|DOJ and States Sue to Block Echostar Directv Merger
10/31. The U.S. Department of Justice
(DOJ) and numerous states filed a
U.S. District Court (DC) against
Echostar Communications, Hughes Electronics, and others, seeking to block the proposed
acquisition of Directv by Echostar, pursuant to Section 7 of the Clayton Act,
15 U.S.C. § 18. EchoStar and Hughes both provide direct broadcast satellite (DBS) service via
Network and DirecTV.
Charles James, the Assistant Attorney General in charge of the DOJ's
Antitrust Division, stated in a
that “This merger would give Echostar control of the skies for the provision of
video programming by satellite, leaving customers to suffer from the resulting
reduction in competition ... This merger would create a monopoly in those areas
where cable television is not available, thereby eliminating the only
competitive choice for millions of households. It would leave tens of millions
of households -- for whom DirecTV, DISH Network, and cable now compete to
provide multichannel video programming distribution service -- with a reduction
from three to two competitive choices".
Charles Ergen, EchoStar Ch/CEO, stated in a
release that "I would like
to personally thank all those, including our customers,
consumers, legislators, employees and numerous others, who during the past year
have supported this historic merger proposal. We also thank the regulatory
officials at the Department of Justice, FCC and the states who worked diligently
to analyze this complex merger and gave us the opportunity to express our views.
We continue to believe passionately that the merger of EchoStar and Hughes is
the best chance to stop rising cable prices and to bring enhanced services to
all Americans, especially those consumers living in rural America. We are
obviously disappointed that at this time we have not been able to convince
regulatory officials to share our vision. EchoStar will continue to explore all
possible means to be allowed to compete against the cable giants and for more
choice for all consumers."
The DOJ release also stated that the DOJ "gave serious consideration to the
efficiencies and new services that the merging parties claimed would result from
the transaction. While recognizing that certain efficiencies could result, the
Department concluded the parties could not demonstrate any efficiencies likely
to result from the merger were sufficient to outweigh the substantial adverse
impact of the transaction on competition and consumers."
The DOJ also stated that it "considered a very recent proposal by the merging
parties to restructure the transaction in an attempt to remedy the
anticompetitive problems inherent in the merger. The Department concluded that
even if the proposed concept could be realized, it was unlikely to become a
sufficient replacement for the vigorous competition that now exists between
Hughes and Echostar within a reasonable period of time."
The complaint alleges that "The proposed acquisition of Hughes by Echostar
would cause significant harm to competition in numerous local markets for MVPD
services throughout the country. For millions of households this merger would
create a monopoly. For tens of millions of households in the United States, this
merger would create a duopoly. The combination of the nation's only two DBS
firms would substantially lessen competition in violation of Section 7 of the
Clayton Act, 15 U.S.C. § 18. For the roughly 95% of U.S. television households
that currently have three or fewer options for MVPD service, this merger would
lead to higher prices and lower service quality than would be the case absent
its consummation. The United States and the Plaintiff States
therefore seek an order permanently enjoining the merger."
The complaint was filed by the DOJ, the states of Missouri, Arkansas,
California, Connecticut, Hawaii, Idaho, Illinois, Iowa, Kentucky, Maine,
Massachusetts, Mississippi, Montana, Nevada, New York, North Carolina, North
Dakota, Oregon, Pennsylvania, Texas, Vermont, Washington, and Wisconsin, and
Puerto Rico. The defendants are Hughes Electronics, Echostar Communications, General Motors and Directv
The DOJ and states request that "the proposed acquisition be adjudged to violate Section
7 of the Clayton Act, 15 U.S.C. §18" and that "the Defendants be permanently
enjoined and restrained from carrying out the Agreement and Plan of Merger dated
October 28, 2001, or from entering into or carrying out any agreement,
understanding, or plan by which Echostar would merge with or acquire Hughes, its
capital stock or any of its assets".
This is case number 1:02CV02138. The case has been assigned to Judge Ellen Huvelle.
On October 10, the Federal Communications
Commission (FCC), which has authority over license transfers, announced that it has "declined to approve the transfer of
licenses from EchoStar Communications Corporation and Hughes Electronics
Corporation, a subsidiary of General Motors Corporation, to a new entity".
