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August 20, 2003, 9:00 AM ET, Alert No. 722.
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Powell Predicts Imminent Release of Triennial Review Order

8/20. Federal Communications Commission (FCC) Chairman Michael Powell held a news conference at the FCC at which he was asked when the FCC would release its triennial review order.

He responded, "I really think that this week. I have said that before. I really do. So, stayed tuned. Hopefully, we will get it out of here in the next couple of days. So, I would be looking for it towards the end of the week."

The FCC announced, but did not release, it triennial review order on February 20, 2003. See, stories titled "FCC Announces UNE Report and Order", "FCC Order Offers Broadband Regulatory Relief", "FCC Announces Decision on Switching", "Commentary: Republicans Split On FCC UNE Order", and "Congressional Reaction To FCC UNE Order" in TLJ Daily E-Mail Alert No. 609, February 21, 2003.

Powell Announces Localism in Broadcasting Initiative

8/20. Federal Communications Commission (FCC) Chairman Michael Powell held a news conference at the FCC to announce a "localism in broadcasting initiative". The initiative includes creating a localism task force, creating a blue ribbon panel on diversity, issuing a Notice of Inquiry on localism, and speeding the issuance of LPFM licenses.

Michael PowellPowell (at right) stated that the FCC will create a localism task force, to be chaired by Michelle Ellison and Robert Radcliffe of the FCC. It will conduct empirical studies on localism, organize a series of public hearings, advise the FCC on steps that it might take, and advise the Congress on possible legislation.

Powell stated that he has directed the staff of the FCC's Media Bureau to prepare a Notice of Inquiry (NOI) on localism. He added that it will work "in parallel" with the localism task force. It will inquire, among other things, whether "localism rules continue to operate effectively".

Powell also announced a "blue ribbon panel" on diversity, to be chaired by former Florida Public Service Commission Chairman Julia Johnson. Powell also reiterated his support for Sen. John McCain's (R-AZ) diversity bill. See, S 267, the "Telecommunications Ownership Diversification Act of 2003 ". See also, TLJ story titled "Sen. McCain Introduces Telecom Diversity Bill" in TLJ Daily E-Mail Alert No. 595, January 31, 2003.

Powell also stated that the FCC will speed its issuance of low power FM licenses. He stated that LPFM broadcasters are non-commercial, educational, who provide a community service. He added that "adding stations will dilute concentration". He also pointed out that the LPFM licensees are not counted for the purpose of statistically calculating concentration, so that granting more LPRM licenses will not result in allowing further consolidation among commercial broadcasters.

Powell explained that the changes to the media ownership rules announced in June were required by statute and court opinions. He added that the changes were "accurate and well balanced". However, he said that the FCC has heard "public concerns", and this initiative is a response to those concerns.

He also said that the FCC will not stay its rules changes. Also, he said that "the ownership caps are not on the table", unless the FCC receives direction from Congress.

On June 2, 2003, the FCC announced its Report and Order and Notice of Proposed Rulemaking [257 pages in PDF] amending its media ownership rules. See, story titled "FCC Announces Revisions to Media Ownership Rules" in TLJ Daily E-Mail Alert No. 672, June 3, 2003.

FTC Chairman Explains Role of FTC

8/19. Federal Trade Commission (FTC ) Chairman Timothy Muris gave a luncheon speech at a conference in Aspen, Colorado hosted by the Progress and Freedom Foundation. The FTC also released an extended written version.

He addressed the philosophy underlying a government consumer protection program. Then, he addressed how this philosophy is employed by the FTC in specific areas, such as fraud, spam, privacy, deceptive advertising, and the FTC's e-commerce initiative. Finally, he addressed the FTC's policy research and development.

