|Michael Powell Addresses
|10/25. FCC Chairman
Michael Powell gave a speech
on broadband policy at a NARUC
convention in Crystal City, Virginia. He stated that broadband
should exist in a minimally regulated space, that there should
be multiple broadband platforms, that availability rather than
adoption rates should drive government policy, that broadband
service is already widely available, and that copyright issues
are delaying the distribution of broadband intensive content,
and hence, demand for broadband.
Powell repeated his oft stated premise that "the key
measure is availability of the service, not adoption rates. I
emphasize availability, because there are many questions that
remain as to what services consumers will value, and to what
degree they will be willing to subscribe. I am hesitant to let
adoption rates drive government responses, for a developing
market needs the cues provided by consumer free choice."
Copyright Barriers to Broadband Adoption. Powell noted
that broadband service, through either cable or DSL service,
is already available to almost 85% of households; yet, only
12% of these households subscribe. He stated that part of the
problem is the lack of applications for broadband. He added
that "much of the broadband intensive content that is
likely to be the core of broadband applications (like movies
and music) is in the hands of major copyright holders that are
unlikely to make it widely available without stringent
protections and a way to profit from its distribution (see,
for example, the Napster experience). This will take some hard
work and time." (Parentheses in original.)
He also stated that "Much of what is holding broadband
content back is caused by copyright holders trying to protect
their goods in a digitized environment (in other words, a
perfect reproduction world). Stimulating content creation
might involve a re-examination of the copyright laws."
Regulatory Classification. Powell stated that "I
believe strongly that broadband should exist in a minimally
regulated space. Substantial investment is required to build
these networks and we should limit regulatory costs and
uncertainty. We should vigilantly guard against regulatory
creep of existing models into broadband, in order to encourage
Competition Policy. Powell was vague on this issue. He
said that "Economic scale does matter and it does take a
great deal of resources to deploy these networks. There will
be a very strong pull towards greater concentration in these
markets to get the job done and we will be forced to consider
the trade-offs. I am equally convinced, however, that
competition can exist in the race to deploy broadband
platforms and that policy should not foreclose competition and
jump on the monopoly trolley as it did in the early
Multiple Broadband Platforms. He stated that "we
should work to keep multiple platforms and routes to the home
open and viable in a broadband world. We need to keep
incentives alive that encourage investment in alternate
platforms (such as cable, wireless, and satellite) and push
entrepreneurs to find creative ways to bypass incumbents and
get into the home."
|George Gilder Addresses
|10/23. George Gilder gave an address on broadband policy in
which he argued that broadband services should be deregulated,
and particularly, that the incumbent local exchange carriers (ILECs)
should be deregulated. He stated broadband deployment is
fundamental to reviving the economy. In addition, he argued
for monetary policy that recognizes that there is global
deflation which is harming debt laden tech companies.
Gilder is the author of Telecosm:
How Infinite Bandwidth Will Revolutionize Our World
[Amazon], and numerous other books.
He stated that "what went wrong is two key factors: ... a
global deflation ... and regulatory paralysis in the local
loop. These were the two big factors that halted this
tremendous pace of Internet deployment and the deployment of
content for it."
Gilder criticized the Telecom Act of 1996. He stated that
"what happened really in 1996 was a regulation of
broadband. And, price controls imposed on broadband by the FCC
across the country. And this meant that the incumbent
operators were forced to share their facilities with rivals at
costs well below their real cost. And this had two effects.
It, one, created lots of companies attempting to hitch hike on
facilities ... The other effect was to devalue all facilities
based carriers ... They had to compete with the bargain
basement facilities that were being mandated under what is
called TELRIC -- total element long run incremental
"They privatize the risk, and socialize the rewards, and
the result is paralysis of investment," concluded Gilder.
Section 271 and Long Distance. "There should not
be any distinction between long distance and local service.
That is a vestige of a long gone era. Communications is
communications. The problem with the separation is that it
adds yet another layer of cost to broadband services,"
said Gilder. "So, you get slower deployment than you
would otherwise have."
Regulation of Voice. Gilder conceded that some
regulation should remain. He said that "there is such an
enormous entrenched regulatory system for voice, which is a
relatively static service, which will be eroded over time, as
IP telephony advances. You probably do have to retain
regulations on voice. The universal service charade is not
going to be dissolved tomorrow. The emergencies services, the
911, all of that cluster of requirements that surrounds
existing voice probably can't be dissolved".
Tauzin Dingell Bill. Gilder stated that the Tauzin
Dingell bill would "deregulate broadband." He stated
that "it is a step forward. It counteracts the pressure
to enforce the darn Act, and to require them to collocate more
fully, and to share more generously, and to unbundle more
readily. And, all those requirements just deter deployment.
