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December 17, 2004, 9:00 AM ET, Alert No. 1,040.
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DOJ and FTC Warn Massachusetts Bar That Its Drafts Rules Restrict Legal Software

12/16. The Department of Justice's (DOJ) Antitrust Division and the Federal Trade Commission (FTC) wrote a letter to the Massachusetts Bar Association regarding its "Draft Proposed Definition of the Practice of Law in Massachusetts".

The FTC/DOJ letter states, for example, that "the definition has the potential to discourage lay activities such as ... the use of interactive self-help legal software to produce simple legal documents. This would likely raise costs for consumers and limit their choices."

The letter elaborates that the proposed definition could "restrict and eliminate" such things as "inexpensive electronic software to complete wills, trusts, tax forms, and other legal documents, because the applications can be interactive and select certain clauses for the documents based on answers that consumers give, as well as providing some legal information and/or advice about those clauses".

The letter adds that "Because the proposed rule is likely to restrain competition without providing any benefits to consumers, we recommend against adopting such a definition of the practice of law. Antitrust laws and competition policy generally consider sweeping restrictions on competition harmful to consumers and justified only by a showing that the restriction is needed to prevent significant consumer injury."

The letter concludes that "The Task Force's proposed definition of the practice of law will likely unnecessarily and unreasonably reduce competition between attorneys and non-attorneys. Massachusetts consumers will likely pay higher prices and face a smaller range of service options with little or no offsetting benefit. The Task Force makes no showing of harm to consumers from lay service providers that would justify these reductions in competition."

The DOJ/FTC letter is signed by Hewitt Pate (Assistant Attorney General in charge of the Antitrust Division), Jessica Arkow (a trial attorney in the Antitrust Division), Deborah Majoras (Chairman of the FTC), and Maureen Ohlhausen (Acting Director of the FTC's Office of Policy Planning).

TLJ spoke with Maureen Ohlhausen regarding the letter. She stated that the DOJ and FTC are not threatening to bring an enforcement action. Rather, they are simply "expressing our concerns that the proposal is not in the best interest of consumers".

The Massachusetts Supreme Judicial Court, which must approve the Massachusetts Bar Association's recommendations, is immune from federal antitrust liability under the state action doctrine. However, as the DOJ/FTC letter points out (in footnote 6), the DOJ has obtained judgments and injunctions against state bar associations for anti-competitive behavior.

FCC Adopts Order and NPRM Regarding Air Ground Service in the 800 MHz Band

12/15. The Federal Communications Commission (FCC) adopted, but did not release, a Report and Order and Further Notice of Proposed Rulemaking regarding the auctioning of 4 MHz of spectrum in the 800 MHz band that is currently dedicated to commercial air-ground service. The FCC will allow auction bidders to determine which of three proposed band plans will be chosen.

The FCC has issued only a short release [PDF] and a chart [1 page in PDF] that depicts the three band plans. Also, three Commissioners prepared brief separate statements. This item is FCC 04-287 in WT Docket 03-103.

FCC Chairman Michael Powell wrote in a separate statement [PDF] that "our rules for the 800 MHz commercial air-ground service has been locked in a narrowly defined technological and regulatory box and have kept passengers from using their wireless devices on planes. Nearly every party in the air-ground proceeding has commented that the existing band plan and our rules have hindered the provision of services that are desired by the public onboard aircraft."

The FCC release and chart disclose that one band plan would provide for two overlapping, cross-polarized 3 MHz licenses. A second plan would provide for an exclusive 3 MHz license and an exclusive 1 MHz license. A third plan would provide for an exclusive 1 MHz license and an exclusive 3 MHz license with the blocks at opposite ends of the band from the second plan.

The FCC release states that "New air-ground service may be any type (e.g., voice, data, broadband internet, etc.) and may be provided to any or all aviation markets (e.g., commercial, military, and general)."

Verizon Airfone is currently operating in this band. The FCC release also states that this item grants Verizon Airfone "a non-renewable 5-year license, subject to existing narrowband technical limits. Noting that the provision of high-speed broadband services to consumers onboard aircraft by one or more new licensees will require at least 3 MHz of the 4 MHz band, the Commission decided that following the grant of the new license, Verizon Airfone must limit operations of the existing narrowband Airfone system under the 5 year non-renewable license to the remaining 1 MHz of spectrum."

Michael CoppsFCC Commissioner Michael Copps (at left) wrote in a separate statement [PDF] that "The current air-to-ground narrowband service surely has not fulfilled expectations. There are few calls made each day and the service is high-priced and limited to voice. A new broadband air-to-ground service could allow a far greater diversity of services, including the ability to check email, access the Web, enhance avionic support, and improve homeland security communications."

However, he also complained that "the way the FCC has decided to launch this new service risks creating a monopoly for broadband air-to-ground services. The Order creates an auction where one company can lock up the only license that can support a true broadband air-to-ground service."

