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February 5, 2002, 9:00 AM ET, Alert No. 361.
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President Bush Releases Proposed Budget for FY 2003
2/4. President Bush released his proposed budget for fiscal year 2003. It includes large increases for national defense and homeland security related programs, with modest increases for most other departments and agencies. However, the President's proposal contains large increases for many tech related agencies. See, Office of Management and Budget (OMB) web page with links to various budget documents.
President Bush stated in his budget message to the Congress that "The 2003 Budget requests the biggest increase in defense spending in 20 years, to pay the cost of war and the price of transforming our Cold War military into a new 21st Century fighting force. We have priorities at home as well -- restoring health to our economy above all."
He added that "The plan also calls for maintaining low tax rates, freer trade, restraint in government spending, regulatory and tort reform, promoting a sound energy policy, and funding key priorities in education, health, and compassionate social programs." He also stated that his budget "moderat[es] the growth of spending in the rest of government", but "offer[s] substantial increases in spending for ... science and technology research ..."
Independent Agencies. The FTC, which has both antitrust and consumer protection authority, would see its budget increase from $156 Million to $177 Million. The FCC's budget would increase $33 Million to $278 Million. The SEC budget would grow to $481 Million.
Commerce. There would also be some large increases at the Department of Commerce's tech related offices. The USPTO's budget would increase 21%; however, total estimated user fees collected would once again exceed the appropriation. The NTIA's budget would shrink, due to the proposed elimination of the Technology Opportunity Program grants. The BXA's budget would grow from $69 Million to $103 Million; however, this would be due in large part to a $20 Million item for the Critical Infrastructure Assurance Office for homeland security and information intelligence. The NIST budget would grow from $321 Million to $402 Million. The Technology Administration would remain at $8 Million.
Justice. The total budget for the Department of Justice would be increased 13% to $30.2 Billion. The Antitrust Division would see an increase from $130 to $142 Million.
FTC Budget Proposal
2/4. The President's proposal provides an operating budget of $177 Million for the Federal Trade Commission (FTC). The FY 2002 appropriation is $156 Million. The FTC is one agency with responsibility for enforcing antitrust laws. It also has consumer protection authority, and has become the lead agency for protecting consumers on the Internet.
The President's proposal states too that "In 2003, the FTC will expand its contribution to the Administration’s consumer privacy agenda by helping victims of ID theft, increasing enforcement and outreach on children’s online privacy, and increasing enforcement against “spam.” It will also seek to establish a national “do not call” list that would protect consumers from unwanted and intrusive telemarketing calls, and bring nationwide consistency to the current patchwork of lists administered by states and the private sector."
FCC Budget Proposal
2/4. President Bush proposed an FY 2003 budget for the Federal Communications Commission (FCC) of $278 Million, an increase of $33 Million over the FY 2002 appropriation of $245. The FCC would maintain a proposed staffing level of 1,975 full time equivalents. See, FCC release, FY 2003 Budget Request [2.3 MB in PDF] and links to appendices, and the President's detailed FCC proposal for the FCC [PDF].
USPTO Budget Proposal
2/4. The President's budget proposal includes a $239 Million, 21% increase, for the U.S. Patent and Trademark Office (USPTO), to $1,365 Million. The proposal also includes an increase in patent and trademark fees of $207 Million; this is described as a "one time surcharge".
The President's budget proposal estimates that fees collected in FY 2003 will total $1,527 Million. The proposed FY 2003 appropriation for the USPTO is $1,365 Million. Hence, the proposal would continue the long standing practice of diverting USPTO user fees to fund other government programs. Opponents of this practice call it a tax on innovation.
The USPTO stated in a release that the increased budget will enable the USPTO to "Hire 950 patent examiners", "Transform trademarks to a fully electronic operation by 2004", and "Implement the President's management agenda, including e-government, outsourcing, and workforce restructuring." The release also stated that USPTO's five year business plan, which contains details of the FY 2003 budget, will be released this week.
The President's DOC proposal states that "The 2003 Budget funds a 21-percent increase (+$239 million) in resources available to the U.S. Patent and Trademark Office (USPTO) to address the agency’s growing workload in the area of intellectual property. USPTO issues patents and registers trademarks. It also works to promote the protection of U.S. intellectual property rights around the world through international treaties. With the passage of the American Inventors Protection Act of 1999, USPTO was designated as a “performance based organization,” which provides the agency additional management flexibilities while ensuring that senior managers' tenure and compensation are at risk based upon their achieving organizational performance targets."