The whole idea of sharing facilities with your rivals is just
not -- at punitive costs -- is just a prescription for
Future of the Bells. "All of these incumbent
companies are going to be swept away by history. And, to worry
about their monopoly power today is just perverse and backward
retro thinking." Gilder added that "BOCs are going
to have very aggressively to compete. They are not going to be
able to exploit their monopolies. They are going to be
Bell Lobbyists. Gilder continued that the Bells
"have to be allowed to compete, or else, they will
increasingly try to obstruct their rivals. It is all they can
do. They got plenty of lobbyists. They are government
creations almost. And, they are surrounded on all sides by
government, and defended on all sides by lobbyists. And, that
arrangement is destructive to the future of the economy."
WorldCom. Gilder also criticized regulators for
requiring WorldCom to sell MCI Internet facilities, and for
blocking the merger with Sprint. He said that "WorldCom
was fighting monopoly, but of course, the monopoly fighters in
Washington all supported the incumbent telopolies against the
Spectrum Policy. Gilder also touched on spectrum policy
and Third Generation (3G) wireless systems. Gilder said that
he opposes public auctions. They "just about wiped out 3G
in Europe." Instead, he argued that "expansion of
unlicensed areas of spectrum is important."
Deflation. Gilder also argued that the world economy is
in a state of deflation, and government policy should
recognize and address this. He added that "one of the
more disappointing developments of the last year has been
Greenspan's incredible blindness on a whole number of issues.
I mean, I think he is over the hill."
He spoke at a Discovery Institute luncheon at the University
Club in Washington DC. He also spoke with TLJ afterwards. The
above quotes are from his luncheon address, his answers to
questions from the audience, and the following interview.
|Senate Passes Anti
|10/25. The Senate passed HR
3162, which is known as the "anti terrorism
bill", by a vote of 98 to 1. See, Roll
Call No. 313. The House passed the bill on October 26.
President Bush will promptly sign it. It contains many
provisions that will increase the ability of law enforcement,
intelligence, and other government agencies to combat
terrorism, including expanded authority to conduct electronic
surveillance of phone and Internet communications. It is
titled the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism
Act of 2001 (USA PATRIOT ACT).
|NTIA Chief Addresses
Victory, head of the National
Telecommunications and Information Administration (NTIA),
also gave a speech
on broadband policy. The NTIA is a part of the Commerce Department. She spoke
at a convention hosted by the NARUC,
a group of government regulators.
Victory stated that "Although I would love to be able to
unveil the Administration's broadband policy for you today, it
remains a work in progress." She did state, however, that
"government policy responses should not be driven by
consumer adoption rates" and that "policies that
promote rational facilities investment should be
pursued". She also said that "competition should be
promoted using a technology neutral paradigm" and that
"the market might not always work in all areas,
particularly in rural and certain urban areas".
Victory also announced that the NTIA is "planning to
release a Request for Public Comment in the next few weeks to
open the record for written comments and suggestions on a
variety of broadband issues."
|8th Circuit Rules in PSLRA
|10/25. The U.S.
Court of Appeals (8thCir) issued its opinion
[PDF] in Florida
v. Green Tree Financial, the 8th Circuit's
first case to address the pleading standards in securities
fraud cases under the PSLRA.
Plaintiffs filed three complaints against Green Tree Financial
and several of its officers alleging violation of §§
10(b) and 20(a) of the Securities Exchange Act of 1934 and
Rule 10b-5 thereunder. The District Court held that the
complaints failed to plead facts giving rise to a strong
inference of scienter, as required by the PSLRA, and dismissed
with prejudice. The Appeals Court reversed and remanded.
The issue in this case is whether the plaintiffs' complaints
meet the pleading requirements set by the Private
Securities Litigation Reform Act of 1995 (PSLRA),
which the Congress passed to insulate defendants from abusive
class action suits. High tech companies are frequently the
targets of these suits. The PSLRA creates both a safe harbor
for forward looking statements, and a heightened pleading
requirement. It provides that plaintiffs must "state with
particularity facts giving rise to a strong inference that the
defendant acted with the required state of mind." Eight
circuits have previously addressed this question, reaching a
variety of results.
The Court of Appeals in this case wrote that "the
legislative history provides nothing but uncertainty about
whether the motive- and- opportunity test is an inherent part
of the strong inference standard or whether it modifies and
relaxes that standard. Ultimately, the Act as passed does not
resolve this question."
