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May 17, 2004, 9:00 AM ET, Alert No. 899.
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House Subcommittee Holds Hearing on Business Activity Taxes

5/13. The House Judiciary Committee's Subcommittee on Commercial and Administrative Law held a hearing on HR 3220, the "Business Activity Tax Simplification Act of 2003". This bill does not reference electronic commerce, digital products, or the internet. However, by requiring a physical presence with the taxing jurisdiction before a business activity tax may be assessed, the bill would protect companies, for example, that sell products over the internet from being subjected to business activity taxes in every taxing jurisdiction in which their customers are located.

The bill does not affect taxation of e-commerce sales, or other remote sales or transactions.

Rep. Bob Goodlatte (R-VA), Rep. Rick Boucher (D-VA), and others introduced this bill on October 1, 2003. See, story titled "Reps. Goodlatte and Boucher Introduce Bill to Limit Business Activity Taxes" in TLJ Daily E-Mail Alert No. 753, October 6, 2003.

Also, the two co-sponsored a similar bill in the 107th Congress. See, HR 2526 (107th Congress) titled the "Internet Tax Fairness Act of 2001". See, stories titled "Goodlatte and Boucher Introduce Net Tax Moratorium Bill" in TLJ Daily E-Mail Alert No. 229, July 18, 2001; and "House Subcommittee Approves Bill to Limit Business Activity Taxes" in TLJ Daily E-Mail Alert No. 471, July 17, 2002.

The present bill, HR 3220, addresses the question of when an out-of-state business may be assessed a tax by a state for doing business in that state.

Rep. Bob GoodlatteRep. Goodlatte (at right) stated at the hearing that "With the growth of the internet, companies are increasingly being able to conduct transactions" across boundaries.

Now, however, he continued, "A growing number of jurisdictions have sought to collect business activity taxes on businesses located in other states, even though those businesses receive no appreciable benefits from the taxing jurisdiction, and even though Supreme Court has ruled that the Constitution prohibits the states from imposing taxes on businesses that lack substantial connections to the state. This has lead to unfairness and uncertainty, generated contentious and widespread litigation, and hindered business expansion due to the fear of exposure to unfair tax burdens."

Goodlatte asserted that "In order for e-commerce, and interstate commerce generally, to continue to grow and prosper, it is imperative that clear and easily navigable rules be set forth regarding when an out of state business is allowed to pay business activity taxes to a state."

Rep. Goodlatte stated that HR 3220 "provides a bright line that clarifies state and local authority to collect business activity taxes from out of state entities which will bring predictability to an unpredictable tax environment for businesses and states. Specifically, the bill would establish a physical presence test".

Rep. Goodlatte is a member of the House Judiciary Committee, but not its Subcommittee on Commercial and Administrative Law. Nevertheless, he was allowed to participate in the hearing as a member, delivering an opening statement, and questioning witnesses.

The bill provides that "no taxing authority of a State shall have power to impose, assess, or collect a net income tax or other business activity tax on any person relating to such person's activities in interstate commerce, unless such person has a physical presence in the State during the taxable period with respect to which the tax is imposed".

It defines business activity tax (BAT) as "(i) a tax imposed on or measured by gross receipts, gross income, or gross profits; (ii) a business licence tax; (iii) a business and occupation tax; (iv) a franchise tax; (v) a single business tax or a capital stock tax; or (vi) any other tax imposed by a State on a business for the right to do business in that State or measured by the amount of, or economic results of, business or related activity conducted in that State."

The bill also clarifies that the term BAT does not include a sales or transaction tax.

The bill further provides that physical presence could be established by "Being an individual physically within the State, or assigning one or more employees to be in such State, on more than 21 days". However, neither "Gathering news and covering events for print, broadcast, or other distribution through the media", nor "Meeting government officials for purposes other than selling goods or services" would count.

Physical presence could also be established by "Using the services of another person ... in such State, on more than 21 days to establish or maintain the market in that State" or "leasing or owning of tangible personal property or real property in such State on more than 21 days".

HR 3220 would also amend 15 U.S.C. § 381, which limits the authority of states to impose a net tax on income derived within the state if the only business activity within the state is "sales of tangible personal property". HR 3220 would change the references to "sales of tangible personal property" to merely "sales". This section codifies a 1959 statute, Public Law No. 86-272.

HR 3220 is different in several respects from the previous version of the bill, HR 2526 (107th Congress). For example, HR 2526 also contained language to extend the internet tax moratorium. In the present Congress, this was dealt with in a separate bill, HR 49, the Internet Non-discrimination Act", which the House has passed.

Also, HR 3220, unlike HR 2526, lacks specific language pertaining the internet, web sites, communications and intellectual property. HR 2526 would have prohibited several internet related BATs, including taxes on "The use of the Internet to create or maintain a World Wide Web site accessible by persons" in the taxing jurisdiction. It would also have prohibited BATs on the use of an ISP, on-line service provider, internetwork communication service provider, or other internet access service provider, or web hosting service. It would also have prohibited BATs on the "use of any service provider for transmission of communications, whether by cable, satellite, radio, telecommunications, or other similar system."

HR 2526 also would have prohibited BATs based on the "presence or use of intangible personal property ... including patents, copyrights, trademarks, logos, ... electronic or digital signals, and web pages ..."

While HR 3220 does not contain internet or e-commerce specific language, it would nevertheless protect out of state businesses from many asserted bases for the collection of business activity taxes where a physical presence is lacking.

Moreover, Rep. Goodlatte discussed the bill in terms of e-commerce and internet activity. For example, he stated that under the "current morass of laws" states are asserting taxing authority "for some of the most obscure reasons". He cited as an example, "the fact that you have a server located in the state".

This witness panel was stacked with a majority of supporters of HR 3220. However, none were representatives of e-commerce or internet companies.