The FCC has assigned the matter for hearing before an administrative law judge.
TLJ story titled
Declines to Approve EchoStar DirectTV Merger", October 10, 2002.
|GAO Reports on Competition Between Cable and DBS
|10/31. The General Accounting Office (GAO)
issued a report [57 pages
in PDF] titled "Telecommunications: Issues in Providing Cable and Satellite
The GAO did not address the merits of the proposed merger of Echostar and
Directv. Rather, the GAO examined three
issues: "(1) whether the availability of cable modem Internet access service
appears to be affecting the competitiveness of DBS companies in the provision of
video services, (2) whether cable prices and DBS penetration rates appear to be
affected in areas where the DBS companies offer local broadcast channels, and
(3) whether the two individual DBS companies are technologically capable of
expanding local broadcast channel services into all 210 television markets in
the United States."
The GAO conducted a telephone survey of consumers.
On the first issue, the GAO found that "the
availability of Internet access services is important for some consumers --
although not the majority of consumers -- when they are considering various
video service providers. In particular, just over half of the respondents to our
survey said that when thinking about purchasing television programming service,
the availability of cable modem Internet service would not make them more likely
to consider cable video service over DBS video service. However, almost
one-third of respondents said that when thinking about purchasing television
programming service, the availability of cable modem Internet service would make
them "moderately more likely" or "much more likely" to consider cable over DBS,
and these respondents were more likely to have a higher household income and to
be younger than respondents not influenced by the availability of cable modem
service. Most respondents (88 percent) said they had never considered satellite
The report was prepared for Sen. Herb Kohl
(D-WI) and Sen. Mike DeWine (R-OH), the
Chairman and ranking Republican on the
Senate Judiciary Committee's
Subcommittee on Antitrust, Competition, and Business and Consumer Rights.
|Tech Crime Report
|10/28. A grand jury of the U.S.
District Court (CDCal) returned a two count indictment of Tony Minh Nguyen
on October 23 charging that he manufactured and trafficked in counterfeit Compaq
computer memory modules. The U.S. Attorneys Office (USAO) announced that he was
arrested on October 28. The USAO explained the scheme in a
directed sales and production at Dynasty Memory, Inc., a Santa Ana computer
supply company. The two count indictment alleges that Nguyen directed Dynasty
employees to purchase out-of-date Compaq memory components. Then, Dynasty
employees would remove the Compaq labels and, under Nguyen’s direction, they
would re-adhere the Compaq labels to non-Compaq memory components, creating a
product that would be substantially indistinguishable from genuine Compaq
products. Nguyen then directed that these counterfeit parts be sold as the
10/29. Jonathan Beck plead guilty in
U.S. District Court (NDCal) to insider trading in the stock of Critical Path
in violation of 15 U.S.C. § 78j(b), 15 U.S.C. § 78 ff(a), and 17 C.F.R.§
240.10b-5. Beck is a former VP of Critical Path, a San Francisco based
technology company. See,
10/30. The U.S. District Court (NDTex) sentenced Henry Wang to six months
confinement, and ordered him to pay $41,042 in restitution, following his plea
of guilty to one count of computer fraud in violation of
18 U.S.C. § 1030(a)(4).
Wang worked as a software developer for J.C. Penney, where he accessed and
copied, without authority, proprietary information, including computer files
that comprised the source code for the J.C. Penney electronic commerce store. See, USAO
10/31. The U.S.
Court of Appeals (6thCir) issued it
v. Tommy Newell, affirming the District Court's imposition
of a 27 month sentence for making threatening statements in numerous e-mails,
and by telephone, in violation of
18 U.S.C. § 875(c).
This is an Internet love gone wrong case. Newall met a woman over the Internet.
They subsequently met in person. When her husband was released from prison, she
dropped Newell. Upset, he sent her lots of ugly threats by e-mail, but did not
harm her. Now, Newell goes to prison.
|10/31. The U.S.