After reviewing the relevant statutes, legislative history,
and opinion of other circuits, the Court reached several
conclusions. It wrote: "First, motive and opportunity are
generally relevant to a fraud case, and a showing of unusual
or heightened motive will often form an important part of a
complaint that meets the Reform Act standard. Second, in some
cases the same circumstantial allegations that establish
motive and opportunity also give additional reason to believe
the defendant's misrepresentation was knowing or reckless. For
instance, in insider trading cases, the timing of trades shows
motive and opportunity, but it may also provide additional
circumstantial evidence that the defendant knew of an
advantage. Such allegations may meet the Reform Act standard,
but if so it is because they give rise to a strong inference
of scienter, not merely because they establish motive and
opportunity. Third, when the complaint does not show motive
and opportunity of any sort -- either the unusual, heightened
motive highlighted in the Second Circuit cases, or even an
everyday motive such as keeping ones job -- then other
allegations tending to show scienter would have to be
particularly strong in order to meet the Reform Act
|10th Circuit Rules in
Dominion v. Echostar
|10/25. The U.S.
Court of Appeals (10thCir) issued its opinion
[PDF] in Dominion
v. Echostar, an interlocutory appeal from the
issuance of a preliminary injunction in a contract dispute
over activation of DBS subscribers. The Appeals Court affirmed
the preliminary injunction order.
EchoStar, also know as the "DISH network", owns and
operates satellites and transmits direct broadcast
programming. Dominion is a TV and radio broadcaster of
religious programming that operates the Sky Angel network.
EchoStar leased eight transponders on its satellites to
Dominion for satellite broadcasting.
The dispute arose when EchoStar sent Dominion a letter stating
that EchoStar would not activate any Dominion subscribers
unless they purchased a minimum level of DISH Network
programming, an unsubsidized satellite receiver directly from
EchoStar, or a Dominion specific smart card. Dominion then
sought, and obtained, injunctive relief from the District
|DOJ and FTC Announce
International Competition Network
|10/25. The Department of
Justice (DOJ) and the Federal
Trade Commission (FTC) announced the launch of an
International Competition Network (ICN), See, DOJ
release and substantially identical FTC release.
The DOJ and FTC stated that the "ICN will provide an
environment in which antitrust officials from dozens of
countries can work together to achieve consensus on ways to
make international antitrust enforcement more efficient and
effective, to the benefit of consumers and companies around
the world." The problem, they said, is that "With
more than 60 countries around the world now reviewing mergers,
many deals are reviewed in multiple countries, thereby
creating the risk of inconsistent outcomes and potentially
unnecessary procedural burdens. International cartels also cut
across national borders, harming consumers in many
The DOJ and FTC also stated that the ICN "has been
embraced by a number of foreign antitrust officials including
Mario Monti, EU Commissioner for Competition, Konrad von
Finckenstein, Commissioner of the Canadian Competition Bureau,
and Dr. Fernando Sanchez Ugarte, President of Mexico's Federal
The DOJ and FTC also asserted that trade and antitrust issues
are separable. They stated that the ICN "will not deal
with trade issues, or other non antitrust issues." The
DOJ and FTC releases do not address the use of antitrust
enforcement as a non tariff barrier to trade.
|About Tech Law Journal
|Tech Law Journal is a free access web site and e-mail alert
that provides news, records, and analysis of legislation,
litigation, and regulation affecting the computer and Internet
industry. This e-mail service is offered free of charge to
anyone who requests it. Just provide TLJ an e-mail address.
Number of subscribers: 2,229.
Contact: 202-364-8882; E-mail.
P.O. Box 15186, Washington DC, 20003.
Copyright 1998 - 2001 David Carney, dba Tech Law Journal. All
|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 (NAB), Robert
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.
The National Association of
Regulatory Utility Commissioners (NARUC) will hold the
second day of a two day conference. See, brochure
[PDF]. Location: Hyatt Regency Hotel, Crystal City, Virginia.
8:15 - 8:45 AM. Speech: Bruce Mehlman (Commerce
8:45 - 9:00 AM. Speech: Rep. Heather Wilson
9:00 - 10:30 AM. Panel: "Competition vs.
Regulation - Whether or what extent government should use
regulatory intervention to accelerate broadband
10:45 AM - 12:15 PM. Panel: "Facilitating the
Business Case for Rural Upgrades."
10:45 AM - 12:15 PM. Panel: "Building The New
Public Switched Network: Conclusions from the National
Research Council and Implications from Internet 2 - Computer
Science & Telecom's forthcoming broadband report and
discuss Internet2 and its implications for new
12:15 - 12:30 PM. Speech: Hilda Legg (Rural Utility
12:30 - 2:00 PM. Lunch: FCC Commissioners Kathleen
Abernathy, Michael Copps, Kevin Martin.
2:00 - 3:30 PM. Panel: "Role of Local
Governments in Broadband Deployment - Discuss local government
policies that encourage and restrict broadband deployment
including rights of way issues, pole attachment policies and
municipal service provision."