Arthur Rosen, a tax lawyer at the law firm of McDermott Will & Emery testified in support HR 3220 on behalf of the Coalition for Rational and Fair Taxation. He wrote in his prepared testimony [PDF] that "some state revenue departments have been creating barriers to interstate commerce by aggressively attempting to impose direct taxes on businesses located in other states that have little or no connection to their state. Some state revenue departments have even asserted that they can tax a business that merely has customers in the state based on the recently-minted notion of ``economic nexus.´´"

There can be no doubt that the rapid growth of e-commerce continues to drastically alter the shape of the American and global economies. As businesses adapt to the "new order" of conducting business, efforts by state revenue departments to expand their taxing jurisdiction to cover activities conducted in other jurisdictions constitute a significant burden on the business community's ability to carry on business. Left unchecked, this attempted expansion of the states’ taxing power will have a chilling effect on the entire economy as tax burdens, compliance costs, litigation, and uncertainty escalate."

Vernon Turner, the Corporate Tax Director for Smithfield Foods, in Smithfield, Virginia, a company that sells ham and pork products in all 50 states, testified about a BAT shakedown by the state of New Jersey. The state stopped one of Smithfield's refrigerator trucks, and seized it, and its driver, and demanded that Smithfield wire the state $150,000 for their release. Turner further testified that Smithfield has no physical presence in the state of New Jersey, and that Smithfield contested the seizures, and that the state of New Jersey apologized. But, he added, many businesses would not have the resources to contest such meritless tax practices. See, prepared testimony.

Jamie Van Fossen, the Chair of Iowa House Ways and Means Committee, also testified in support of HR 3220 on behalf of the state of Iowa and the American Legislative Exchange Council (ALEC). He stated that "This bill is about the rights of Iowa business owners and their customers to engage in interstate commerce free from the undue burdens associated with paying taxes in multiple states." See, prepared testimony.

Rick Clayburgh, the Commissioner of the North Dakota Office of State Tax Commission, testified on behalf of the National Governors Association (NGA) in opposition to HR 3220. He wrote in his prepared testimony that "The NGA opposes H.R. 3220 because it would unduly interfere with the ability of states to determine and manage their own tax policies."

Clayburgh argued also that HR 3220 favors big taxpayers over small taxpayers. He said that "big business has more resources to handle this morass" of state business activity taxes.

Rep. Goodlatte rebutted Clayburgh on this point. He pointed out that one large group of very small businesses that could be harmed by BATs would be those who sell over eBay.

Clayburgh also made a statement that North Dakota would consider items other than physical presence in determining whether to impose a BAT on a business. Rep. Mel Watt (D-NC), the ranking Democrat on the Subcommittee, followed up on this.

Rep. Watt asked what some of these other items are. Clayburgh enumerated none. Rep. Watt asked the question in many ways. Clayburgh provided no responsive information. Rep. Watt asked "What is the articulable standard?" Clayburgh articulated no standard. Finally, he stated, "economic nexus", without providing a definition.

Rep. William Delahunt (D-MA), was the sole member of the Subcommittee to speak against HR 3220 at the hearing. He rebutted the assertions of Van Fossen and Rep. Goodlatte that HR 3220 would be good for the states. He said that he has heard from representatives of states that "hold a contrary position". He said that among the states, this "legislation will create some winners and losers".

Rep. Delahunt also said that "I don't see this bill going anywhere". He acknowledged that it could pass in the House, but argued that it would not pass in the Senate. He cited the recent debate over the Internet Non-discrimination Act (INDA). He said that this bill was held up by Republicans who are former state governors. He did not mention Sen. Lamar Alexander (R-TN) by name.

House Subcommittee Holds Hearing on Creating Fair Use Exceptions to DMCA

5/12. The House Commerce Committee's Subcommittee on Commerce, Trade, and Consumer Protection  held a hearing on HR 107, the "Digital Media Consumers' Rights Act of 2003".

Rep. Rick Boucher (D-VA) and Rep. John Doolittle (R-CA) introduced this bill on January 7, 2003. There are now 19 sponsors, including Rep. Joe Barton (R-TX), the Chairman of the House Commerce Committee.

Rep. Rick BoucherThis bill would provide fair use exceptions to the anti-circumvention provisions of the Digital Millennium Copyright Act (DMCA). Rep. Boucher (at left) and Rep. Doolittle testified in support. They were joined by representatives of groups that advocate fair use rights, and consumer electronics industry representatives. They were opposed by representatives of various copyright industries.

The hearing was unusually long. There were three panels of witnesses, and almost all of the members of the Subcommittee participated in at least part of the hearing. The hearing room was packed, with attendees lined up outside the hearing room until long after the start of the hearing. The witnesses, and some of the members of the Subcommittee, expressed sharply divergent views on this issue.

Rep. Joe Barton (R-TX) spoke favorably about the bill. "We are now beginning to understand that some of the fair uses by consumers are no longer protected because of the anti-circumvention provision. H.R. 107 would restore the ability consumers to use copyrighted material lawfully and would permit consumers the ability to circumvent copy protection technology as long as it was consistent with fair use. At the same tiem, H.R. 107 maintains the protections for copyright producers to use copy-protection technology against illegal piracy. The balance between consumers' rights and producers' rights over copyright material needs to be restored to ensure our society progresses, not regresses. This legislation accomplishes that goal and I support it."

Rep. Joe BartonRep. Barton (at right) did not specify whether the final word -- "it" -- refers to the "legislation", or to the "goal" of the legislation. This quotation is from a written opening statement, which Rep. Barton read early in the hearing.

Rep. Cliff Stearns (R-FL), the Chairman of the Subcommittee holding the hearing, stated that supporters of HR 107 argue that the DMCA "prevents consumers from making fair use of encrypted materials. As a practical matter this means that a consumer cannot make a copy of a DVD for his or her ``fair use.´´" In contrast, said Stearns, the opponents of HR 107 argue that "without the prohibition against breaking encryption, the protection for copyrighted works under current law would be weakened. They also hold that allowing persons the ability to ``unlock´´ anti-tampering technology and access the copyrighted material would quickly spur piracy gadgets and technology that would quickly devalues their products and put them out of business." He concluded that he supports "fair and balanced intellectual property laws". See, prepared statement.