Court of Appeals (6thCir) issued its
Telxon v. Federal Insurance, a
diversity case involving the obligation of an insurance company to reimburse its
insured, a telecom company, for costs of defending of class action securities
case. The Court of Appeals affirmed the District Court's summary judgment for
the insurance company
10/31. The Federal Communications Commission's
(FCC) Wireline Competition Bureau (WCB) issued a
Public Notice [PDF] in which
it requests comments on AT&T's
October 15 Petition for Rulemaking to Reform Regulation of Incumbent Local Exchange Carrier
Rates for Interstate Special Access Services
[118 pages in PDF]. AT&T stated in a release
"the premature removal of price regulations on special
access services -- the high capacity local links to buildings that provide
businesses with telephone and high speed Internet
services -- has allowed the Bells to gouge their customers and competitors to
the tune of $5 billion annually, with a resulting deadweight drag on the
economy." The ILECs oppose the proposal. Comments are due by December 2,
2002. Reply comments are due by December 23, 2002. This is RM No. 10593.
|FCC Announces Agenda for November 7 Meeting
|10/31. The Federal Communications Commission
(FCC) announced the
agenda for its open meeting on Thursday, November 7. The FCC's
Spectrum Policy Task Force (SPTF) will
report on its findings and recommendations, and the FCC will
take up other spectrum related items.
In addition to the SPTF report, four other spectrum related items
are on the agenda. The FCC's International Bureau will report on
the outcome of the International Telecommunication Union Plenipotentiary
Conference. The FCC will consider a Second Report and Order that would allocate
spectrum in the 1.7 and 2.1 GHz bands that can be used to provide advanced
wireless services (AWS), such as 3G or IMT-2000. The FCC will consider a Notice
of Proposed Rulemaking (NPRM) concerning service rules for (AWS) in the 1.7 GHz
and 2.1 GHz bands. The FCC will consider a NPRM and Order concerning allocation and service
rules for the Dedicated Short Range Communication Services in the 5.850-5.925
The FCC will also consider a
Second Report and Order concerning new broadcast and MVPD equal employment
opportunity rules and policies.
The meeting will be at 9:30 AM
in Room TW-C305 (Commission Meeting Room), 445 12th Street, SW.
|Greenspan Addresses Education, Knowledge, Innovation and
|10/29. Federal Reserve
Board Chairman Alan Greenspan gave a
speech titled "Education" to the Institute of International Education, in
New York City. It was a wide ranging and philosophical speech about the nature
of knowledge, additions to knowledge, innovation, education and economic
success. And, like many of Greenspan's recent speeches, it focused on the causes
and consequences of advances in computer and communications technologies.
It was an unusual speech for a federal government official. He praised the
U.S. educational system, which is not unusual. But, he said that its excellence
is not the result of government funding or guidance. Rather, "it has been
influenced importantly by the values of a strong market economy -- competition,
risk taking, and innovation."
It is common for elected representatives and government officials to advocate
the role of government in improving the educational system. Greenspan omitted
the role of government from his speech. Instead, he argued, the educational
system is good because it imitates, interacts with, and responds to the private
sector. Moreover, it works so well because of some of its own institutions, such
as its emphasis on research, its peer reviewed journals, and its continuing
commitment to the liberal arts and interdisciplinary activities.
According to Greenspan, a nation's economic success is dependant in part on
its education system. One of the reasons that the U.S. is prosperous, and the
U.S. economy over the years has grown so fast, is the educational system.
It is also common for elected representatives and government officials to
address innovation in terms of increasing government spending at agencies or
universities that conduct research. It is also common for representatives and
officials to advocate changes to the legal framework for protecting innovation
-- the intellectual property laws. Although, most of the debate in recent years
has focused solely on laws affecting the music and movie industries, which
rarely contribute to knowledge.
Greenspan made no mention of either R&D spending or IP laws. Instead, he
identified various institutions of the U.S. educational system that contribute
to technological creation and innovation.
To Greenspan, knowledge is "a deeper understanding of how the world works".
Its proper use is "to alter our physical and social environment for the better".
He stated, "Especially notable has been our application of both scientific
advances and organizational paradigms to raise living standards across most of
the population, and, as a consequence, engender marked increases in average
longevity and quality of life."
