Tech Law Journal Daily E-Mail Alert
March 27, 2002, 9:00 AM ET, Alert No. 397.
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FCC's Cable Modem Service Ruling Challenged in Court
3/25. Verizon, Earthlink, BrandX, and several interest groups filed petitions for review of the Federal Communications Commission's (FCC) Declaratory Ruling and Notice of Proposed Rulemaking (DR & NPRM) of March 15, 2002, in which the FCC ruled that cable modem service is an interstate information service. Three petitions were filed with the U.S. Court of Appeals (DCCir), and one (BrandX's) was filed with the U.S. Court of Appeals (9thCir).
The FCC announced its Declaratory Ruling and Notice of Proposed Rulemaking [PDF] at its meeting on March 14. It released the 75 page document on March 15. It addresses the legal classification and the appropriate regulatory framework for broadband access to the Internet over cable system facilities. The vote was three to one. Commissioner Michael Copps wrote strenuous dissent. This is GN Docket No. 00-185 and CS Docket No. 02-52. See also, FCC release.
DR & NPRM. The FCC concluded "that cable modem service, as it is currently offered, is properly classified as an interstate information service, not as a cable service, and that there is no separate offering of telecommunications service. In addition, we initiate a rulemaking proceeding to determine the scope of the Commission's jurisdiction to regulate cable modem service and whether (and, if so, how) cable modem service should be regulated under the law ..." The DR & NPRM further states that "The Communications Act does not clearly indicate how cable modem service should be classified or regulated", but nevertheless "conclude[s] that cable modem service as currently provided is an interstate information service, not a cable service, and that there is no separate telecommunications service offering to subscribers or ISPs."
The regulatory classification of cable modem services has significant implications. Classification as a telecommunications service could lead to the result that cable operators must provide "open access" to their cable facilities to competing ISPs. Hence, ISPs, such as Earthlink and BrandX have challenged the ruling. Similarly, classification as a cable service could lead to regulation by a multitude of local franchising authorities. Incumbent local exchange carriers (ILECs), such as Verizon, would like to see their DSL service receive regulatory treatment at least comparable to that of cable operators' cable modem service.
Four Petitions for Review. Verizon Telephone Companies and Verizon Internet Solutions dba filed petition number 02-1100 with the DC Circuit on March 25. Their attorneys are William Barr, Michael Glover, Edward Shakin, and John Frantz, in house counsel all.
EarthLink, Inc. filed petition number 02-1097 with the DC Circuit on March 22. Their attorneys are John Butler and Earl Comstock of the law firm of Sher & Blackwell, and Dave Baker, VP for Law and Public Policy at Earthlink
The Consumer Federation of America (CFA), Consumers Union, and the Center for Digital Democracy (CDD) filed petition number 02-1099 with the DC Circuit on March 25. Their attorneys are Andrew Jay Schwartzman, Harold Feld and Cheryl Leanza of the Media Access Project (MAP).
BrandX Internet, an ISP based in Santa Monica, California, filed a petition with the 9th Circuit.
Verizon's Legal Arguments. Petitions for review typically do not contain legal arguments. Those are presented later in the briefs. Typically, these petitions merely assert that the final order of the agency is "arbitrary, capricious, an abuse of discretion, contrary to statutory authority, and otherwise not in accordance with law".
However, Verizon's petition for review does address legal issues. It states that the FCC "reached a final determination to classify high-speed Internet access service offered over cable systems ... as an interstate information service. ... It also determined that cable modem service does not contain a telecommunications service that is subject to regulation on a common carrier basis, ... and is not subject to the FCC rules that apply to wireline telephone companies that provide functionally equivalent high-speed Internet access services over their facilities. ..."
Verizon continues that "The Declaratory Ruling thus classifies cable modem service in a radically different manner from functionally equivalent high-speed Internet access services offered by telephone companies and their affiliated ISPs, such as Petitioners here. The Declaratory Ruling also exempts cable modem service from numerous regulatory requirements and burdens that apply to functionally equivalent high-speed Internet access services offered by telephone companies and their affiliated ISPs. While in separate proceedings the Commission has sought comment on potential changes in the ongoing regulatory treatment of high-speed Internet access service offered by telephone companies, its current rules impose burdens that cable companies are shielded from as a result of the Declaratory Ruling. Petitioners participated in the proceedings before the FCC in this matter and are aggrieved by the FCC's Declaratory Ruling within the meaning of 28 U.S.C. § 2344."