The "one time surcharge" is defined in the President's detailed DOC proposal [PDF] as follows: "Provided further, That there shall be a surcharge of 19.3 percent, rounded by standard arithmetic rules, on all fees authorized by 35 U.S.C. 41(a) and (b) and a surcharge of 10.3 percent, rounded in the same manner, on those fees authorized by 15 U.S.C. 1113 that are implemented by 37 C.F.R. 2.6(a)(l),(5) and (12): Provided further, That these surcharges shall be effective on October 1, 2002 and shall expire on September 30, 2003 ..."
NTIA Budget Proposal
4/2. President Bush proposed a reduced budget for the National Telecommunications and Information Administration (NTIA). However, this is due to the proposal to eliminate the Technology Opportunities Program (TOP) grants. These were formerly known as TIIAP grants.
The President's detailed DOC proposal [PDF] states that "Technology Opportunities Program grants have demonstrated the use of advanced telecommunications technologies to enhance the delivery of social services, such as education, health care, and public safety. This program has fulfilled its mission and is proposed for termination. 2003 funds and use of deobligations and unobligated balances are requested for monitoring existing grants and close-out costs."
The TOP grant program had detractors on Capitol Hill. In October of 2001, the NTIA's list of grant winners included a cyber cafe for gang members in Detroit, a network of surveillance cameras on California beaches, and a web site containing pictures of artifacts from Maine. See, TLJ Daily E-Mail Alert No. 277, Oct. 2, 2001.
The President's DOC proposal also elaborates on other NTIA programs: "The budget strengthens the spectrum management capabilities of the National Telecommunications and Information Administration by providing $3 million to begin the process of spectrum management reform and to upgrade its radio quiet zone test facility in Colorado. In addition, the Administration will propose legislation to streamline the current process for reimbursing federal agencies that must relocate from spectrum auctioned to commercial users."
BXA Budget Proposal
The President's budget proposal would increase the Bureau of Export Administration (BXA) budget from $69 Million to $103 Million. The BXA regulates exports of critical goods and technologies, including dual use items, such as computer and software, in order to promote national security, foreign policy, and economic interests. $20 Million of this proposed increase would go to the Critical Infrastructure Assurance Office (CIAO), which works with government agencies and the private sector in developing a national plan to reduce the exposure to attack of the nation's critical infrastructures.
The President's proposal states that "Additional funding for the CIAO will be used to support the Homeland Security Information Technology and Evaluation Program. The office will work in consultation with the Office of Homeland Security to implement the Information Intelligence Initiative. This initiative includes technological and procedural improvements to the process of information sharing to assure broad access to relevant homeland security information at all levels of government. The program office is expected to be open for 1 to 2 years."
The President's proposal would also enable the BXA to open field offices in U.S. port cities, and in foreign countries, including in the Middle East.
More DOC Budget Information
2/4. The National Institute of Standards and Technology (NIST) would see an increase from $321 Million to $402 Million. The Technology Administration would see its budget drop slightly. After rounding, it would remain at $8 Million. See also, DOC release.
DOJ Budget Proposal
2/4. The President's FY 2003 budget proposal for the Department of Justice (DOJ) is $30.2 Billion, a 13% increase over FY 2002. Attorney General John Ashcroft stated in a release that "The President's budget supports the Department's reorganization to refocus law enforcement efforts to fight the war on terrorism."
The President's detailed DOJ proposal [PDF] provides that the Antitrust Division's budget would be increased from $130 Million to $142 Million.
Cato Releases List of 12 Worst Tech Bills
2/4. Cato Institute released a study [PDF] titled "The Digital Dirty Dozen" which ranks and evaluates the authors' list of the worst high tech legislative proposals of the current Congress. Wayne Crews, Cato's Director of Technology Studies, and Adam Thierer, Cato's Director of Telecommunications Studies, authored the report. The list is as follows:
1. S 1364, the "Telecom Fair Competition Enforcement Act", sponsored by Sen. Ernest Hollings (D-SC). This bill would require structural separation of the Region Bell Operating Companies' retail operations. The Cato report states that "S. 1364 ranks as the single most destructive digital economy bill of the year for a very simple reason: It would do more than any other piece of legislation to destroy the foundations upon which a good portion of the digital economy rests. S. 1364 would set back telecommunications policy 20 years and constitute possibly the most radical, proregulatory measure to come along for any American industry in decades."