Timothy MurisMuris (at right) stated that the American economic system is "a three-legged stool". The first leg is "competition based on free enterprise". The second leg is "the legal structure of contract, property, and other private law that largely focuses on the relative rights of particular parties". The third leg is "Public agencies -- entrusted to promote consumer welfare by preserving competition and protecting consumers". He elaborated that one must first understand that nature of, and limitations of the first two legs, competition and the private law of contract, property and tort, to understand how the third leg, which involves the FTC, can best be performed.

"Competition presses producers to offer the most attractive array of price and quality options possible. In competitive industries, the imperative to gain new sales by satisfying consumer needs increases the choices available. In competitive markets, when consumers dislike the offerings of one seller, they can turn to others. This ability to shift expenditures imposes a rigorous discipline on each seller to satisfy consumer preferences. Competition does more than simply increase choices for consumers, however. It motivates sellers to provide truthful, useful information about their products and drives them to fulfill promises concerning price, quality, and other terms of sale. Consumers can punish a seller's deceit or failure to fulfill a promise by voting with their feet -- and their pocketbooks."

He added that for "products purchased infrequently, for which an individual consumer cannot usually rely on personal experience to evaluate a seller's truthfulness, private institutions can help provide the information that augments or substitutes for such experience." He cited the publication of Consumer Reports as an example.

However, he said that competition in the market sometimes fails to protect consumer welfare, because "some sellers are unconcerned about repeat business and reputation or because deception is difficult to detect because of information asymmetries".

But here, the second leg, the private law of property, contract and tort can be employed to overcome deficiencies in the first leg, market based competition. Muris stated that here the government provides "default rules -- terms that apply when the parties do not explicitly specify otherwise. The more efficient these rules, the greater the scope for exchange and thus the greater the gain in consumer welfare. When contracts are formed, even in the most complex transactions, parties do not find it useful to define the terms for every contingency possible. Instead, courts, legislatures, and agencies have developed default rules that are like buying off-the-rack clothing rather than specially tailored clothes. Rather than writing your own contract, you get it ``off the rack,创 as it has come down in the judicial and legislative pronouncements. Many of these rules of exchange are so basic -- for example, rules against fraud, breach of contract, and deceptive advertising -- that we do not even think about them as rules at all."

However, sometimes neither market based competition, nor private enforcement for contract, property and tort rights, is sufficient to protect consumers. Muris stated that "One can easily imagine sellers unconcerned about repeat customers or reputation, or who make product claims that are difficult to verify, and who rely on the fact that few injured consumers will undertake the often difficult task of suing to vindicate their rights."

This then creates the need for the third leg of the American economic system, the public agencies, such as the FTC, that are authorized to promote consumer welfare by preserving competition and protecting consumers. The FTC fulfills these two functions by enforcing the antitrust statutes, and by enforcing the ban on unfair or deceptive acts or practices contained in the FTC Act. However, Muris's address focused almost exclusively in consumer protection, as opposed to competition, authority.

Muris reviewed in detail the FTC's activities in the areas of fraud, advertising, health claims, privacy, spam, international cooperation, and the FTC's e-commerce initiative

On the subject of e-commerce, Muris stated that "While many states are regulating e-commerce to promote important public interest objectives, such as protecting consumers from deception and fraud, some of these actions also shield local businesses from out-of-state competition."

He cited some examples: "some states require that online vendors maintain a physical office in the state, others completely prohibit online sales or shipments of certain products. Many states also require that out-of-state sellers obtain an in-state license before selling particular goods, such as caskets or contact lenses, or services, such as medical or legal advice. Some observers question whether the attendant higher prices and loss of variety outweigh the consumer protection benefits."

On the subject of privacy, he stated that "Fair Information Practices or ``FIPs创 appears to be an appealing model because it is seemingly based on consumer consent, on contracts between consumers and businesses. In practice, however, consent is illusory. For most consumers, the costs of exercising choice -- although not high -- are not worth the perceived benefits. Consider the billions of privacy notices sent to consumers under Gramm Leach Bliley. Very few have exercised their right to opt-out of information sharing. Part of the problem, no doubt, is the difficulty of understanding some of the notices."