Verizon concludes that "the Declaratory Ruling's differential treatment of equivalent parties provided by cable companies and telephone companies violates the First and Fifth Amendments of the United States Constitution, the Communications Act of 1934, as amended, is arbitrary, capricious and an abuse of discretion within the meaning of the Administrative Procedure Act, ..."
Earthlink's Legal Arguments. Earthlink has previously filed comments with the FCC. Based on these, Earthlink is likely to advance the argument that, while cable Internet access is an information service, the underlying transport service is a common carrier service under the Communications Act, and hence, subject to regulation as a common carrier service, including the obligation to offer the same service to others.
In addition, on March 15, Dave Baker, Earthlink's VP for Law and Public Policy, stated in a release that "The FCC fails to make the fundamental distinction between how you treat regulated networks like cable systems and unregulated information services like broadband Internet access that travel over those networks. Both statute and longstanding FCC precedent draw these distinctions ..."
He added that "broadband is already deployed to 85 percent of American homes. The challenge is not just providing more broadband connections, but giving consumers meaningful choices in their broadband providers over those connections. Encouraging broadband deployment does not mean sacrificing consumer choice. Unfortunately, today's FCC decision does just that."
Interest Groups' Legal Arguments. The Media Access Project (MAP) stated in a March 25 release that the FCC's DR & NPRM "effectively freed cable operators from having to provide non-discriminatory ``open access´´ to the public." The MAP also stated that "the legal status of cable modem service has important First Amendment ramifications". It elaborated that "Without non-discriminatory open access, cable operators retain the legal right to censor messages, to limit the size and nature of files which can be uploaded and downloaded and to favor content provided by their commercial ``partners´´ and ``preferred vendors.´´"
Similarly, Jeff Chester of the CDD, stated in a March 14 release that "Michael Powell's FCC has struck a deadly blow to the future health of the Internet and has given a great victory to the cable industry lobby". He added that "Cable will now be able to become an even more powerful media gatekeeper, controlling much of what will be digitally distributed into U.S. homes."
Further Proceedings. Additional parties have 60 days from the date of the order to file petitions for review. Also, the circuit courts will likely consolidate all petitions for review, and assign the matter to either the DC Circuit or the 9th Circuit by lottery.
AT&T v. Portland. The Appeals Court already has a precedent on this topic. The U.S. Court of Appeals (9thCir) ruled in AT&T v. City of Portland that cable modem service is a telecommunications service. (See, TLJ story, Ninth Circuit Reverses District Court in AT&T v. Portland, June 22, 2000.) The Appeals Court which hears the present petitions for review could determine that the facts underlying the two cases are essentially the same, and follow the Portland case as precedent. On the other hand, the Appeals Court in this case could determine that the Portland case did not involve review of a FCC order, and hence, is not applicable.
The FCC was not a party to the Portland case. However, it did file an amicus curiae brief. The FCC also addressed the Portland case in its DR & NPRM. It wrote that "While we are considering the broad issue of the appropriate national framework for the regulation of cable modem service, the Portland court considered a much narrower issue -- whether a local franchising authority, whose authority was limited to cable service, had the authority to condition its approval of a cable operator’s merger on the operator's grant of multiple ISP access." The FCC also wrote that "The Ninth Circuit’s decision was based on a record that was less than comprehensive", and that the FCC "was not a party to the case and did not provide its expert opinion on this issue."
District Court Orders DOJ to Expand Its Search for Carnivore Records
3/25. The U.S. District Court (DC), Judge James Robertson presiding, issued a Memorandum Order in EPIC v. DOJ, a Freedom of Information Act (FOIA) suit regarding records pertaining to the FBI's e-mail surveillance system known as Carnivore. The Department of Justice (DOJ) has already produced some records. The Court ordered it to continue its search for more responsive records.
In July of 2000, the Electronic Privacy Information Center (EPIC) submitted a request, pursuant to the FOIA, 5 U.S.C. § 552, for "all FBI records concerning the system known as 'Carnivore' and a device known as 'EtherPeek' for the interception and/or review of electronic mail (e-mail) messages." The EPIC also asked for expedited processing of its request.