2:00 - 3:30 PM. Panel: "Economic Impact of
3:30 - 4:15 PM. Speech: Brett Perlman (Texas PUC).
|Monday, Oct 29
|The House will meet at 2:00 PM in pro forma session only.
12:00 NOON - 5:00 PM. The FCC's Office of Plans and Policy
will hold a forum to discuss FCC media ownership policies.
Location: FCC, Commission Meeting Room (Room TW-C305), 445
12th Street, SW, Washington DC. The schedule is as follows:
12:00 NOON. Speech by FCC Chairman Michael Powell.
12:15 PM. Panel: Ownership Policies and Competition.
The speakers will be Stanley Besen (Charles River Assoc.),
Mark Cooper (CFA), Robert
Majure (DOJ), Bruce Owen (Economists Incorporated).
2:30 PM. Panel: Ownership Policies, Diversity and
Localism. The speakers will be Douglas Gomery (U Maryland),
Philip Napoli (Fordham U), and Joel Waldfogel (U
4:15 PM. Jane Mago and Robert Pepper.
|Tuesday, Oct 30
|The House will meet at 10:00 AM for legislative business.
10:00 AM - 1:00 PM. The FCC's Network Reliability and
Interoperability Council will hold a meeting. See, FCC
release. Location: FCC, Room TW-C305, 445 12th Street, SW,
12:00 NOON - 1:30 PM. The National
Telephone Cooperative Association (NTCA) will host a press
luncheon to release and discuss its 2001 Wireless Survey. The
speakers will be Michael Brunner (NTCA CEO), Jill Canfield (NTCA
regulatory counsel), and Rick Schadelbauer (NTCA economic
analyst). RSVP to Contact Donna L. Taylor at 703 351-2086 or email@example.com. Location:
Hyatt Regency Washington, Lobby Level, Congressional A, 400
New Jersey Avenue, NW, Washington DC.
12:15 PM. The Federal
Communications Bar Association's (FCBA) Cable Practice
Committee will host a luncheon. The speakers will be Susanna
Zwerling, the Mass Media and Cable legal advisor to FCC
Commissioner Copps. The price to attend is $15. RSVP to firstname.lastname@example.org. NCTA, 1724
Massachusetts Ave., NW, Washington DC.
1:30 - 3:00 PM. The U.S. International Telecommunication
Advisory Committee (ITAC) will hold a meeting. The purpose of
this meeting is to prepare the State Department for the 2002
Plenipotentiary Conference and the 2002 World
Telecommunication Development Conference. See, notice
in Federal Register, October 17, 2001, Vol. 66, No. 201, Page
52825. Location: Federal Communications Commission, Room
2:30 - 4:30 PM. The FCC will host a tutorial on developments
in wireless networks and technology, including wireless data,
CDMA, TDMA, GSM, IDEN, wireless content, applications and
market growth. The speakers will be Mark Desautels (CTIA) and
representatives of TBD, Verizon, Voicestream, Nextel, NextBus,
Nokia, Qualcomm, OnStar, Aether Technologies, Openwave,
Telephia and others. See, FCC
notice. Location: FCC, Commission meeting room.
|Wednesday, Oct 31
|10:00 AM. The House
Commerce Committee's Subcommittee on Telecommunications
and the Internet will hold a hearing titled "An
Examination of How the Corporation for Public Broadcasting
Uses Federal Funds for National Public Television
Programming." Location: Room 2123, Rayburn Building.
|People and Appointments
|10/25. Brian Gross was named Director of
Communications of the SEC.
This newly created position will manage the SEC's
relationships the Congress, Administration, federal, state,
and local agencies, foreign regulatory bodies, and the SEC's
regulatory constituents. Gross was previously a long time
assistant to Sen. Phil
Gramm (R-TX), ranking Republican on the Senate Banking
Committee, which oversees the SEC. Sen. Gramm recently
announced that he will not run for re-election in 2002. See, release.
10/25. Stephen Cutler was named Director of the SEC's Division of
Enforcement. Before joining the SEC in 1999, Cutler was a
partner at the Washington DC law firm of Wilmer Cutler & Pickering.
|10/25. Microsoft announced the worldwide availability of its
Windows XP operating system. See, release.
10/26. The Library of Congress, which includes the Copyright Office,
announced that it has "completed testing of all its
Capitol Hill buildings and has been notified by the Centers
for Disease Control and Prevention that the tests were
negative and no evidence of anthrax contamination was
found." It will reopen on Friday, October 26.
Reserve Board Chairman Alan Greenspan gave a speech
titled "Globalization". He advocated free markets,
free trade, and globalization. He spoke in Washington DC at
the Institute for International Economics.