2. S 792 and HR 2246, the "Media Marketing Accountability Act of 2001", sponsored by Sen. Joe Lieberman (D-CT) and Rep. Steve Israel (D-NY). These bills would prohibit the targeted marketing to minors of adult rated media as an unfair or deceptive practice. Cato calls this "government censorship".
3. S 512 and HR 1410, the "Internet Tax Moratorium and Equity Act", sponsored by Sen. Byron Dorgan (D-ND) and Rep. Ernest Istook (R-OK). Cato states that these bills would "authorize a multi-state tax cartel for the purposes of collecting sales taxes on electronic commerce transactions".
4. HR 718, the "Unsolicited Commercial Electronic Mail Act of 2001", sponsored by Rep. Heather Wilson (R-NM).
5. HR 2724, the "Music Online Competition Act", or MOCA, sponsored by Rep. Chris Cannon (D-UT) and Rep. Rick Boucher (D-VA). The bill provides that recording companies that license digital music would be required to do so on a nondiscriminatory basis, offering similar prices and terms to all. Cato calls this "compulsory licensing". However, Cato's objection to this bill focuses solely on the bills requirements regarding nondiscriminatory music licensing. Cato does not address the bill's proposed changes to copyright law pertaining to the in store exemption, consumer back up copies, buffer copies, and ephemeral copies. See also, Rep. Boucher's summary of the bill.
6. The "Security Systems Standards and Certification Act", a bill which has not yet been introduced. This bill, which may be introduced by Sen. Ernest Hollings (D-SC) would mandate that digital devices contain copy protection technology, or digital rights management (DRM) tools, to protect intellectual property rights. The bill would also make it illegal to remove or disable the DRM technology.
7. S 927 and HR 1837, the "Mobile Telephone Driving Safety Act and Call Responsibly and Stay Healthy (CRASH) Act", sponsored by Sen. Jon Corzine (D-NJ) and Rep. Gary Ackerman (D-NY). These bills would require states to prohibit cell phone use while driving.
8. S 88 and HR 267, the "Broadband Internet Access Act", sponsored by Sen. Jay Rockefeller (D-WV) and Rep. Phil English (R-PA). These bills would provide tax credits to incent deployment of broadband Internet access facilities in rural and underserved areas. The Cato authors concede that this legislation is likely to pass.
9. HR 1697 and HR 1698, the "Broadband Competition and Incentives Act" and the "American Broadband Competition Act", sponsored by Rep. John Conyers (D-MI) and Rep. Chris Cannon (R-UT), respectively. These bills would increase antitrust oversight of the telecom sector.
10. HR 237, the "Consumer Internet Privacy Enhancement Act", sponsored by Rep. Anna Eshoo (D-CA).
11. HR 556, the "Unlawful Internet Gambling Funding Prohibition Act", sponsored by Rep. James Leach (R-IA), and HR 3215, the "Combating Illegal Gambling Reform and Modernization Act", sponsored by Rep. Bob Goodlatte (R-VA). Both bills would, among other things, attempt to prevent the use of credit cards for online gambling.
12. HR 1531, the "Cell Phone Service Disclosure Act", sponsored by Rep. Anthony Weiner (D-NY).
The Cato report concluded that "there is good evidence that policymakers -- whether through conscious design or not -- are adopting the telecom regulatory paradigm for the tech sector. It appears that the tech sector may be pigeonholed into that paradigm simply because it offers a familiar set of rules and a bank of regulatory agencies that can be activated on command. If that happens, it will be a grave blow to the Internet sector. Policymakers would be wise to reject this paradigm and instead let the Internet and cyberspace evolve with minimal federal intrusion and regulatory interference."
