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August 21, 2003, 9:00 AM ET, Alert No. 723.
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FCC Releases Order Permitting AOL Time Warner to Provide Advanced IM Services

8/20. The Federal Communications Commission (FCC) released a Memorandum Opinion and Order [13 pages in PDF] granting AOL Time Warner's petition to remove the FCC's restriction on its provision of video streaming advanced Instant Messaging based high speed services (AIHS). The FCC had imposed this restriction in its order approving the merger of AOL and Time Warner in early 2001.

The FCC adopted the Memorandum Opinion and Order (MOO) on July 31, 2003, but did not announce, or release, it at that time. This proceeding is Docket No. 00-30.

April 2, 2003 AOL Time Warner submitted a petition [58 pages in PDF] to the FCC requesting relief from the FCC's January 2001 Memorandum Opinion and Order (MOO) approving the merger of AOL and Time Warner. Specifically, AOL Time Warner sought relief from the condition restricting its ability to offer internet users streaming video advanced Instant Messaging based high speed services (AIHS) via AOL Time Warner broadband facilities.

The FCC adopted this MOO on January 11, 2001, and released it at a later date. This MOO is numbered FCC 01-12. The FCC has published the MOO in its electronic comment filing system (ECFS). It is published in six parts as PDF scans. Each part takes an extraordinarily long time to download. See, parts 1, 2, 3, 4, 5, and 6. It is also published at 16 FCC Rcd 6547.

AOL Time Warner argued in its petition that the condition was based upon the assumptions that "AOL was the dominant provider of IM services and, absent interoperability, the ``strong 'network effects'创 associated with IM would cause AOL's unassailable lead in text-based IM to ``swell创 over time", and that "AOL's dominance in the text-based IM would afford the merged company an anti-competitive first-mover advantage in streaming video AIHS, creating barriers to entry and foreclosing competition".

AOL Time Warner further asserted that now, "AOL is not dominant in the provision of IM services today and there is no danger of ``network effects创 causing AOL's share to ``swell创", and that "As Microsoft and Yahoo! have each independently introduced streaming video AIHS, AOL does not have -- and cannot obtain -- a ``first mover创 advantage in this area".

Gerald Faulhaber and David Farber, who worked at the FCC in 2000, submitted a comment [PDF] on April 5, 2003, in which they stated that "We urge the FCC to proceed cautiously. While conditions have evolved since the Merger Order that suggest network effects and tipping are not as urgent today, other evidence suggests that it is perhaps even more urgent. The FCC needs to recall that AOL Time Warner has in its own hands the ability to offer advanced IM-based highspeed services without let or hindrance: it need only interoperate with its competitors, as it promised the world it would do two years ago, to the benefit of all customers."

BellSouth submitted a comment [10 page PDF scan] on May 20, 2003 opposing the removal of the condition. It argued that "circumstances that gave rise to the Condition have not changed substantially enough to warrant modification or removal of the merger Condition."

However, the FCC saw things differently. It wrote in its July 31, 2003 MOO that "Based on information obtained from comScore Media Metrix, a firm that measures Internet and digital media use, AOL抯 market share is shown to have been 100% as recently as June 1999. For the four months prior to the filing of the current petition, Media Metrix reports AOL Time Warner抯 market share as 59.5%, 58.5%, 57.6%, and 58.5% for November 2002, December 2002, January 2003, and February 2003, respectively, a decline for AOL from 75.3% in March 2000 and 61.5% in December 2000, shortly before the Order was released. AOL抯 two major IM competitors, Microsoft and Yahoo!, have averaged 22.2% and 19.3% market shares, respectively, over that same period, an increase from 10.7% and 14% in October 2000." (Footnotes omitted.)

The FCC's MOO states that "the trend in market shares is inconsistent with the market ``tipping创 concerns expressed in the Order. In particular, if a market is subject to tipping and the subsequent dominance of the largest firm, then as the overall market grows, we should see an increase in the largest firm's market share or at least an increase in the largest firm's number of users. In fact, the data show the opposite trend; the smaller firms are consistently growing at the expense of AOL Time Warner as the market grows." (Footnotes omitted.)