Michael PowellPowell (at right) said that "we will soon be considering pending applications and a rulemaking to authorize more satellite providers". He also pointed out that "we have asked questions in our ongoing 3G proceeding about the possibility of air-ground services in those bands. We will continue to explore opportunities for further competition in other bands and other platforms."

FCC Commissioner Jonathan Adelstein wrote in a separate statement [PDF] that "we already are seeing the deployment of satellite-based high-speed Internet services on international long-distance routes."

However, he added that "But we lost a golden opportunity here to guarantee true broadband competition. While a future auction likely will result in two unique licensees, it is agreed that a licensee with one megahertz of spectrum will be unable to compete against a licensee with three megahertz for a true broadband service. We could have easily made a change to the item to ensure that the broadband air-ground market would have been served by two competitors."

The FCC release states that the FCC "decided not to authorize ancillary services in the band."

The CTIA praised this decision. CTIA P/CEO Steve Largent stated in a release that "There was simply too much uncertainty regarding the Air to Ground spectrum and interference to allow a terrestrial component in the 800 MHz band at this time. There is an obligation to provide for interference-free homeland security communications, which could have been negatively impacted by a new terrestrial offering".

FCC Expands Rural Telemedicine Subsidy Program

12/15. The Federal Communications Commission (FCC) adopted, but did not release, an item titled "Second Report and Order, Order on Reconsideration, and Further Notice of Proposed Rulemaking" that pertains to the the FCC's rules regarding its rural health care subsidy system.

The FCC issued only a short release, and four Commissioners prepared brief separate statements. This item is FCC 04-289 in WC Docket No. 02-60.

The FCC created its rural health care program in its Order of May 8, 1997. It is a cross subsidy program. It provides subsidies to schools, libraries, and rural health clinics for telecommunications services, internet access, and computer networking. It is loosely based upon the Telecommunications Act of 1996. Section 254 of the Act codified the long standing practice of providing "universal service" support for telephone service in high cost and rural areas. The Act also included a subsection that extended universal service support to any school, library and rural health clinic.

The FCC last amended its rules regarding health clinics in November of 2003. See, story titled "FCC Expands Universal Service Support for Rural Clinics and Telemedicine" in TLJ Daily E-Mail Alert No. 779, November 14, 2003.

The present FCC release states that this item adopts rules changes that "Redefine what constitutes a rural area" to enable more towns to qualify. The FCC release cites as an example a small town in southwestern Virginia that will now qualify.

Rep. Rick Boucher (D-VA), who represents the area, and is a member of the House Commerce Committee's Subcommittee on Telecommunications and the Internet, has pressed the FCC on this subject. See, for example, comment [8 pages in PDF] submitted by Rep. Boucher on July 31, 2002.

The FCC release also states that this item adopts changes in FCC rules to "Increase discounts available to mobile rural health care providers for the purchase of mobile satellite telecommunications services". In addition, FCC Chairman Michael Powell wrote in a separate statement [PDF] that this item "seeks comment on whether to modify its rule specifically to allow mobile rural health care providers to receive discounts for facilities other than satellite."

The FCC release also states that the further NPRM portion of this item examines "whether a flat 25 percent discount for Internet services is sufficient and whether network infrastructure should be funded under the rural health care mechanism".

See also, statement [PDF] of Commissioner Kathleen Abernathy, separate statement [PDF] of Commissioner Michael Copps, and statement [PDF] of Commissioner Jonathan Adelstein.

DOJ Charges Company with Universal Service Subsidy Fraud

12/8. The Department of Justice (DOJ) and the U.S. Attorneys Office (USAO) for the Northern District of California charged Inter-Tel Technologies Inc., a subsidiary of Inter-Tel Incorporated, with one count of mail fraud and aiding and abetting, in violation of 18 U.S.C. §§ 1341 and 2, and one count of criminal violation of the Sherman Antitrust Act, in violation of 15 U.S.C. § 1, in connection with its bid rigging and wire fraud related to the Federal Communications Commission's (FCC) schools and libraries subsidy program.

The DOJ charged Inter-Tel by sealed criminal information [9 pages in PDF] on December 6, 2004. The DOJ unsealed the information on December 8, 2004. The DOJ also announced that Inter-Tel has agreed to plead guilty. See, DOJ release and USAO release.

Hewitt Pate, Assistant Attorney General in charge of the DOJ's Antitrust Division, stated that "This conduct deprived the E-Rate program of fair and competitive prices, caused the program to pay for unnecessary, inappropriate, and ineligible items, and as a result, prevented the program from funding projects at other schools that should have received funding".

This case is another in a series of e-rate fraud prosecutions.

This case is United States of America v. Inter-Tel Technologies, Inc., U.S. District Court for the Northern District of California, San Francisco Division, D.C. No. CR 04-0399-JSW.

Washington Tech Calendar
New items are highlighted in red.
Friday, December 17

The House will next meet on January 4, 2004 at 12:00 NOON. See, Republican Whip Notice.