Greenspan then turned to how the U.S. economy has become increasingly
knowledge based, and how knowledge is becoming increasingly specialized. He
stated that "The share of the nation's output that is conceptual appears to
have accelerated after World War II with the insights that led to the
development of the transistor and microprocessor. They have spawned remarkable
alterations in how we, and many other societies, live."
He continued that "Computers, telecommunications, and satellite technologies have
enabled data and ideas -- the ever more important elements of valued output -- to
be expeditiously transferred geographically to where they can be put to best
use. Thus, these advanced means of communication have added much the same type
of value that the railroads added in transporting the more physical goods of an
"Here in the United States, we have developed an exceptionally
sophisticated stock of capital assets -- fostered by the most conceptual and
intangible of all new products -- software. Breakthroughs in all areas of
technology -- despite the recent slowdown -- have been continually adding to the
growing list of almost wholly conceptual elements in our economic output. These
developments are affecting how we produce output and are demanding greater
specialized knowledge," said Greenspan.
Greenspan next listed the major determinants of a nation's economic success.
Among these is its educational system. He said that the "key determinants of how
successful any country will be in transforming its physical and human assets
into economic growth" are "openness to trade, a strong institutional
infrastructure, disciplined macroeconomic policies, and an effective system of
education -- formal or otherwise".
He added that success lies in the interaction of these determinants. For
example, "An educated workforce, then, is a necessary ingredient for economic
advance, but it is apparently much more powerful when combined with a strong,
competitive economic system, where rights of persons and property are
He then turned to the economic advantages held by the U.S. as a result of its
First, he said, is that "the marketplace work[s] efficiently to guide our
educational system, defined in its widest sense, toward the broader needs of our
economy." He elaborated that "technological advance has brought with it not only
improvements in the capital inputs used in production but also new demands on
workers who must interact with that increasingly more complex stock of capital"
and "Our educational system responded".
He also said that the U.S. system of higher education is
effective because of competition, both between institutions, and
between categories of institutions (such as research
universities, liberal arts colleges, and community colleges).
He also addressed the sources of the creativity and
innovation at U.S. institutions of higher education. One source
is the "promotion of peer reviewed scholarship and the value
they place on creativity and risk taking". Another is the
"patience and the flexibility to accept that uncertainty,
confident that the rigorous effort to explore ideas would
eventually lead to discovery."
He also tackled the roots of creative and innovative
thinking. He suggested that the liberal arts education and
interdisciplinary activity remain essential. "Critical awareness
and the abilities to hypothesize, to interpret, and to
communicate are essential elements of successful innovation in a
conceptual based economy," said Greenspan. Moreover, "the
ability to think conceptually is fostered through exposure to
philosophy, literature, music, art, and languages. So called
liberal education is presumed to spawn a greater understanding
of all aspects of living -- an essential ingredient to broaden
one's world view. As the President of the University of
Pennsylvania, Judith Rodin, put it, such an understanding comes
by ``vaulting over disciplinary walls´´ and
exploring other fields of study. Most great conceptual advances
are interdisciplinary and involve synergies of different
Or, in Greenspan speak, the liberal arts education is "a
means of increasing technical intellectual efficiency".
He then offered the observation that the payoffs have been impressive. "With
the emergence of significant centers of commercial innovation and
entrepreneurship -- Silicon Valley, the Research Triangle, and the clustering of
biotech enterprises in the Northeast corridor -- creative ideas flow freely
between local academic scholars and those in industry. Those ventures that
succeeded have materially added to our base of knowledge. But even those that
failed, as many did, left residual insights that may spark future research."
Greenspan made no pleas for government spending on education or research and
development. He made no recommendations for government regulation of education.
He commented on no pending legislation.
He offered only one recommendation. He said that "We must ensure that
teaching and research continue to supply the creative intellectual energy that
drives our system forward. As the conceptual inputs to the value added in our
economic processes continue to grow, the ability to think abstractly will be
increasingly important across a broad range of professions. Critical awareness
and the abilities to hypothesize, to interpret, and to communicate are essential
elements of successful innovation in a conceptual based economy." Although, he
offered no guidance on how one ensures this, or if the government even plays any
role in ensuring this.
