and Recovery Act of 2001. The Cannon, Longworth and Rayburn offices remained closed.
Senate. The Russell Building is scheduled to reopen at 9:00 AM. The Hart and Dirksen Buildings "will reopen as soon as environmental remediation to remove the evidence of anthrax spores is completed, or until those areas that have tested positive have been sealed to allow for remediation without exposing other areas to contamination," according to Majority Leader Daschle's office.
POSTPONED. 10:00 AM. The House Commerce Committee's Subcommittee on Commerce, Trade, and Consumer Protection is scheduled to hold a hearing titled "Challenges Facing the Federal Trade Commission." FTC Chairman Timothy Muris will be the only witness.
10:00 AM - 12:00 NOON. The FCC will hold a public forum on the Commission Registration System (CORES) and FCC Registration Number. Location: FCC, 445 12th Street, SW, Commission Meeting Room, Washington DC.
?? 2:00 PM. The Senate Judiciary Committee's Subcommittee on Technology, Terrorism and Government Information is scheduled to hold a hearing titled "The World's Most Wanted Terrorists - Who Are They and What Do They Want?" Sen. Diane Feinstein (D-CA) will preside. Location: Room 226, Dirksen Building.
2:30 - 4:30 PM. Roe Hemenway, Manager of Optical Network Equipment Research at Corning's Sullivan Park research facility, will give a presentation on optical fiber communications. See, FCC release. Location: TW-C305 (Commission Meeting Room), FCC, 445 12th Street, SW, Washington DC.
Deadline for submitting public comments to the FTC's Bureau of Competition regarding AOL Time Warner's requests for approval of two alternative cable broadband ISPs. On September 26 and 24, AOLTW submitted two motions to the FTC titled "Motion for Approval of Non Affiliated ISP and Alternative Cable Broadband ISP Service Agreement". AOLTW is required, pursuant to ¶ II.A.2 of the FTC's Decision and Order [PDF] approving the merger of AOL and Time Warner, dated April 17, 2001, to enter into such agreements, and obtain FTC approval. The FTC published a redacted version of the motion [PDF] regarding AOLTW's agreement with Internet Junction Corp. and a  redacted version of the motion [PDF] regarding AOLTW's agreement with New York Connect.Net, Ltd.
Thursday, Oct 25
8:30 - 10:00 AM. Harold Furchtgott-Roth and others will hold an informal discussion titled "The Telecommunications Sector in a Slowing Economy". RSVP to Veronique Rodman at 202-862-4871 or vrodman@ Location: American Enterprise Institute, 1150 17th Street, NW, 11th Floor Conference Room, Washington DC.
9:30 AM. The Senate Commerce Committee is scheduled to hold a hearing to examine promoting broadband, focusing on securing content and accelerating transition to digital television. Location: Room 253, Russell Building.
POSTPONED. 9:30 AM. The House Commerce Committee's Subcommittee on Telecommunications and the Internet is scheduled to hold a legislative hearing on HR 2417, the Dot Kids Domain Name Act of 2001.
10:00 AM. The Senate Judiciary Committee might hold an executive business meeting. Room 226, Dirksen Building.
12:15 PM. The Federal Communications Bar Association's (FCBA) Common Carrier Committee will host a brown bag lunch. The speakers will be Tamara Preiss, Blair Levin, and Jonathan Askin. The topic will be "Perspectives on Local Competition and Local Competitors". RSVP to Naja Wheeler. Location: Wiley Rein & Fielding, 1750 K Street, 10th Floor, Washington DC.
Deadline to reply submit comments to the FCC in its rule making proceeding regarding locating spectrum bands below 3 Ghz for possible reallocation for Third Generation (3G) wireless services, and for other purposes. (ET Docket Nos. 00-258 and 95-18 and IB Docket No. 99-81.) See, notice in Federal Register, September 13, 2001, Vol. 66, No. 178, at Pages 47618 - 47621.
Deadline to submit reply comments to the FCC in its rule making proceeding regarding permitting Mobile Satellite Service (MSS) operators flexibility to use their spectrum for land based transmitters. (IB Docket No. 01-185, ET Docket No. 95-18.) See, notice in Federal Register, September 13, 2001, Vol. 66, No. 178, at Pages 47621 - 47625.
Friday, Oct 26
9:30 AM - 12:00 NOON. The American Enterprise Institute (AEI) will host a panel discussion titled "What Should the Government Do about the Transition to Digital Television?" The participants will be Harold Furchtgott-Roth (AEI), Stanley Besen (Charles River Associates), Thomas Hazlett (AEI), Bruce Owen (Economists Incorporated), Edward Fritts (National Association of Broadcasters), Robert Sachs (National Cable Television Association), Gary Shapiro (Consumer Electronics Association), Richard Wiley (Wiley Rein & Fielding), and Gregory Sidak (AEI). The price to attend is $5 (waived for AEI supporters, government employees, and media). Location: Wohlstetter Conference Center, Twelfth Floor, 1150 17th Street, NW, Washington DC.
11:00 AM. The Heritage Foundation will host a panel discussion titled "How Internet Based School Report Cards are Revolutionizing Educational Accountability." The speakers will be Bill Owens (Governor of Colorado), Eugene Hickok (Undersecretary of Education), and Tom Hinton (Heritage). Location: Heritage Foundation, 214 Massachusetts Ave NE, Washington DC.
People and Appointments
10/23. The Senate confirmed by unanimous votes four persons to be U.S. District Court Judges: James Payne (Northern Eastern and Western Districts of Oklahoma), Karen Caldwell (Kentucky), Laurie Camp (Nebraska), Claire Eagan (Oklahoma).
10/23. President Bush nominated Arden Bement to be Director of the National Institute of Standards and Technology (NIST). See, release.
10/23. The Business Software Alliance (BSA) named Mario Correa to be its Director of Internet and Network Security Policy. This is a new position, responsible for managing BSA's global policies for Internet and IT security related issues, including cyber crime and cyber terrorism, computer privacy and encryption. Prior to joining the BSA in 1998, Correa was an assistant to Rep. Connie Morella (R-MD).
10/23. The Intellectual Property Owners Association (IPO) named John Maxin of National Semiconductor to be Chairman of the IPO Insurance Committee. It also named Anthony Chavez of Exxon Mobil to be Chairman of the IPO Standards Setting Committee.
10/23. AT&T appointed William Schleyer to be P/CEO of its broadband services unit, AT&T Broadband. He replaces Daniel Somers, who retired. See, AT&T release.
Fed Circuit Rules in Patent Infringement Case
 10/23. The U.S. Court of Appeals (FedCir) issued its opinion in Scaltech v. Retec/Tetra, a patent infringement case involving waste recycling technology. Scaltech is the holder of U.S. Patent No. 5,443,717, titled "Recycle of Waste Streams". It filed a complaint in U.S. District Court (SDTex) against Retec alleging infringement. The present appeal, from judgment on remand, involves the issue of whether the claims of this patent are invalid under 35 U.S.C. § 102(b) because the claimed invention was offered for sale more than one year before the filing of the patent application. The Appeals Court affirmed the District Court's summary judgment of invalidity.
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