The FCC's MOO adds that "We view this development of stable competitors as an indication that the market is maturing and stabilizing." It concluded too that "removal of the IM condition will likely provide public interest benefits. The Commission has continually recognized competition as an important policy objective for communications services, bringing consumer benefits of increased choice, lower prices, improved service, and new product offerings. With the removal of the IM condition, AOL Time Warner will be able to offer new and innovative AIHS services and provide competitive choices to the marketplace at lower prices."  (Footnotes omitted.)

FCC Chairman Powell, who dissented from imposing the condition back in 2001, praised the removal of the condition. He wrote in a statement [3 pages in PDF], "That the Commission strayed out of its core competencies in its analysis of instant messaging should now be clear. As I noted in my statement, the Commission provided no clear market definition, used inconclusive market share data, and relied upon a flawed ``tipping创 analysis with respect to instant messaging. We now have two-and-one-half years of evidence that the market is not tipping."

In contrast, Commissioners Michael Copps and Jonathan Adelstein wrote a joint dissent [PDF]. They argued that "While AOL Time Warner submits evidence that its market share eroded slightly over more than two years while competitors have increased market share, we cannot conclude that AOL Time Warner has made the requisite showing necessary to eliminate this condition nor that relief from the condition is a fair outcome for consumers."

See also, TLJ story titled "AOL Time Warner Petitions FCC for Relief From Instant Messaging Restriction", April 2, 2003, and story titled "FCC Receives Few Comments on AOL Time Warner Petition" in TLJ Daily E-Mail Alert No. 660, May 13, 2003.

10th Circuit Rules in Cell Tower Case

8/20. The U.S. Court of Appeals (10thCir) issued its split opinion in U.S. Cellular Telephone of Greater Tulsa v. City of Broken Arrow, a cellular tower permitting case. The local zoning authority denied two applications for permits. The Appeals Court held that the denials were supported by "substantial evidence", as required by Section 332 of the Communications Act. Judge Milton Shadur dissented. He labeled Broken Arrow's permitting process "TEGWAR", or "the exciting game without any rules".

U.S. Cellular is a wireless telecommunications service provider. United States Cellular Telephone of Greater Tulsa applied to the City of Broken Arrow, Oklahoma for two specific use permits for the construction of cellular transmission towers. The first was for a a 120 foot monopole cellular transmission tower. The second was for a 240 foot, self-supporting cellular transmission tower. Broken Arrow denied the applications.

U.S. Cellular filed two complaints in the U.S. District Court (NDOkla) against Broken Arrow. The District Court held that the denial of one application was not supported by substantial evidence, and granted summary judgment to U.S. Cellular. The District Court held that the denial of the other application was supported by substantial evidence.

47 U.S.C. 332(c)(7) pertains to the preservation of local zoning authority. Subsection (c)(7)(A) provides that "nothing in this chapter shall limit or affect the authority of a State or local government or instrumentality thereof over decisions regarding the placement, construction, and modification of personal wireless service facilities." However, subsection (c)(7)(B) enumerates several limitations upon local zoning authority. Subsection (c)(7)(B)(iii), which is at issue in this case, provides that "Any decision by a State or local government or instrumentality thereof to deny a request to place, construct, or modify personal wireless service facilities shall be in writing and supported by substantial evidence contained in a written record."

The Appeals Court upheld the District Court's affirmance of the denial of one application, and reversed the District Court's reversal of the denial of the other application.

Judge Tacha, writing for the majority, stated that "judicial review under the substantial-evidence standard is quite narrow." He reviewed the city's ordinance, U.S. Cellular's arguments regarding compliance with the ordinance, and the city's reasons for denying the the applications. He concluded that Broken Arrow satisfied the substantial evidence requirements of the federal statute.