The EPIC filed a complaint on July 31, 2000, in the U.S. District Court (DC) alleging failure to respond to the EPIC's request for expedited processing. See, EPIC's Carnivore page for links to further pleadings. In late January 2001, the FBI completed its processing of EPIC's FOIA request. It stated that there are 1,756 pages of responsive material. It produced 1,502 pages in part; 254 were withheld in their entirety. The DOJ then moved for summary judgment. However, the EPIC asserted that the DOJ has not conducted an adequate search. In particular, it asserted that the DOJ has not adequately searched FBI divisions, including the offices of General Counsel and Congressional and Public Affairs.
In its March 25, 2002, order, the District Court denied the government's motion for summary judgment and ordered it to "conduct and complete within 60 days of the date of this order a further search of FBI records reasonably expected to produce the requested information, including (but not necessarily limited to) the files of the FBI offices of General Counsel and Congressional and Public Affairs." (Parentheses in original.)
On March 21, 2002, the U.S. District Court (DC), Judge Ricardo Urbina presiding, issued its opinion [PDF] in Judicial Watch v. FBI, a separate FOIA suit to compel release of documents related Carnivore. That suit was filed on February 1, 2001. The complaint, and the underlying FOIA request, sought records pertaining to "An FBI automated system designed to ``wiretap´´ the Internet and reportedly dubbed ``Carnivore.´´" Judicial Watch asserts that the FBI produced no records. The Court dismissed that suit for failure to exhaust administrative remedies.
David Sobel, General Counsel for the EPIC, concluded: "One case is dead. Now, the other is moving."
Rep. Cubin Introduces Wireless One Percent Bill
3/20. Rep. Barbara Cubin (R-WY) introduced HR 4012, the "Rural Wireless Telecommunications Consumer Enhancement Act of 2002". This bill would amend the Communications Act of 1934 to provide regulatory relief to wireless telecommunications providers with fewer that one percent of subscribers. It was referred to the House Commerce Committee, of which she is a member.
The bill would provide regulatory relief to "small rural wireless carriers". However, the bill's definition of this term makes no reference to "rural". Rather, it is based on subscriber base. It is "any wireless company (together with all affiliates) whose wireless subscribers are fewer than 1 percent of the Nation's wireless subscribers in the aggregate nationwide".
The bill then provides that "In adopting rules that apply to small rural wireless carriers ... the Commission shall separately evaluate the burden that any proposed regulatory, compliance, or reporting requirements would have on small rural wireless carriers." For example, the bill provides that if the FCC's "evaluation determines that any proposed regulatory, compliance, or reporting requirement would create a financial burden on small rural wireless carriers by imposing additional costs that require small rural wireless carriers to divert resources from improving existing and advanced services, making infrastructure investments, and other competitive initiatives for the benefit of businesses and residents in rural areas, the Commission shall forbear from imposing such requirement on small rural wireless carriers unless it determines such forbearance is not in the public interest."
The bill would also create at the FCC an "Office of Rural Advocacy" to be headed by a "Rural Advocate" who would be appointed by the President and confirmed by the Senate.
Rep. Rothman Introduces Teacher Technology Training Bill
3/20. Rep. Steve Rothman (D-NJ) introduced HR 4064, the "Education for the 21st Century (E-21) Act". This bill was referred to the Committee on Education and the Workforce.
The bill would authorize appropriations of $30 Million for each of fiscal years 2003 through 2007 to fund a grant program for teacher training in technology.
The bill would also authorize appropriations of $5 Million for each of fiscal years 2003 through 2007 to fund a grant program relating to education software and web sites. The bill states that "The Secretary of Education is authorized to award grants, on a competitive basis, to students in secondary schools and institutions of higher education, working with faculty of an institution of higher education, software developers, and experts in educational technology for the development of high-quality educational software and Internet websites by such students, faculty, developers, and experts."
Greenspan Addresses IT and Uncertainty
3/26. Federal Reserve Board Chairman Alan Greenspan gave a speech titled "Corporate Governance" at the Stern School of Business at New York University in New York City. He also touched on information technology and uncertainty.
He stated that "Earnings uncertainty has been particularly elevated in recent years. Improvements in information technology have created new opportunities for innovative companies, but an environment of rapid technological change is also one in which the resulting profit opportunities are difficult to assess and project. In particular, such rapid change has heightened the potential for competitors to encroach on established market positions. This process of capital reallocation has not only increased the long-term earnings growth potential of the economy as a whole, but has widened as well the degree of uncertainty for individual firms."
State Rights of Way Disputes, Diversity Jurisdiction, and Abstention
3/26. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in Tuscon v. Qwest. This case arises out of a dispute over Qwest's franchise for the use of rights of way in Tuscon. However, this opinion deals solely with jurisdictional and abstention issues. The Appeals Court reversed a District Court decision to decline to exercise diversity jurisdiction.