GAO Reports that Treasury Dept Computers are Vulnerable
2/4. The General Accounting Office (GAO) released a report [PDF] titled "Financial Management Service: Significant Weaknesses in Computer Controls Continue". The report found that the computer systems of the FMS, which disburses trillions of dollars per year, are vulnerable to fraud and disruption.
The report states that in FY 2000 the Department of the Treasury’s Financial Management Service (FMS) "disbursed over $1.9 trillion primarily for Social Security and veterans’ benefit payments, Internal Revenue Service (IRS) tax refunds, federal employee salaries, and vendor billings. With several exceptions (the largest being the Department of Defense), FMS makes disbursements for most federal agencies. FMS is also responsible for administering the federal government’s collections system. In fiscal year 2000, the government collected over $2 trillion in taxes, duties, and fines. In addition, FMS oversees the federal government’s central accounting and reporting systems used to reconcile and keep track of the federal government’s assets and liabilities."
The GAO report found that the "FMS's overall security control environment continues to be ineffective in identifying, deterring, and responding to computer control weaknesses promptly. Consequently, billions of dollars of payments and collections are at significant risk of loss or fraud, sensitive data are at risk of inappropriate disclosure, and critical computer based operations are vulnerable to serious disruptions."
The report goes on to identify many weaknesses in the FMS's data centers, including "weak network security configurations that allowed us to identify user names and compromise the associated passwords, which resulted in our gaining unauthorized access to the mainframe production environment of a key financial application at one data center, the development environments at another data center, and an unrelated procurement application at a third data center".
The report also found that the FMS "granted excessive and powerful systems privileges to certain users who did not need such access". It also found that the FMS "did not effectively manage the administration of certain passwords and user IDs". In addition, it found that the FMS was "not effectively monitoring and controlling dial-in access to certain local area networks and the mainframe environments."
People and Appointments
2/4. Thomas Navin was named Deputy Chief of the Federal Communications Commission's (FCC's) Common Carrier Bureau's Policy and Program Planning Division. See, FCC release.
2/4. Megan Gray joined the Washington DC based Electronic Privacy Information Center (EPIC) as Senior Counsel, and director of an intern program for law students. She focuses on litigation involving anonymous free speech. For example, she represented an anonymous plaintiff in Aquacool v. Yahoo. See, complaint and TLJ story. She will begin work in April 2002. She was previously an associate with the law firm of Baker and Hostetler.
4/1. BT announced the appointment of Ian Livingston as group finance director. He previously worked as Finance Director at Dixons Group plc. See, BT release.
More News
2/4. The Federal Communications Commission (FCC) set comment deadlines in the matter of Ambient's application for a determination that it is an exempt telecommunications company. It is an electric power company that also provides broadband Internet access and related information services over power lines to electrical outlets in residences. Comments are due by February 19, 2002. Reply comments are due by February 26, 2002. See, FCC release [PDF].
2/4. Monday, February 4, was the deadline to submit petitions and comments to the FCC's Cable Services Bureau regarding the applications of Hughes Electronics Corporation and EchoStar Communications Corporation to the FCC requesting consent to the transfer of control of licenses and authorizations involved in the EchoStar DirecTV merger. See, FCC notice [MS Word]. Oppositions and responses are due by February 25, 2002. This is CS Docket No. 01-348. See, the FCC's Search for Filed Comments page.
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Bush Budget Addresses Spectrum Policy
2/4. President Bush's proposed budget contains information regarding spectrum management policy. The President's proposal states that "In 1993, the President and the Congress gave the FCC authority to assign spectrum licenses through competitive bidding, which has proven to be an efficient and effective way to allocate this finite public resource. Upcoming spectrum auctions are expected to generate more than $25 billion over the next five years."
However, the proposal focuses on the revenue generation side of auctions. It does not address spectrum sharing, secondary markets for spectrum, or developing property rights in spectrum.
The proposal continues that "The Administration will propose legislation to provide more certainty in upcoming auctions. The legislation will establish a framework for the FCC to develop regulations that promote clearing the spectrum in television channels 60–69 (747–762 and 777–792 MHz) for new wireless services in an effective and equitable manner. Such legislation also would shift the statutory deadlines for the auction of channels 60–69 from the elapsed 2000 date to 2004 and for the auction of channels 52–59 (698–746 MHz) from 2002 to 2006. Providing more certainty about how and when the spectrum in channels 60-69 will become available to new entrants and shifting the deadlines for both auctions would increase expected revenues by $6.7 billion."