Rep. Janice Schakowsky (D-IL), the ranking Democrat on the Subcommittee, stated that the "DMCA was drafted with such broad strokes that it swept away fair use". She worried that unless the Congress revisits the DMCA, then "libraries may have to charge for services that they have traditionally provided for free".

See also, prepared statement of Rep. John Dingell (D-MI), the ranking Democrat on the full Committee.

DMCA Anti-Circumvention. § 1201(a)(1)(A) of the Copyright Act, which was added in 1998 by the DMCA, provides that "No person shall circumvent a technological measure that effectively controls access to a work protected under this title." See, 17 U.S.C. § 1201.

Then, § 1201(a)(2)( A) provides that "No person shall manufacture, import, offer to the public, provide, or otherwise traffic in any technology, product, service, device, component, or part thereof, that --- (A) is primarily designed or produced for the purpose of circumventing a technological measure that effectively controls access to a work protected under this title;"

Furthermore, § 1201(b)(1)(A) provides that "No person shall manufacture, import, offer to the public, provide, or otherwise traffic in any technology, product, service, device, component, or part thereof, that --- (A) is primarily designed or produced for the purpose of circumventing protection afforded by a technological measure that effectively protects a right of a copyright owner under this title in a work or a portion thereof".

HR 107. One key provision of HR 107 would amend § 1201(c)(1), which currently provides that "Nothing in this section shall affect rights, remedies, limitations, or defenses to copyright infringement, including fair use, under this title."

HR 107 bill would add to this sentence the following phrase: "and it is not a violation of this section to circumvent a technological measure in connection with access to, or the use of, a work if such circumvention does not result in an infringement of the copyright in the work".

Also, the bill would add to § (c) the following new subparagraph: "(5) It shall not be a violation of this title to manufacture, distribute, or make noninfringing use of a hardware or software product capable of enabling significant noninfringing use of a copyrighted work."

The bill would also add to both § 1201(a)(1)(A) and § 1201(b)(1)(A) an exception for scientific research. Specifically, the bill provides that "Subsections (a)(2)(A) and (b)(1)(A) ... are each amended by inserting after ‘‘title’’ in subsection (a)(2)(A) and after ‘‘thereof’’ in subsection (b)(1)(A) the following: ‘‘unless the person is acting solely in furtherance of scientific research into technological protection measures’’."

Testimony and Debate. Jack Valenti, the P/CEO of the Motion Picture Association of America (MPAA), testified that "H.R. 107 has one unfixable defect: It will legalize the hacking of copy protection measures, which in turn will make it impossible to truly protect valuable creative property."

He elaborated that once encryption is broken, once the circumvention has taken place, you cannot restrict the copying to just one copy. In addition, he said that there is no known device that can distinguish between a fair use circumvention and an infringing one.

He also argued that the intellectual property industries greatly benefit the U.S. economy. He said that these industries are creating new jobs at three times the national rate. See, prepared testimony.

Rep. Adolphus Towns (D-NY), a senior member of the Committee, echoed this thought. He said that "this is a jobs issue".

Rep. Mike Ferguson (R-NJ) discussed the argument that consumers who buy CDs should be able to make copies for their personal use. He asked what is different about purchasing a car, and asking a dealer to provide a second car, for your own personal use?

Rep. Karen McCarthy (D-MO) says that when she wants two copies of CDs to keep at two locations, she buys two copies of the CD. She also made the point that "what you are proposing today is ahead of the technology to control it".

Robert Holleyman, the P/CEO of Business Software Association (BSA), testified that creating fair use exceptions to the anti-circumvention provisions "would swallow the rule; they would effectively nullify section 1201. Congress rejected this proposal in 1998, and this subcommittee should reject it now." See, prepared testimony.

Cary Sherman, President of the Recording Industry Association of America (RIAA), stated that "HR 107 destroys this balance of interests and the protections Congress so carefully crafted. The amendments contained in this bill create not merely a loophole, but an exception that swallows the rule, leaving copyright holders and content providers with no way to protect the works they create." See, prepared testimony.

The Subcommittee also heard from numerous supporters of HR 107. Gary Shapiro, P/CEO of the Consumer Electronics Industry (CEA), stated that this bill "would restore some balance to a copyright system that has recently been tilted to elevate the interests of media giants over those of ordinary people". See, prepared testimony.

Similarly, Lawrence Lessig, a law professor at Stanford University, stated that "Congress's zealous efforts to attack ``piracy´´ have had the unintended collateral effect of destroying a crucial balance in copyright law. Never in the history of our nation has the law of copyright regulated as broadly; never has it regulated as extensively. And in light of the creative and commercial potential of digital technologies, never has the law burdened creative work as directly or pervasively." See, prepared testimony.

Commerce Committee and Intellectual Property Rights. The primary purpose of the bill is to create fair use exceptions to the anti-circumvention provisions of the DMCA. A lesser purpose is to create an exception for certain scientific research.. These are all amendments to the Copyright Act. This falls within the jurisdiction of the House Judiciary Committee, and its Subcommittee on Courts, the Internet and Intellectual Property (CIIP). Hence, this bill has also been referred to the House Judiciary Committee.

This bill is before the Commerce Committee because Rep. Boucher drafted it with jurisdiction in mind. He added a provision giving the Federal Trade Commission (FTC) authority regulate, as unfair and deceptive trade practices, the mislabeling of DVDs. The FTC and the FTC Act lie within the jurisdiction of the Commerce Committee.

The DVD labelling provisions of the bill were all but forgotten at the Commerce Committee hearing, which focused almost exclusively on the intellectual property provisions of the bill.

The Commerce Committee has a history of aggressively defending and expanding its authority. This has led to turf fights with the Judiciary Committee. See for example, story titled "House Commerce and Judiciary Committees Vie for High Tech Leadership", June 15, 1999.