He offered only one criticism of the U.S. educational system. He said that
"tests of student achievement in mathematics and science suggest that our high
schoolers have been falling short of their peers in other countries." However,
he added, "I trust that this degradation will prove to be transitory."
|People and Appointments
|10/31. Robert Lamm was named Corporate Secretary and Director of
Corporate Governance of Computer Associates International. See,
10/29. Samuel Palmisano was elected Chairman of the Board of Directors of IBM,
effective January 1, 2003. He will succeed Louis Gerstner. See,
10/31. Jack Krumholtz was named co-chair of
CapNet, a Washington DC based group that
represents technology companies. He is also Microsoft's Director of Federal
Government Affairs and Associate General Counsel. He replaces former Rep. Vic
Fazio. Lisa Nelson of AOL Time Warner remains a co-chair.
|Judge Kotelly to Release Rulings in Microsoft Cases on
Friday at 4:30
|10/31. The U.S. District Court (DC)
published a notice
[PDF] stating that "At approximately 4:30 p.m. on Friday, November 1, 2002,
United States District Court Judge Colleen Kollar- Kotelly will issue Opinions in
the Microsoft cases."
The notice adds that "At that time, copies of the Opinions can be downloaded
in PDF format from the U.S. District Court's homepage,
The Department of Justice, nine state plaintiffs, and
Microsoft reached a
settlement last November of the governments' antitrust case against Microsoft.
They submitted a revised settlement agreement in February of this year. Judge Kotelly can either approve or reject this settlement. See,
Second Revised Proposed Final Judgment, filed on February 27, 2002. In
addition, Judge Kotelly will likely rule on remedies requested by the non-settling state
|Friday, November 1
|8:30 AM - 1:00 PM. Day two of a two day CLE seminar hosted by the
FCBA titled "Communications Law 101: A Practitioner's Primer". The price
to attend is $250 for lawyers and paralegals in private practice or corporate
positions, and $125 for those in government service, non-profit positions or
in law school. Location: Georgetown University Law Center, 600 New Jersey
12:30 - 2:00 PM. The Cato
Institute will host an event titled "Capitol Hill Briefing:
Too Much Deregulation or Not Enough?" The speakers will be Peter
VanDoren (Cato) and Mark Cooper (Consumer
Federation of America). For more information, contact
Krystal Brand at 202 789-5229. Location: Room 121, Cannon House
4:30 PM. The U.S. District Court
(DC) will release online its opinions in the Microsoft cases. See,
Deadline to submit reply comments to the
regarding BellSouth's Section 271
application with the FCC to provide in region interLATA service in the states
of Florida and Tennessee. This is WC Docket No. 02-307. See,
FCC notice [PDF].
Deadline to submit reply comments to the FCC
regarding the petition for declaratory ruling in CC Docket No. 01-92
requesting that the FCC determine that wireless termination tariffs are not a
proper mechanism for establishing reciprocal compensation arrangements between
local exchange carriers (LECs) and commercial mobile radio service (CMRS)
FCC notice [PDF].
|Monday, November 4
|The Senate will meet at 10:30 AM in pro forma session only.
The Supreme Court will return from its recess, which it began on October
8:30 - 11:00 AM. The Alliance for Public
Technology (APT) & the High Tech Broadband Coalition (HTBC) will host an
event titled "From Debate to Deployment: Demonstrating the Power of
Commissioner Michael Copps
will deliver the opening keynote address. For more information, contact Matt
Bennett at 202 263-2972 or mbennett @apt.org.
Location: The Hotel Washington, 515 15th Street NW.
Deadline to submit comments to the
NTIA in response to its request for comments on two of the nine exceptions
to the Electronic Signatures in Global and National Commerce (E-SIGN) Act. The
E-SIGN Act provides for the acceptance of electronic signatures in interstate
commerce, with certain enumerated exceptions. The two categories of exempt
documents that are the subject of this request for comments are court records
and hazardous materials notices. The Act tasks the NTIA with studying these
exemptions, and providing reports to Congress. See also,
notice in Federal Register, regarding court records, and
notice in Federal Register, regarding hazardous materials notices.
Deadline to submit reply comments to the
regarding SBC's Section 271 application with
the FCC to provide in region interLATA service in the state of California.