It also states that "To facilitate the clearing of analog television broadcast spectrum and provide taxpayers some compensation for use of this scarce resource, the Administration will propose legislation authorizing the FCC to establish an annual lease fee totaling $500 million for the use of analog spectrum by commercial broadcasters beginning in 2007. Upon return of their analog spectrum license to the FCC, individual broadcasters will be exempt from the fee."
Tuesday, Feb 5
The House will meet at 12:30 PM for morning hour and at 2:00 PM for legislative business. No recorded votes are expected before 6:30 PM. The House will consider several non tech related bills under suspension of the rules.
9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in EchoStar v. FCC, No. 01-1032. Judges Ginsburg, Edwards and Sentelle will preside.
11:00 AM. The FTC will hold a press conference to "unveil a new FTC ID theft consumer assistance initiative". FTC Chairman Timothy Muris and others will participate. See, FTC release. Location: Room 432, 600 Pennsylvania Ave., NW. Reporters may also access the press conference by a conference call at 1 800 597 7623; the chairperson is Bruce Jennings, and the confirmation number is 11222708.
RESCHEDULED FOR FEB 12. 12:15 PM. The FCBA's Transactional Practice Brown Committee will host a brown bag lunch on wireless transactions.
1:30 PM. The Department of Commerce (DOC) will hold a press conference to discuss the President's proposed budget for the DOC for FY 2003. The following persons will be present: Philip Bond (Under Secretary of Commerce for Technology), Conrad Lautenbacher (Administrator of the NOAA), James Rogan (Director of the USPTO), Nancy Victory (Assistant Secretary for the NTIA), and Arden Bement (Director of the NIST). See, USPTO release. Location: Room 4830, DOC, 14th St. & Constitution Ave., NW.
1:30 PM. The U.S. International Telecommunication Advisory Committee (ITAC) will hold a meeting. See, notice in Federal Register. Location: State Dept.
2:30 PM. The Senate Finance Committee will hold a hearing on the President's FY 2003 budget and tax proposals. Treasury Secretary Paul O'Neill will testify. Location: Room 215, Dirksen Building.
4:00 PM. The Cato Institute will host a book forum on Against the Dead Hand: The Uncertain Struggle for Global Capitalism [Amazon], by Brink Lindsey (Cato Institute). The commenters will be Robert Zoellick (USTR), Sebastian Mallaby (Washington Post), and Douglas Irwin (Dartmouth). See, online information and registration page. Location: The Cato Institute, 1000 Massachusetts Ave., NW.
5:30 PM. The House Rules Committee will meet to adopt a rule for consideration of HR 3394, the Cyber Security Research & Development Act.
Deadline to submit applications to the NTIA for planning and construction grants for public telecommunications facilities under the Public Telecom Facilities Program (PTFP) for FY 2002. See, notice in Federal Register.
Wednesday, Feb 6
The House will meet at 10:00 AM. It may take up HR 3394, the Cyber Security Research and Development Act, sponsored by Rep. Sherwood Boehlert (R-NY). The House Science Committee approved the bill on December 12, 2001, by a unanimous voice vote. The bill would authorize the funding of new research and education programs pertaining to cyber security. See, TLJ Alert No. 323, Dec. 7, 2001.
10:00 AM. The Senate Finance Committee will hold a hearing titled Ongoing U.S. Trade Negotiations. The scheduled witnesses are Robert Zoellick (USTR), Gary Broyles (National Association of Wheatgrowers), George Scalise (Semiconductor Industry Association), and Arthur Wainwright (National Association of Manufacturers). See, release [PDF]. Location: Room 215, Dirksen Building.
10:00 AM. The House Judiciary Committee will hold a hearing on HR 2341, the Class Action Fairness Act of 2001, sponsored by Rep. Bob Goodlatte (R-VA). Location: Room 2141, Rayburn Building.
10:00 AM - 12:00 NOON. The FCC's Advisory Committee for the 2003 World Radiocommunication Conference (WRC-03) will meet.  Location: FCC, 445 12th Street, SW, Commission Meeting Room, Washington DC. This meeting had previously been scheduled for January 30. See, FCC notice of postponement [PDF].
