|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.
Copps wrote strenuous dissent.
This is GN Docket No. 00-185 and CS Docket No. 02-52. See
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
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 Verizon.net 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
& Blackwell, and Dave Baker, VP for Law and Public
Policy at Earthlink
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
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".
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
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
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
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
|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
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.
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
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
|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
|Greenspan Addresses IT and
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
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
|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.
|USPTO Director Rogan
Addresses International Patent System
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
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
|Wednesday, March 27
|The House and Senate are both in recess for the Spring
District Work Period. Both bodies will return on Monday, April
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 @fcba.org. 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
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 @willkie.com.
Location: Willkie Farr &
Gallagher, 1155 21st Street, NW (between L & M), 6th
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 @main.nlc.gwu.edu
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
|Friday, March 29
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,
EXTENDED TO APRIL 22.
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.
|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
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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