Neither the House Judiciary Committee, nor its CIIP Subcommittee, have held a hearing or markup for this bill. Rep. Boucher is also a member of the CIIP Subcommittee, as is Rep. Zoe Lofgren (D-CA), who is a cosponsor of HR 107. However, support for this bill is limited at the CIIP Subcommittee, which is more concerned with holding hearings on, and marking up, bills that further protect intellectual property in digital media.

Related Stories. See, story titled "Reps. Boucher and Doolittle Introduce Digital Fair Use Bill" in TLJ Daily E-Mail Alert No. 582, January 14, 2003, and stories titled "Reps. Boucher and Doolittle Introduce Digital Media Consumer Rights Act" and "Summary of the Digital Media Consumer Rights Act" in TLJ Daily E-Mail Alert No. 532, October 4, 2002.

See also, speech by Rep. Boucher of March 6, 2001, and story titled "Boucher Proposes Changes to Copyright Law" in TLJ Daily E-Mail Alert No. 138, March 7, 2001.

Rep. Barton Addresses Spyware

5/12. Rep. Joe Barton (R-TX), the Chairman of the House Commerce Committee, used the occasion of the hearing on HR 107 to once again express his views on the topic of spyware.

He stated that "Two weeks ago during a hearing before this subcommittee, I made my intentions know regarding spyware. I object strongly to any company invading my computer -- invited -- and planting software or other tracking device to spy on me. My computer is my property, no different than my home. I determine who I permit to enter, how long they can stay, and what they can do while they are in my home. Anyone who enters my house uninvited and without my knowledge is trespassing, at the least, and  possibly breaking and entering."

There are several bills pending in the Congress that reference spyware.

First, there is HR 2929, the "Safeguard Against Privacy Invasions Act", introduced by Rep. Mary Bono (R-CA) and Rep. Adolphus Towns (D-NY) on July 25, 2004. See also, story titled "Rep. Bono Introduces Spyware Bill" in TLJ Daily E-Mail Alert No. 706, July 29, 2003.

Second, there is HR 4255, the "Computer Software Privacy and Control Act'", introduced by Rep. Jay Inslee (D-WA) on April 30, 2004.

Third, there is S 2145, the "Software Principles Yielding Better Levels of Consumer Knowledge Act", or "SPY BLOCK Act", introduced by Sen. Conrad Burns (R-MT) on February 27, 2004. See also, story titled "Senators Introduce Anti-Spyware Bill" in TLJ Daily E-Mail Alert No. 847, March 2, 2004.

Also, there is HR 4077, the "Piracy Deterrence and Education Act of 2004", introduced by Rep. Lamar Smith (R-TX) on March 31, 2004, which references spyware on peer to peer systems.

The Senate Commerce Committee held a hearing on spyware on March 23, 2004. See, story titled "Senate Communications Subcommittee Holds Hearing on Spyware Bill" in TLJ Daily E-Mail Alert No. 862, March 24, 2004.

The House Commerce Committee's Subcommittee on Commerce, Trade, and Consumer Protection held a hearing on spyware on April 29, 2004. See, links to prepared testimony.

DHS Creates Data Analysis Entity

5/13. The Department of Homeland Security (DHS) announced in a release that it has created an entity named the National Visual Analytics Center (NVAC). The DHS states that the NVAC will "provide scientific guidance and coordination for the research and development of new tools and methods that Homeland Security has identified as required for managing, visually representing, and analyzing enormous amounts of diverse data and information."

The DHS adds that NVAC projects are "all related to analysis of enormous, dynamic and complex information streams that consist of structured and unstructured text documents, measurements, images, and video data".

The DHS also stated that the NVAC "will be led by" the Department of Energy's Pacific Northwest National Laboratory (PNNL).

The DHS description of the NVAC bears similarities to the Defense Advanced Research Projects Agency's (DARPA) description of its former Information Awareness Office.

Finally, the DHS states that the NVAC will not collect data, and that it will protect the privacy of individuals.

Rep. Markey Introduces Data Protectionism Bill

5/13. Rep. Ed Markey (D-MA) introduced HR 4366, the "Personal Data Offshoring Protection Act of 2004". This bill is part data privacy legislation, and part protectionist restraint on trade in services legislation. It would prohibit entities from sending personally identifiable information to another country, unless the FTC has certified that the country has adequate privacy protections, such as those embodied in the EU privacy directive, or the entity receives consent from the affected individuals.

This bill is similar, but not identical, to S 2312. On April 8, 2004, Sen. Hillary Clinton (D-NY) and Sen. Mark Dayton (D-MN) introduced S 2312, the "SAFE-ID Act". See, story titled "Sen. Clinton Introduces Bill That Mixes Trade Protectionism and Data Privacy" in TLJ Daily E-Mail Alert No. 876, April 14, 2003.

The Markey bill provides that "A business enterprise may transmit personally identifiable information regarding a citizen of the United States to any foreign affiliate or subcontractor located in a country that is a country with adequate privacy protection, provided that the citizen has been provided prior notice that such information may be transmitted to such a foreign affiliate or subcontractor and has not objected to such transmission."

The bill would leave it to the Federal Trade Commission (FTC) to certify which countries are countries "with adequate privacy protection". It adds that "A country that has comprehensive privacy laws that meet the requirements of the European Union Data Protection Directive shall be certified under this section unless the Federal Trade Commission determines that such laws are not commonly enforced within such country." Thus, the gist of this bill is that it should be the U.S. law that U.S. entities in the U.S. must comply with European Union law.

There are several key differences between the Clinton and Markey bills. In each case, the Markey version imposes the more onerous requirements.

The Clinton version of the bill is vague as to whom has authority to enforce the statute, and/or sue for violations. The Markey bill is more clear. It would give enforcement authority to the FTC. It would also give the states authority to sue, in federal court, for damages. It would also give any person or entity a private right of action, in state court, for damages.

Another difference is the definition of "business enterprise". The Clinton version defines this term as "any organization, association, or venture established to make a profit". The Markey version defines this term to include non-profit organizations.