Parties. Tucson is a city in the state of Arizona. Qwest provides telecommunications services in Tucson. Qwest has installed, and currently operates and maintains, equipment and facilities within the public rights of way of Tucson.
Proceeding Below. Tucson filed a complaint in Arizona Superior Court for quo warranto, or in the alternative, for declaratory relief, alleging Qwest "illegally usurped and continues to illegally usurp the franchise for the use of the public rights of way of the City of Tucson for the transaction of its telecommunications business." Qwest removed the action to the U.S. District Court (DAriz), based upon diversity of citizenship. Qwest filed an answer in the District Court stating that it holds a valid pre-statehood, statewide franchise and is therefore not required to obtain additional franchises from each Arizona city. Tucson moved to remand the case to state court, based on various abstention doctrines. The District Court remanded, based upon the Burford abstention doctrine. This appeal followed. Tucson also challenged the appellate jurisdiction of the Court of Appeals.
Burford Abstention Doctrine. The Appeals Court wrote that this "doctrine allows allows a federal district court to abstain from exercising jurisdiction if the case presents ``difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case then at bar,´´ or if decisions in a federal forum ``would be disruptive of state efforts to establish a coherent policy with respect to a matter of substantial public concern.´´" (Citation omitted.) See, Sun Oil Co. v. Burford, 124 F.2d 467 (5th Cir. 1941), vacated by 130 F.2d 10 (5th Cir. 1942).
Appeals Court Holding. The Appeals Court, applying factors which the 9th Circuit requires for application of the Burford abstention doctrine, ruled that abstention is inappropriate in this case because the state of Arizona has not designated to a particular court the duty of resolving utility franchise disputes, and because federal review would not disrupt public policy. The Court reversed, and remanded, to the U.S. District Court.
People and Appointments
3/26. The Barbara Cherry was named Deputy Chief of the Federal Communications Commission's (FCC) Office of Plans and Policy. She was previously Associate Director of the Quello Center for Telecommunications Management and Law at Michigan State University. See, FCC release [PDF].
3/26. Mark Weinberger, Assistant Secretary of the Treasury for Tax Policy, plans to leave the Treasury Department in mid-April. See, Treasury release.
USPTO Director Rogan Addresses International Patent System
3/26. James Rogan, Director of the U.S. Patent and Trademark Office (USPTO), gave a speech at a World Intellectual Property Organization (WIPO) convention in Geneva, Switzerland, regarding the international patent system. See also, USPTO release.
He stated that "the process of constructing an international patent system, while slow, has been steady. The importance of this issue is such that it cannot be ignored. I fully intend, during my tenure as Under Secretary, to make this issue a priority and assume a leadership role in its promotion and ultimate resolution."
He stated that "the foundation for an international system exists in the Patent Cooperation Treaty [PCT] and the Patent Law Treaty [PLT], both of which are administered by this body, and in the Agreement on the Trade Related Aspects of Intellectual Property [TRIPs Agreement], administered by the World Trade Organization." (Brackets in original.)
He added that "To gain maximum efficiency in such a system, the substantive standards for granting patents and the basis on which searches and examinations are done should be reconciled. In addition, patent applicants around the world should have confidence that those mutually accepted standards will be applied objectively in each patent office conducting the searches and examinations. To achieve that, we have considerable work before us. The United States is committed to working with other Members of WIPO to bring about reconciled standards for searches, examinations and the granting of patents."
Wednesday, March 27
The House and Senate are both in recess for the Spring District Work Period. Both bodies will return on Monday, April 8.
10:00 AM. The Progress and Freedom Foundation will hold a press conference to release a survey based report titled "Privacy Online: A Report on the Internet Practices and Policies of Commercial Websites". Federal Trade Commission (FTC) Chairman Timothy Muris and FTC Bureau of Consumer Protection Director Howard Beales will speak. Location: National Press Club, Holeman Lounge, 529 14th St. NW, 13th Floor.
11:00 AM. The Cato Institute will host a panel discussion on spam. The speakers will be Howard Beales (FTC), Rebecca Richards (TRUSTe), Chris Hoofnagle (Electronic Privacy Information Center), and Jerry Cerasale (Direct Marketing Association). See, online registration page. Lunch will follow the program. Location: Cato, 1000 Massachusetts Ave., NW.