Judge Shadur wrote in his dissent that Broken Arrow practices an "egregious brand of anarchy". He wrote that "It has in fact prescribed a set of rules, but when U.S. Cellular has then conformed meticulously to every one of the prescribed standards, the Broken Arrow response has been ``Too bad -- you lose anyway.创 And regrettably the majority opinion has sanctioned that level of lawlessness on the City's part."

He concluded that "Congress has enacted the Telecommunications Act for a dual purpose: to facilitate the growth of wireless telephone service on a national basis, while at the same time preserving local control -- subject to specified restrictions -- over the siting of towers. What the majority has permitted Broken Arrow to do, I submit, is to subvert the careful balance prescribed by Congress."

This case is U.S. Cellular Telephone of Greater Tulsa v. City of Broken Arrow, Nos. 02-5128 and 02-5172, appeals from the U.S. District Court for the Northern District of Oklahoma, D.C. Nos. 01-CV-0550EA(J) and 01-CV-0518E(M).

FCC Release NOI On Communications Towers and Migratory Birds

8/20. The Federal Communications Commission (FCC) adopted a Notice of Inquiry (NOI) [pages in PDF] "to gather comment and information on the impact that communications towers may have on migratory birds."

The FCC seeks comments on several subjects, including "information that is supported by evidence concerning the number of migratory bird collisions with communications towers and the role that specific factors associated with communications towers may have in increasing or decreasing the incidence of such collisions. Such factors may include lighting, height, and particular type of antenna structure (including guyed and unguyed structures), meteorological conditions, location, physiographic features of sites, and known migratory bird migration corridors."

In addition, the FCC seeks "information on whether any current or proposed research may provide useful data regarding the subjects of this inquiry, and what other actions may be necessary to spur additional, necessary research."

The FCC also seeks comments "on whether certain measures might minimize any adverse impacts of communications tower siting and construction on migratory birds, whether any such measures are supported by adequate and reliable empirical and/or scientific evidence, and how the use of such measures may affect the ability of licensees and other parties to provide efficient and reliable communications services."

This is merely a notice of inquiry. However, the FCC also stated that "Depending on the record developed in this proceeding, the Commission will consider whether the current state of research would support further action by the Commission in this area, including possible amendments of its environmental rules."

This proceeding is titled "In the Matter of Effects of Communications Towers on Migratory Birds". The FCC announced the adoption of the NOI, and released its text, on August 20. However, the FCC also stated that it adopted the NOI back on August 8.

The FCC also issued a release [2 pages in PDF]. The FCC has not set a deadline for comments. Those will be announced in a future notice in the Federal Register. Initial comments will be due 60 days after publication in the Federal Register. Reply comments will be due within 90 days of publication in the Federal Register. For more information, contact Bill Stafford at 202 418-0563 or Bill.Stafford@fcc.gov. This WT Docket No. 03-187.

People and Appointments

Bryan Tramont8/20. Federal Communications Commission (FCC) Chairman Michael Powell announced his intention to appoint Bryan Tramont (at right) to be FCC Chief of Staff. He replaces Marsha MacBride. Tramont is currently Powell's Senior Legal Advisor, with responsibility for wireless, international, technology, and consumer issues. Tramont previously was Senior Legal Advisor to Commissioner Kathleen Abernathy. Before that, he was Senior Legal Advisor to former Commissioner Harold Furchtgott-Roth. And before that, he was an attorney in the Washington DC office of the the law firm of Wiley Rein & Fielding. Tramont is also an adjunct law professor at The Catholic University of America. See, FCC release [PDF].

8/20. Julia Johnson, a former Chairman of the Florida Public Services Commission, was named Chairman of the Federal Communications Commission's (FCC) new Federal Advisory Commission on Diversity in the Digital Age. See, FCC release [PDF].

8/20. Michelle Ellison and Robert Radcliffe will chair the Federal Communications Commission's (FCC) localism task force, which was announced by FCC Chairman Michael Powell on August 20. Ellison is a Deputy General Counsel in the FCC's Office of General Counsel. Before she joined the FCC in 1995 she was a partner in the law firm of Williams & Connolly. Radcliffe is a Deputy Bureau Chief of the FCC's Media Bureau.