Another difference is in the list of items that constitute "personally identifiable information", or PII. The Clinton version contains many items commonly understood as PII, such as names, addresses, and social security numbers. The Markey version adds the phrase "any consumer transactional or experiential information relating to the person".

HR 4366 was referred to the House Commerce Committee. Rep. Markey is a member of the Committee, and the ranking Democrat on the Subcommittee on Telecommunications and the Internet.

OECD Meeting Addresses Doha and Outsourcing

5/14. The Organization for Economic Cooperation and Development (OECD) held a ministers meeting in Paris, France. Among the issues addressed were World Trade Organization (WTO) trade negotiations, the Doha round, and offshore outsourcing.

At the conclusion of the meeting, the OECD released a document titled "Chairman's Summary". It states that "Ministers were determined to reach basic agreements on frameworks for key issues of the Doha Agenda by July of this year. They shared the view that these agreements need to build on the lessons of the Fifth WTO Ministerial Conference in Cancún and on the work performed and the contributions made since then. They noted that momentum has been building, and that they should take advantage of the window of opportunity that has now opened."

The Chairman's Summary also praised the practice of outsourcing. It states that "Ministers discussed outsourcing. In itself, outsourcing is part of the continuing trend towards international integration, and should be welcomed because it leads to higher productivity and real incomes. However, a number of Ministers considered that the OECD could help to dispel fears about this issue. Some workers, companies and communities will be adversely affected, at least in the short term. OECD countries therefore need policies that help the adjustment of people who are dislocated because of outsourcing or other developments. If a smooth adjustment is not achieved, protectionist pressures may rise."

U.S. Trade Representative (USTR) Robert Zoellick held a press conference after the meeting. He stated that "Doha remains America's top trade priority", and "although it's an election year, President Bush has instructed me to spare no effort to try to accomplish this end." See, transcript [PDF].

Zoellick also gave a speech titled "A Strategic Opportunity for Trade" to the French Senate in Paris on May 13.

rightZoellick (at right) compared 1940 to 2003, and the evacuation at Dunkirk to the failure of negotiations at Cancun. He said that "Cancún was a missed opportunity, not a catastrophe. We lost an important chance to move the Doha agenda forward, but a number of self-proclaimed victors soon realized they had the most to lose, and it did not take long for the first signs of renewed interest to emerge."

He asserted that "We are regaining some momentum, but the road ahead could be rough. Our ability to make notable progress by this summer depends principally, in my view, on two steps: First, we need to resolve the problem of the ``Singapore Issues´´ by agreeing to focus solely on trade facilitation, the overhaul of 50-year-old customs rules that no longer match the needs of today's economy, much less tomorrow's; second, and most importantly, we need to concentrate on the draft agriculture text to see if we can agree on specific frameworks for reform. If we can break the logjam on these two critical issues, much more could quickly flow: an agreement on frameworks for cutting industrial tariffs and removing non-tariff barriers to the trade in goods, renewed energy to open services markets, and agreement on how the poorer and smaller developing countries can best participate in the global trading system."

He also said that "This bigger and more populous world marketplace is also adjusting to rapid technological change." He discussed mobile communications, nanotechnology, biotechnology, and pharmaceuticals.

Pascal Lamy, the European Commissioner for Trade gave a speech to the OECD on May 14. He used a different metaphor. He did not reference his nation's defeat in 1940. Rather, he said, WTO trade negotiations, including the Doha round, are like "volcanoes"; that is, "they can be sleeping smoking or erupting." And now, said Lamy, "the WTO volcano is smoking again".

Zoellick Addresses IPR and Russian Accession to WTO

5/14. U.S. Trade Representative (USTR) Robert Zoellick was asked at a press conference in Paris, France about the the prospectus for Russia reaching an agreement with the U.S. for World Trade Organization (WTO) accession this year

Zoellick stated that he had met with German Gref, Russia's Minister of Economic Development and Trade, and that his staff has had extensive discussions with Maxim Medvedkov, the Deputy Minister of Economic Development and Trade.

Zoellick stated that "I noted that we're having a real problem with intellectual property rights, estimated loss at about a billion dollars a year but I'm also working on that with Minister Fursenko, the Science and Education Minister, then we talked through some of the services issues, some of the telecom issues." See, transcript [PDF].

Washington Tech Calendar
New items are highlighted in red.
Monday, May 17

The House will meet at 12:30 PM for legislative business, and at 2:00 PM for legislative business. The House will consider several non-technology related items under suspension of the rules. Votes will be postponed until 6:30 PM. See, Republican Whip Notice.

The Senate will meet at 12:00 NOON for morning hour. At 2:00 PM it will begin consideration of S 2400, the Department of Defense Authorization Bill.

The Supreme Court will return from the recess that it began on May 3.

9:30 AM. The U.S. Court Appeals (DCCir) will hear oral argument in PanAmSat v. FCC, No. 03-1133. Judges Edwards, Sentelle and Rogers will preside. Location: Prettyman Courthouse, 333 Constitution Ave.

12:15 PM. The Federal Communications Bar Association's (FCBA) Online Committee will host a brown bag lunch. The speaker will be Hillary Brill, legislative assistant to Rep. Rick Boucher (D-VA). RSVP to Evelyn Opany at 202 689-7163. Location: Piper Rudnick, 1200 19th Street, NW, Suite 700.

3:00 PM. The Senate Finance Committee will hold a members' meeting with Mark Vaile, Australian Trade Minister, to discuss the U.S.-Australia Free Trade Agreement. Location: Room 211, Dirksen Building.

Day one of a three day conference of the American Cable Association. See, notice. Location: Wyndham Hotel.

Deadline to submit comments to the Office of the U.S. Trade Representative (USTR) regarding the complaint that the USTR submitted to the World Trade Organization (WTO) regarding the PR China's value added tax on integrated circuits. See, story titled "US Complains to WTO About PR China's Tax Preference for Domestic Producers of Integrated Circuits" in TLJ Daily E-Mail Alert No. 859, March 19, 2004. See also, notice in the Federal Register (April 21, 2004, Vol. 69, No. 77, at Pages 21593 - 21594) requesting comments.

Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its notice of proposed rulemaking (NPRM) regarding unwanted mobile service commercial messages and the CAN-SPAM Act. This is CG Docket No. 04-53. See, notice in the Federal Register, March 31, 2004, Vol. 69, No. 62, at Pages 16873 - 16886.

Tuesday, May 18

The House will meet at 9:00 AM for morning hour, and at 10:00 AM for legislative business. The House will consideration several non-technology related items. See, Republican Whip Notice.

8:30 AM - 3:00 PM. George Mason University (GMU) will host a symposium titled "Information Technology for Homeland Security". See, agenda and registration pages. Location: GMU, Fairfax Campus, Dewberry Hall in the Johnson Center.

9:30 AM. The U.S. Court Appeals (DCCir) will hear oral argument in Vista Communications v. FCC, Nos. 01-1168 and 03-1281. Judges Edwards, Sentelle and Henderson will preside. Location: Prettyman Courthouse, 333 Constitution Ave.

9:30 AM - 5:00 PM. The North American Numbering Council (NANC) will meet. See, notice in Federal Register, April 12, 2004, Vol. 69, No. 70, at Pages 19183 - 19184. Location: Federal Communications Commission (FCC), 445 12th Street, SW, Room TW-C305.

12:00 NOON - 1:30 PM. The Federal Communications Bar Association's (FCBA) Common Carrier Practice Committee will host a brown bag lunch. The topic will be "Meet Wireline Competition Bureau Chief Bill Maher". The FCBA states that this will be an opportunity "to hear directly from the Bureau Chief about all the major issues facing the Bureau -- unbundled network element negotiations and the future of the Triennial Review, the VOIP proceedings, intercarrier compensation reform, universal service reform, and other matters". For more information, contact Matt Brill, Jonathan Banks, or David Sieradzki, Co-Chairs of the FCBA's Common Carrier Practice Committee. RSVP to Cecelia Burnett at 202 637-8312. Location: Hogan & Hartson, 555 13th St., NW, Lower Level.

1:30 - 3:00 PM. (or 2:00 - 4:00 PM?) The Federal Communications Commission's (FCC) World RadioCommunication 2007 (WRC-07) Advisory Committee's Informal Working Group on Terrestrial and Space Science Services will meet. See, FCC notice [PDF]. Location: FCC, 445 12th Street, SW, South Conference Room, 6th Floor, Room 6-B516.

9:00 AM - 4:00 PM. Day one of a two day closed meeting of the President's National Security Telecommunications Advisory Committee (NSTAC) to discuss "cyber-related vulnerabilities of the internet". See, notice in the Federal Register, April 16, 2004, Vol. 69, No. 74, at Pages 20635 - 20636. Location: undisclosed.

Day one of a two day conference hosted by the CompTel/Ascent titled "Advancing the Business of VOIP". See, notice. Location: Renaissance Mayflower Hotel.

Day two of a three day conference of the American Cable Association. See, notice. Location: Wyndham Hotel.

Wednesday, May 19

The House will meet at 10:00 AM for legislative business. See, Republican Whip Notice.

9:00 AM - 4:00 PM. Day two of a two day closed meeting of the President's National Security Telecommunications Advisory Committee (NSTAC) to discuss "cyber-related vulnerabilities of the internet". See, notice in the Federal Register, April 16, 2004, Vol. 69, No. 74, at Pages 20635 - 20636. Location: undisclosed.

9:30 AM. The Senate Commerce Committee will hold a hearing titled "From Public Service to Private Sector: Spinning the Revolving Door for Personal Gain". The Committee's notice does indicate whether the scope of the hearing will encompass any of the federal agencies that exercise authority that affects the communications or information technology sectors. Sen. John McCain (R-AZ) will preside. The hearing will be webcast by the Committee. Press contact: Rebecca Fisher at 202 224-2670. Location: Room 253, Russell Building.

9:30 AM - 5:00 PM. The Federal Communications Commission (FCC) will host an event titled "Wireless Broadband Forum". See, notice and agenda [PDF]. Location: FCC, Room TW-C305 (Commission Meeting Room), 445 12th Street, SW.

10:00 AM. The House Commerce Committee's Subcommittee on Telecommunications and the Internet will hold a hearing titled "Competition in the Communications Marketplace: How Convergence Is Blurring the Lines Between Voice, Video, and Data Services". The hearing will be webcast by the Committee. See, notice. Press contacts: Jon Tripp (Barton) at 202 225-5735 or Sean Bonyun (Upton) 202 225-3761. Location: Room 2123, Rayburn Building.

2:00 PM. The House Government Reform Committee's Subcommittee on Technology, Information Policy, Intergovernmental Relations and the Census will hold a hearing titled "Federal Enterprise Architecture: A Blueprint for Improved Federal IT Investment & Cross-Agency Collaboration and Information Sharing". Location: Room 2154, Rayburn Building.

2:00 - 4:00 PM. Federal Communications Commission's (FCC) World RadioCommunication 2007 (WRC-07) Advisory Committee's Informal Working Group on IMT-2000 and 2.5 GHz Sharing Issues will meet. See, FCC notice [PDF]. For more information, contact Cecily Cohen at 202 887-5210. Location: FCC, 445 12th Street, SW, South Conference Room, 6th Floor, Room 6-B516.

Day two of a two day conference hosted by the CompTel/Ascent titled "Advancing the Business of VOIP". See, notice. Location: Renaissance Mayflower Hotel.

Day three of a three day conference of the American Cable Association. See, notice. Location: Wyndham Hotel.

Thursday, May 20

The House will meet at 10:00 AM for legislative business. See, Republican Whip Notice.