12:15 PM. The FCBA's Telecom Competition Committee will host a brown bag lunch. The speakers will be Jim Bird, head of the FCC's transactions team, and other FCC representatives. RSVP to Wendy Parish at wendy Location: FCC, 445 12th Street, SW, Eighth Floor, Conference Room 1.
12:30 PM. Larry Thompson, Deputy Attorney General of the U.S., will speak at the Heritage Foundation. See, notice. Location: 214 Massachusetts Ave NE, Washington DC.
Thursday, March 28
Passover begins.
12:15 PM. The FCBA's Young Lawyers Committee will host a brown bag luncheon. The topic will be "Putting the ``Mass´´ Back in Media -- A First Amendment Right to Bulk Up." The speaker will be Paul Gallant, Special Advisor to Kenneth Ferree, Bureau Chief of the Cable Services Bureau, and a member of the Media Ownership Working Group. RSVP to rwallach Location: Willkie Farr & Gallagher, 1155 21st Street, NW (between L & M), 6th Floor.
4:00 PM. John Duffy (Marshall Wythe School of Law) will give a lecture titled "The Puzzling Persistence of the Ideal of Marginal Cost Pricing in the Economic Analysis of Patents". For more information, contact Robert Brauneis at rbraun or 202 994-6138. Location: George Washington University Law School, 2000 H Street, NW.
Deadline to submit comments to the FCC regarding ways to improve its electronic licensing systems. See, FCC notice [PDF].
Friday, March 29
Good Friday.
Extended deadline to submit public comments to the FTC regarding the use of disgorgement as a remedy for competition violations, including those involving the Hart Scott Rodino (HSR) Premerger Notification Act, FTC Act, and Clayton Act. See, original FTC release and Federal Register notice, and FTC release and Federal Register notice extending deadline from March 1 to March 29.
Deadline to submit comments to the FTC regarding proposed new Privacy Act system of records. This system, if adopted, would include telephone numbers and other information pertaining to individuals who have informed the Commission that they do not wish to receive telemarketing calls. See, notice to be published in the Federal Register.
Monday, April 1
The Supreme Court of the U.S. will go on recess until Monday, April 15.
The USTR will hold a hearing regarding negotiation of a U.S. Singapore Free Trade Agreement. The USTR stated in its notice in the Federal Register that the agreement is "expected to include provisions on trade in services, investment, trade related aspects of intellectual property rights, competition, government procurement, electronic commerce, trade related environmental and labor matters, and other issues." See, Federal Register, Vol. 67, No. 40, at pages 9349 - 9351.
10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Philip Jackson v. Casio PhoneMate, No. 01-1456, a patent infringement case involving telephone answering machines. The U.S. District Court (NDIll) granted summary judgment to Casio. Location: Courtroom 201, LaFayette Square, 717 Madison Place, NW.
EXTENDED TO APRIL 22. Deadline to file reply comments with the FCC in response to its notice of proposed rulemaking (NPRM) regarding the appropriate regulatory requirements for incumbent local exchange carriers' (ILECs') provision of broadband telecommunications services. The FCC adopted this NPRM at its December 12 meeting. This is CC Docket No. 01-337. See, notice in the Federal Register See, Order [PDF] extending deadline to April 22.
Deadline to submit written requests to participate as a panelist in the workshop to be hosted by the FTC on May 16 and 17 to explore issues relating to the security of consumers' computers and the personal information stored in them or in company databases. See, notice in Federal Register.
Tuesday, April 2
10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Netscape Communications v. Allen Konrad, No. 01-1455. Location: Courtroom 201, LaFayette Square, 717 Madison Place, NW.
More News
3/26. Verizon refiled with the Federal Communications Commission (FCC) its Section 271 application to provide in region interLATA services in the state of New Jersey. See, Verizon release.
3/26. Federal Reserve Board Governor Mark Olson gave a speech titled "Career Development in a Changing Economy" at the School of Business and Industry at Florida A&M University in Tallahassee, Florida. He reviewed the outlook for the U.S. economy, and gave advice to business students regarding their careers. He stated that "businesses are focusing more on the ``bottom line´´ and are more aggressively searching for ways to improve their efficiency and profitability. They are asking what each unit within the company is contributing to the value of the firm." He added that "Firms for which intangibles -- brands, patents, software, research programs, and the like -- are an important component of value have moved toward integrating, or at least producing, intellectual capital accounts in addition to the usual financial balance sheets."
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