12:15 PM. The FCBA's Online Committee will host a brown bag lunch. RSVP to Scott Harris at sharris
2:00 PM. The Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ) will hold the first of a series of joint hearings on antitrust and intellectual property. The hearings are titled "Competition and Intellectual Property Law and Policy in the Knowledge Based Economy". The speakers at the opening hearing will be Timothy Muris (FTC Chairman), Charles James (Asst. Atty. Gen.for the Antitrust Division), James Rogan (Director of the USPTO), Judge Pauline Newman (U.S. Court of Appeals for the Federal Circuit), Robert Pitofsky (Georgetown University), Todd Dickinson (Howrey Simon), Gerald Mossinghoff (Oblon Spivak), Richard Gilbert (U.C. Berkeley), and Richard Levin (President of Yale). See, FTC release and DOJ release. Location: Room 432, FTC, 600 Pennsylvania Ave., NW.
Deadline to submit comments to the FCC regarding Verizon's Section 271 application to provide in region interLATA services in the state of Vermont. See, FCC notice [PDF]. This is CC Docket No. 02-7.
Extended deadline to submit additional comments to the Copyright Office in response to its March 9, 2001, Notice of Inquiry concerning the interpretation and application of the copyright laws to certain kinds of digital transmissions of prerecorded musical works in light of an agreement between the Recording Industry Association of America (RIAA), the National Music Publishers Association (NMPA), and The Harry Fox Agency (HFA). See, 17 U.S.C. § 115. See, notice in Federal Register, January 31, 2002, Vol. 67, No. 21, at Pages 4694 - 4695. This is Docket No. RM 2000-7B.
Thursday, Feb 7
The House will meet at 10:00 AM. It may take up HR 3394, the Cyber Security Research and Development Act, sponsored by Rep. Sherwood Boehlert (R-NY).
10:00 AM. The House Ways and Means Committee will hold a hearing on the President's Trade Agenda for 2002. U.S. Trade Representative (USTR) Robert Zoellick will testify. Location: Room 1100, Longworth Building.
10:00 AM. The Senate Judiciary Committee has scheduled an executive business meeting. Location: Room 226, Dirksen Senate Office Building.
12:30 PM. Tom Ridge, Director of the Office of Homeland Security will speak at a luncheon. Location: Ballroom, National Press Club, 529 14th St. NW, 13th Floor.
Friday, Feb 8
The House will not be in session.
9:00 AM - 12:30 PM. The FTC and the Antitrust Division of the Department of Justice (DOJ) will hold the second in a series of joint hearings on antitrust and intellectual property. There will be two concurrent sessions, titled "Patent Law for Antitrust Lawyers" and "Antitrust Law for Patent Lawyers". See, FTC release and DOJ release. Location: Rooms 432 and 332, respectively, of the FTC, 600 Pennsylvania Ave., NW.
TO BE DECIDED ON THE BRIEFS. 9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in Chameleon Radio Corp v. FCC, No. 00-1546. Judges Edwards, Sentelle and Silberman will preside.
10:00 AM - 12:00 NOON. The AEI will host a panel discussion titled "Should the Government Promote Open Source Software?" The speakers will be Robert Hahn (AEI Brookings Joint Center), James Bessen (Research on Innovation), David Evans (NERA), Lawrence Lessig (Stanford Univ.), and Craig Mundie (Microsoft). See, online registration page. Location: AEI, 12th Floor, AEI, 1150 17th St., NW.
10:00 AM. Chris Murck, Chairman of the American Chamber of Commerce in China, will speak on the U.S. relationship with China. He will also comment on China's membership into the WTO and its likely impact on the global marketplace. For more information, contact Micaela de Leon Vivero at mdeleon or 202 778-1024. Location: Murrow Room, National Press Club, 529 14th St. NW, 13th Floor.
12:15 PM. The FCBA's Wireless Telecommunications Practice Committee will host a lunch. The topic will be "Hot Wireless Issues on the Hill". The price to attend is  $15.00. RSVP to Wendy Parish at by 12:00 NOON on February 6. Location: Sidley & Austin, Room 6-E, 1501 K Street, NW.
Sixth Anniversary of passage of the Telecommunications Act of 1996.