9:30 AM. The Senate Commerce Committee will hold a hearing regarding the CAN SPAM Act. The hearing will be webcast by the Committee. Press contact: Rebecca Fisher at 202 224-2670. See, notice. Location: Room 253, Russell Building.

9:30 - 10:00 AM. Federal Communications Commission (FCC) Commissioner Jonathan Adelstein will host an event titled "press breakfast". RSVP to Anne Perkins (Adelstein's Special Assistant for Legislative and Media Affairs) at 202 418-2314 by May 19. Location: FCC, 8th Floor Conference Room 1, 445 12th St., SW.

10:00 AM. The Senate Appropriations Committee's Subcommittee on Commerce, Justice, State, and the Judiciary will hold another hearing on intellectual property. Location: Room 138, Dirksen Building.

10:00 AM - 12:00 NOON. The World RadioCommunication 2007 (WRC-07) Advisory Committee's Informal Working Group 5: Regulatory Issues will meet. Location: Boeing, Arlington, VA.

12:00 NOON. The Congressional Internet Caucus Advisory Committee will host a panel discussion titled "Wiretapping the Internet: Is VOIP Different?" The speakers will be James Dempsey (Center for Democracy & Technology), Anthony Rutkowski (VeriSign), and Mike Warren (Fiducianet). RSVP to or 202 638-4370. Lunch will be served. Location: Reserve Officers Association, 1st and Constitution, NE (between the Dirksen Building and the Supreme Court).

2:00 - 4:00 PM. Several groups will hold a workshop on the Federal Information Security Management Act (FISMA). The speakers will include Glenn Schlarman (OMB), Drew Arenas (Verizon), Stuart Katzke (NIST), Bob Dix (House Government Reform Committee), Mike Jacobs (SRA), Lance Hoffman (George Washington University), Allen Paller (SANS Institute), and Werner Lippuner (Ernst & Young). The hosting groups are the Center for Democracy and Technology (CDT), the Council for Excellence in Government (CEG), the Cyber Security and Policy Research Institute of George Washington University, and the American Council for Technology. RSVP to Danielle Wiblemo at Location: Mayflower Hotel, Connecticut Ave.

Deadline to submit comments to the Department of Homeland Security (DHS) regarding its interim rule pertaining to receiving and protecting critical infrastructure information (CII). This rule pertains to the Homeland Security Act's exemption to the Freedom of Information Act (FOIA) for certain information about critical infrastructures, such as cyber security, that is voluntarily provided to the federal government. See, notice in the Federal Register, February 20, 2004, Vol. 69, No. 34, at Pages 8073 - 8089. See also, story titled "DHS Announces Adoption of Rules Implementing the Critical Infrastructure Information Act" in TLJ Daily E-Mail Alert No. 840, February 19, 2004.

Friday, May 21

The House will meet at 10:00 AM for legislative business. See, Republican Whip Notice.

Day one of a two day conference hosted by the Electronic Privacy Information Center (EPIC) titled "Freedom 2.0: Distributed Democracy". The topics to be addressed include the reliability of electronic voting systems, enabling public participation, government accountability, secrecy and surveillance, Freedom of Information Act, open government initiatives, privacy enhancing technologies, anonymity and identity, trans border data flows, radio frequency identification (RFID), biometrics, Civil Society, World Summit on the Information Society, United Nations Information and Communications Technology Task Force, ICANN, and UNESCO. See, conference web site. Location: Washington Club, 15 Dupont Circle.

Deadline to submit comments to the Federal Trade Commission (FTC) for its June 21, 2004 workshop on the uses, efficiencies, and implications for consumers associated with radio frequency identification (RFID) technology. See, FTC web page for this workshop, and notice in the Federal Register, April 15, 2004, Vol. 69, No. 73, at Pages 20523 - 20525.

Extended deadline to submit comments to the Federal Trade Commission (FTC) regarding its April 19, 2004 workshop titled "Monitoring Software on Your PC: Spyware, Adware, and Other Software". See, notice in the Federal Register, April 1, 2004, Vol. 69, No. 63 at Pages 17155 - 17156.

FCC Adopts Access Charge Reform Report and Order

5/13. The Federal Communications Commission (FCC) adopted, but did not release, an Eighth Report and Order and Fifth Order on Reconsideration regarding interstate access services provided by competitive local exchange carriers to interexchange carriers.

The FCC released a short release [PDF] describing this item. It states that the report and order "generally maintains the rules adopted by the FCC in April 2001, which limited competitive LECs' access charges to benchmark rates no higher than the rates charged by incumbent LECs, with some exceptions."

FCC Commission Kevin Martin stated at the meeting that "I think we have provided some really helpful guidance to industry". He added this item will "limit regulatory arbitrage opportunities".

The FCC's release adds that this report and order provides that "A competitive LEC is entitled to charge the full benchmark rate if it provides an IXC with access to the competitive LEC's own end-users", and that "The access rate a competitive LEC charges for access components when it is not serving the end-user should be no higher than the rate charged by the competing incumbent LEC for the same functions".

It further states that the competing ILEC rate for a CLEC switch "is the end office switching rate when a competitive LEC originates or terminates calls to its end-users and the tandem switching rate when a competitive LEC passes traffic from one carrier to another".

Finally, it states that "A pre-subscribed interexchange carrier charge (PICC) may be imposed by a competitive LEC qualifying for the rural exemption in addition to the rural benchmark rate if, and only to the extent that, the competing incumbent LEC charges a PICC."

This item is FCC 04-110 in Docket No. 96-262. Victoria Schlesinger of the FCC Wireline Competition Bureau's (WCB) Pricing Policy Division (PPD) presented this item to the Commission at the May 13 meeting. She can be reached at 202 418-1520 or

FCC Adopts NPRM Regarding One Call Notification System

5/14. The Federal Communications Commission (FCC) adopted a notice of proposed rulemaking (NPRM) regarding a national one call notification system at its meeting of Thursday, May 13. On Friday, May 14, the FCC released the text [34 pages in PDF] of the NPRM.