Copps Criticizes Powell's Localism in Broadcasting Initiative

8/20. Federal Communications Commission (FCC) Commissioner Michael Copps responded to FCC Chairman Michael Powell's localism in broadcasting initiative. He called it "a day late and a dollar short".

Earlier on August 20, Powell announced an initiative that includes creating a localism task force, issuing a notice of inquiry on localism, and speeding the activation of low power FM stations. See, FCC release [3 pages in PDF]. See, story titled "Powell Announces Localism in Broadcasting Initiative" in TLJ Daily E-Mail Alert No. 722, August 20, 2003.

Copps stated in a release that "This proposal is a day late and a dollar short. It highlights the failures of the recent decision to dismantle ownership protections. To say that protecting localism was not germane to that decision boggles the mind. The ownership protections, as well as the other public interest protections that the Commission has dismantled over the past years, are all designed to promote localism, diversity and competition. We should have heeded the calls from over 2 million Americans and so many Members of Congress expressing concern about the impact of media concentration on localism and diversity before we rushed to a vote. We should have vetted these issues before we voted. Instead, we voted; now we are going to vet. This is a policy of 憆eady, fire, aim!"

Michael Copps"We now hear that there may be localism issues after all. But what抯 going to happen while we study localism over the next year? The answer is: deals, deals and more deals." Copps (at left) continued that "By refusing to stay our rules, we guarantee a rash of mergers, acquisitions and swaps that cannot be undone because the genie will be out of the bottle long before this new task force reports. While we study, Big Media conglomerates will gobble up still more local stations and licenses will be renewed without examining how stations are serving their local communities."

Commissioner Copps did add that "promoting low-power radio stations is a welcome step and one that I support ..."

Rep. Billy TauzinHowever, Rep. Billy Tauzin (R-LA) (at right), the Chairman of the House Commerce Committee, weighed in low power FM. He stated in a release he supports the goal of localism in broadcasting, and that "This initiative represents an important first step toward that goal, but at the same time, the FCC should move cautiously to make certain that low power radio stations do not create interference problems for existing license holders. Low power radio stations provide an important community service, but the FCC will accomplish nothing if it solves one problem only to create another."

See also, the FCC's LPFM web page.

Mark Cooper of the Consumer Federation of America stated in a release that "The FCC's suggestion that it will further study the issue of media concentration, without staying its June 2 rules, is an insult to those of us who suggested, in the record that the Commission had not done its homework. The appropriate time for study is before rules are issued, not afterwards."

Cooper added that "We are certain that the Chairman's actions today will not stop the political firestorm that the FCC rules have created."

Thursday, August 21

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

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 laurenvanwazer@fcc.gov. 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.

10:00 AM. Several groups will hold a press briefing regarding the new Computer Assisted Passenger Pre-screening System (CAPPS II). The participants will include James Dempsey (Center for Democracy and Technology), Laura Murphy (ACLU), former Rep. Bob Barr (R-GA), David Keene (American Conservative Union), Grover Norquist (Americans for Tax Reform), and Hilary Shelton (NAACP). Location: Lisagor Room, National Press Club, 529 14th St. NW, 13th Floor.

Thursday, August 28

10:00 - 11:45 AM. The American Enterprise Institute (AEI) will host a panel discussion titled "Is There Any Development in the Doha Development Agenda?" The speakers will be Michael Finger (AEI), Arvind Panagariya (University of Maryland), and Sarath Rajapatirana (AEI). See, notice. Location: AEI, 12th Floor, 1150 17th Street, NW.

Sunday, August 31

Deadline to submit comments to the National Institute of Standards and Technology (NIST) regarding its second public draft [62 pages in PDF] of its publication titled "Guide for the Security Certification and Accreditation of Federal Information Systems". This is NIST Special Publication 800-37 authored by Ron Ross and Marianne Swanson. Comments may be submitted to sec-cert@nist.gov.

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