This is WC Docket No. 02-306. See,
FCC notice [PDF].
|Tuesday, November 5
9:30 AM. The U.S. Court of Appeals
(DCCir) will hear oral argument in 21st Century Telesis v. FCC, No.
01-1435. Judges Randolph, Rogers and Williams will preside. Location:
Courtroom 20, 333 Constitution Ave., NW.
Deadline to submit applications to the Agriculture Department's
Rural Utilities Service for grants
under its pilot program for the provision of broadband transmission service in
rural America for fiscal year 2002. See,
notice in the Federal Register.
|Wednesday, November 6
|9:30 - 11:30 AM and 2:00 - 4:00 PM. The
Antitrust Division will hold the final
workshops in their joint series titled "Competition and Intellectual Property
Law and Policy in the Knowledge Based Economy" on October 25 and 30 and
November 6. The November 6 event is titled "Antitrust Law and Patent
Landscapes". The 9:30 AM program is titled "Standard Setting Organizations:
Evaluating the Anticompetitive Risks Of Negotiating IP Licensing Terms and
Conditions Before A Standard Is Set". The 2:00 PM program is titled
"Relationships Among Competitors and Incentives to Compete: Cross Licensing of
Patent Portfolios, Grantbacks, Reach Through Royalties, and Non- Assertion
Clauses". Location: FTC Room 432, 600 Pennsylvania Ave., NW.
10:00 - 11:30 AM. Media Security
and Reliability Council (MSRC) will hold a meeting.
Chairman Michael Powell
will participate. The MSRC is a federal advisory committee formed after the
terrorist attacks of September 11, 2001, to study ways to secure and maintain
broadcast and multichannel video programming distribution (MVPD) in the face
of terrorist attacks, natural disasters and other threats. See,
FCC release [PDF]. Location: FCC, Commission Meeting Room (TW-C305), 445
12th Street, SW.
12:15 PM. The
FCBA's Global Telecommunications Development Committee and International
Practice Committee will host an event titled "What Happened in Marrakesh? A
Debriefing on the 2002 ITU Plenipot". The speakers will be David Gross,
Coordinator of International Communications and Information Policy at the
State Department. RSVP to jhindin @wrf.com.
Location: Wiley Rein & Fielding, 1750 K St,
|Thursday, November 7
|The Senate will meet at 10:30 AM in pro forma session only.
9:30 AM. The FCC will hold a meeting. The agenda includes a number of
spectrum related items. The
Spectrum Policy Task Force will report on its findings and recommendations.
The FCC's International Bureau will report
on the outcome of the International Telecommunication Union Plenipotentiary
Conference. The FCC will consider a Second Report and Order that would
allocate spectrum in the 1.7 and 2.1 GHz bands that can be used to provide
advanced wireless services (AWS), such as 3G or IMT-2000. The FCC will
consider a Notice of Proposed Rulemaking (NPRM) concerning service rules for (AWS)
in the 1.7 GHz and 2.1 GHz bands. And, the FCC will consider a NPRM and Order
concerning allocation and service rules for the Dedicated Short Range
Communication Services in the 5.850-5.925 GHz band. Location: FCC, 445 12th Street, SW,
Room TW-C05 (Commission Meeting Room).
10:00 AM. The U.S. Court of Appeals (FedCir)
will hear oral argument in Altiris v. Symantec, No. 02-1137. This is a
patent infringement case involving technology for remotely controlling the
boot process of a computer. It is appealed from the U.S. District Court (CDUtah).
Location: 717 Madison Place, NW.
|Friday, November 8
|The Senate will meet at 10:30 AM in pro forma session only.
9:30 AM. The U.S. Court of Appeals
(DCCir) will hear oral argument in AT&T v. FCC, No. 01-1511. Judges
Ginsburg, Edwards and Garland will preside. Location: 333 Constitution Ave.,
10:00 AM. The U.S. Court of Appeals (FedCir)
will hear oral argument in Cygnus Telecommunications Technology v.
Totalaxcess.com, No. 02-1325. This is a consolidated patent case appealed
from the U.S. District Court (NDCal). Location: 717 Madison Place, NW.
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