This NPRM is mandated by the Pipeline Safety Improvement Act of 2002. This was HR 3609 in the 107th Congress. It is Public Law No. 107-355.

The NPRM states that "A One Call notification system is a communication system established by operators of underground facilities and/or state governments in order to provide a means for excavators and the general public to notify facility operators in advance of their intent to engage in excavation activities. One Call Centers, which cover different geographic areas, are generally accessed by dialing a toll-free or local telephone number. Our objective in initiating this proceeding is to assess possible abbreviated dialing arrangements to use to access state One Call Centers, while at the same time, seeking to minimize any adverse impact on numbering resources."

FCC Chairman Michael Powell wrote a separate statement [PDF], and Commissioner Michael Copps wrote a separate statement [PDF]. The FCC also issued a release [2 pages in PDF] describing this item.

Regina Brown, of the FCC's Wireline Competition Bureau (WCB), presented this item to the Commissioners at the May 13 meeting. She can be reached at 202 418-0792.

This NPRM is FCC 04-111 in Docket No. 92-105. Comments will be due 30 days after publication of a notice in the Federal Register. Reply comments will be due 45 days after publication in the Federal Register. This publication has not yet occurred.

FCC Affirms International Bureau's Whipsawing Order

5/13. The Federal Communications Commission (FCC) adopted, but did not release, a Order on Review that affirms the FCC's International Bureau's (IB) previous decision that Philippine carriers had whipsawed U.S. carriers.

On March 10, 2003 the IB issued its Order [21 pages in PDF] in its proceeding title "In the Matter of AT&T Corp. Emergency Petition for Settlements Stop Payment Order and Request for Immediate Interim Relief and Petition of WorldCom, Inc. For Prevention of ``Whipsawing´´ On the U.S.-Philippines Route". This order is DA 03-581 in IB Docket No. 03-38.

The FCC's IB found that six Philippines carriers acted collectively to demand rate increases from U.S. carriers, and retaliating against AT&T and MCI for refusing to agree to their demand for rate increases for termination services on their networks in the Philippines.

"Whipsawing" is a term used by the FCC to describe various anticompetitive conduct by foreign carriers possessing market power, when the foreign carriers exploit that market power in negotiating settlement rates with competitive U.S. telecommunications carriers. That is, the foreign carriers demand that a U.S. carrier pay an above cost settlement rate for terminating its international traffic. Competitive carriers that do not agree to pay the demanded rate, such as AT&T and MCI in this matter, have their circuits blocked.

The IB ordered U.S. carriers providing facilities based services to suspend payments for termination services to the Philippine carriers pending restoration of circuits. This suspension has since been lifted, because the Philippine carriers restored circuits.

The IB also removed the Philippines from the FCC's list of routes approved for International Simple Resale (ISR), and required that upon restoration of the circuits U.S. carriers comply with the FCC's International Settlements Policy (ISP) for traffic terminated on the U.S Philippine route.

The FCC issued a release [PDF] that describes the Order on Review adopted on May 13. It states that the FCC affirms the IB's decision.

The release further states that "The Commission’s decision today did not grant requests of both the Philippine and U.S. carriers to restore ISR to the Philippines route and eliminate the requirement that U.S. carriers make payments in accordance with the ISP. In the Commission’s recent 2004 ISP Reform Order, it decided to eliminate the ISR policy and to remove the ISP from benchmark-compliant routes. The question of whether the U.S.-Philippines route is benchmark-compliant will be addressed in a public comment process as described in the 2004 ISP Reform Order. The 2004 ISP Reform Order set out a process by which interested parties could make public comment on those routes that the Commission believed were benchmark-compliant but that had not been approved as such through a public process. Because the ISR policies were eliminated and the question of whether benchmark-compliance will be out for public comment, the Commission today dismissed in part the Applications for Review to the extent they requested reinstatement of ISR."

This item is FCC 04-112 in IB Docket No. 03-38. Kimberly Cook presented this item to the Commission at its May 13 meeting. She can be reached at 202 418-7532.

People and Appointments

5/11. Eric Schuppenhauer was named senior advisor to Donald Nicolaisen, the Securities and Exchange Commission's (SEC) Chief Accountant. See, SEC release.

5/13. Federal Communications Commission (FCC) Commissioner Michael Copps introduced two new interns in his office, Laura Hendrickson (a student at Georgetown University Law Center) and John Cascarano (a student at the University of Michigan Law School), at the May 13 meeting of the FCC.

More News

5/14. The Federal Communications Commission (FCC) denied Entercom's Application for Review of the FCC's April 8, 2004, Memorandum Opinion and Order (FCC 04-89) imposing a $12,000 fine for broadcasting indecent material on a program titled "Andy Savage Show". See also, FCC release, separate statement by FCC Commissioner Kevin Martin, and separate statement by Commissioner Michael Copps.

5/14. Robert Crandall, Robert Hahn, Robert Litan and Scott Wallsten (all of the AEI-Brookings Joint Center for Regulatory Studies) released a paper [PDF] titled "Universal Broadband Access: Implementing President Bush’s Vision". The paper argues that "removing price and ``unbundling´´ regulations at the wholesale and retail levels would help increase the diffusion of broadband. Banning Internet access taxes would be beneficial, but we believe such a ban would be less effective than removing these regulatory barriers to competition. We argue against subsidizing broadband to increase penetration because subsidies are likely to result in economic inefficiencies."

5/14. The Department of Justice (DOJ) announced in a release "a national law enforcement initiative aimed at combating the growing volume" of peer to peer child pormography. Attorney General John Ashcroft stated that the DOJ "stands side-by-side with our partners in the law enforcement community to pursue those who victimize our children under the perceived, but false, cloak of anonymity that the peer-to-peer networks provide." David Israelite, Chairman of the Intellectual Property Task Force, said in a statement that "Today's announcement is first and foremost an important blow against child pormography. It also sheds light on the growing problem of illegal activity conducted using peer-to-peer computer networks, which extends beyond the distribution of child pormography to massive theft of intellectual property."

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