"Nor is opt-in the solution", said Muris. "Because most consumers will not expend the time and effort to consider the choice, opt-in is only the correct default if most fully-informed consumers would refuse to share information. Explaining the benefits and costs of information sharing is beyond the competence of even the best drafted short notices. We cannot make people focus on this, or any other, issue."

Muris States Spam Debate on Capitol Hill is Veering Off On the Wrong Track

8/19. Federal Trade Commission (FTC ) Chairman Timothy Muris addressed government efforts to deal with spam in his speech at the Progress and Freedom Foundation conference in Aspen, Colorado. See, extended written version. He stated that spam is a problem that should be addressed by government action, but that current legislative proposals are veering off on the wrong track. He stated, for example, that a "Do Not Spam Registry" would be unenforceable, and do little to reduce spam. Similarly, many bills go into detail on non-deceptive spam, which Muris argues is not the real problem.

He began by stating that "It is not apparent, however, that any regulatory solution exists for spam. Spam is one of the most daunting consumer protection problems that the Commission has ever faced." He added that "Despite the concerted efforts of government regulators, legislators, Internet service providers, and other interested parties, the problem continues to worsen."

He analyzed how spam differs from other forms of marketing. "First, unlike telemarketers or direct mail users, spammers can easily hide their identity and cross international borders. Email can be sent from anywhere to anyone in the world, without the recipient knowing who sent it. Spammers are technologically adept at hiding their identities, using false header information, and routing their emails across borders and through open relays, making it extremely difficult even for experienced government investigators with subpoena power to track them."

Moreover, "Because of the anonymity the technology affords, spammers are often exceptionally bold fraud artists", said Muris.

"Second, there are fundamental differences between the costs of email and other forms of marketing. Unlike phone calls or mail solicitations, sending additional spam is essentially costless. Instead, recipients and Internet Service Providers bear most of the costs. Because email technology allows spammers to shift the costs almost entirely to third parties, there is no incentive for the spammers to reduce the volume," said Muris. "If spammers had to pay the actual costs of spam, normal market forces would eliminate much of the spam problem."

Hence, Muris concluded that "spam is a major problem that normal market forces will not solve and is therefore a prime candidate for governmental intervention. The very technology that makes email such a powerful and revolutionary tool for business, however, makes spam a problem that the application of the Commission's law enforcement and regulatory tools cannot solve. There is no quick or simple ``silver bullet.创"

He also commented that "In our haste to reduce spam, we must avoid over-regulation that could impede the flow of useful information to consumers. It is important to include legitimate marketers in this discussion because they have a strong interest in solving the spam problem -- the sheer volume of spam and its impact on consumer confidence is eroding a valuable form of marketing."

Muris then turned to the spam related legislation that is currently pending in the House and Senate. See, stories titled "House Judiciary Committee Holds Hearing on Spam Bill", "House Commerce Committee Holds Hearing on Spam Bills", and "Spam Bills Pending in the House and Senate" in TLJ Daily E-Mail Alert No. 696, July 11, 2003.

He stated that "Parts of these proposals can help, but no one should expect any new law to make a substantial difference by itself. Unfortunately, the legislative debate seems to be veering off on the wrong track, exploring largely ineffective solutions. For example, a ``Do Not Spam创 list is an intriguing idea, but it is unclear how we can make it work. Most spam is already so clearly illegitimate that the senders are no more likely to comply than with the ``ADV创 laws they now ignore."

He added that "We are sure the National Do Not Call Registry will reduce calls significantly. There is no basis to conclude that a Do Not Spam list would be enforceable or produce any noticeable reduction in spam. If it were established, my advice to consumers would be: Don't waste the time and effort to sign up."

Muris then offered his own assessments. (This speech contains his personal views, and not those of the FTC.) He argued that "There are three issues that any spam legislation must confront to be effective: First, legislation must enhance the ability to find the person sending the spam messages. Although technological changes will most effectively deal with this issue, we have proposed five procedural legislative changes that can provide some assistance in our law enforcement investigations. Thus far, proposed spam legislation has not included these additional changes that would make it easier for us to find and prosecute spammers, although some of them are included in other legislative proposals."

He elaborated on this point. He said that " proposals in both the House and the Senate require us to prove knowledge to bring an action against a seller that hires a spammer. Under one of the Senate bills, it would be extremely difficult successfully to sue a seller that hires a third-party to send email that is deceptive or otherwise violates the act, such as by not providing a working "opt-out." The FTC would have to prove that the seller knew, or consciously avoided knowing, that the third-party emailer it hired intended to violate the law. This standard requires proof of both the seller's and spammer's level of knowledge."

Second, spam legislation "must deal with how to punish the person sending the spam messages. Most spam we see already violate the FTC Act. Outside the spam context, when we find a fraudulent seller, we often can freeze assets and seek restitution of ill gotten gains for consumers. Unfortunately, most of our spam enforcement targets to date have very limited assets."

Finally, said Muris, "legislation can determine what standards will govern non-deceptive, unsolicited commercial email. This is the least important issue for dealing with the current spam problem, which involves few legitimate marketers. Ironically, because the legislation will do little to solve the current spam plague, this is the issue to which the proposals are most clearly addressed."

He concluded that "In the end, legislation cannot do much to solve the spam problem, because it can only make a limited contribution to the crucial problems of anonymity and cost shifting. Some of the proposed legislation, unfortunately, could be harmful or, at best, useless."

Wednesday, August 20

The House is in recess until September 3. Senate is in recess until September 2. The Supreme Court is in recess until October 6.

10:00 AM. Federal Communications Commission (FCC) Chairman Michael Powell will hold a news conference to "discuss issues that the FCC will be taking up in the Fall". Location: FCC, Commission Meeting Room, 445 12th Street, SW.

12:00 NOON. Gordon England, Deputy Secretary of the Department of Homeland Security (DHS), will give a speech titled "Leading the Department of Homeland Security: Progress and Challenges of Transition during the War on Terrorism". See, notice. Location: Lehrman Auditorium: Heritage Foundation, 214 Massachusetts Ave NE.

Thursday, August 21

9:30 AM. The U.S. District Court (DC) will hold an initial conference in EPIC v. DHS, D.C. No. 1:2003cv1255. The Electronic Privacy Information Center (EPIC) filed suit against the Department of Homeland Security (DHS) under the Freedom of Information Act (FOIA). Location: Courtroom 11, 333 Constitution Ave. NW.

10:00 AM. Ed Thomas, Chief of the Federal Communications Commission's (FCC) Office of Engineering and Technology (OET) will hold a press briefing and tour at the FCC's Columbia, Maryland laboratory facility. For more information, contact Lauren Van Wazer at 202 418-0030 or Location: 7435 Oakland Mills Road, Columbia, MD.

2:00 PM. The U.S. District Court (DC) will hold an status conference in Communications Workers of America v. Verizon, D.C. No. 1:2001cv2633. Location: Courtroom 11, 333 Constitution Ave. NW

Friday, August 22

Deadline to submit comments to the Department of Homeland Security's (DHS) Bureau of Customs and Border Protection (CBP) regarding its proposed rule to require that CBP must receive, by electronic data interchange system, information pertaining to cargo before the cargo is either brought into or sent from the U.S. by any mode of commercial transportation. See, notice in the Federal Register, July 23, 2003, Vol. 68, No. 141, at Pages 43573 - 43606.

Monday, August 25

10:00 AM - 4:00 PM. The Commerce Department's National Medal of Technology Nomination Evaluation Committee will hold a closed meeting to discuss the relative merits of persons and companies nominated for the medal. See, notice in the Federal Register, July 24, 2003, Vol. 68, No. 142, at Page 43716. Location: Room 4813, U.S. Department of Commerce, 1401 Constitution Ave., NW.

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