The Senate will next meet on January 4, 2005 at 12:00 NOON.

The Supreme Court will next meet on Monday, January 10, 2005. See, Order List [9 pages in PDF] at page 9.

9:30 AM - 12:00 NOON. The U.S. China Policy Foundation will host an event titled "Prospects for U.S.-China Relations in Bush Administration". For more information, contact Chi Wang at 202 547-8615. Location: Murrow Room, National Press Club, 529 14th St. NW, 13th Floor.

12:00 NOON. Deadline to submit comments to the Office of the U.S. Trade Representative (USTR) regarding various trade related telecommunications issues. The USTR seeks comments on "Whether any WTO member is acting in a manner that is inconsistent with its commitments under the WTO Basic Telecommunications Agreement or with other WTO obligations", "Whether Canada or Mexico has failed to comply with their telecommunications commitments or obligations under NAFTA", "Whether Chile or Singapore or any other FTA partner with an Agreement that comes into force on or before January 1, 2005 has failed to comply with their telecommunications commitments or obligations under the respective FTAs", "Whether other countries have failed to comply with their commitments under additional telecommunications agreements", and "Whether there remain outstanding issues from previous Section 1377 reviews". See, notice in the Federal Register, Vol. 69, No. 226, Wednesday, November 24, 2004, at Page 68439.

Tuesday, December 21

12:00 NOON. The Federal Communications Bar Association's (FCBA) Executive Committee will meet. Location: Wiley Rein & Fielding, 1776 K St., NW.

Extended deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its Notice of Proposed Rulemaking and Declaratory Ruling (NPRM & DR) [100 pages in PDF] regarding imposing Communications Assistance for Law Enforcement Act (CALEA) obligations upon broadband internet access services and voice over internet protocol (VOIP). This NPRM is FCC 04-187 in ET Docket No. 04-295. The FCC adopted this NPRM at its August 4, 2004 meeting, and released it on August 9. See, story titled "Summary of the FCC's CALEA NPRM" in TLJ Daily E-Mail Alert No. 960, August 17, 2004. See, notice in the Federal Register, September 23, 2004, Vol. 69, No. 184, Pages 56976 - 56987. See also, notice of extension [PDF].

Thursday, December 23

Deadline to submit comments to the National Institute of Standards and Technology's (NIST) Computer Security Division regarding the FIPS 201 and SP 800-73 public drafts. See, document [91 pages in PDF] titled "Federal Information Processing Standard 201 (FIPS 201), Personal Identity Verification for Federal Employees and Contractors", and document [99 pages in PDF] titled "Special Publication 800-73 (SP 800-73), Integrated Circuit Card for Personal Identity Verification". Submit comments to

Friday, December 24

The Federal Communications Commission (FCC) and other federal offices will be closed. See, Office of Personnel Management's (OPM) list of federal holidays.

Saturday, December 25


5th Circuit Rules on Jurisdiction, Removal and Remand in Dispute Over Laying of Fiber Optic Cable

12/13. The U.S. Court of Appeals (5thCir) issued its opinion [8 pages in PDF] in Schexnayder v. Entergy, a case involving the laying of fiber optic cable. However, this appeal involves procedural questions regarding jurisdiction, removal, and remand. The Court of Appeals held that it lacked jurisdiction to review the District Court's order remanding the case to state court, and dismissed the appeal.

State courts have general jurisdiction, while federal District Courts have limited jurisdiction. They have jurisdiction only over cases in which there is diversity of citizenship or there is a claim based upon federal law. A case in which there is diversity of citizenship or a federal question may be brought in a state court. However, it can then be removed by a defendant to federal court. And, in some situations, the federal court may remand the case back to the state court. 28 U.S.C. § 1447 covers removal jurisdiction.

This is important because the outcome of a case may be affected by which court tries the case. The present case is a class action trespass and fraud case against a set of telecom companies. The plaintiffs want it to proceed in state court. The defendants want it to proceed in federal court.

Entergy Services and affiliated companies provide telecommunications services in the states of Texas, Louisiana and Arkansas. They upgraded their infrastructure by laying fiber optic cable.

Arthur Schexnayder and other land owners filed a complaint in state court in Louisiana against Entergy Services and related companies alleging trespass and fraud for laying cable across their properties without their permission. They plead no federal claims.

Six months later another party intervened, and also alleged a RICO violation, which is a federal claim. Entergy removed the action to the U.S. District Court based upon federal subject matter jurisdiction.

Schexnayder moved to remand the case back to the state court, arguing that removal jurisdiction cannot be based upon an intervenor's claim. The District Court granted this motion. This appeal followed.

The Court of Appeals held that it lacks jurisdiction to review the District Court order, and dismissed the appeal.

It wrote that "Congress has severely circumscribed the power of federal appellate courts to review remand orders. Section 1447(d) states that ``[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise.´´"

The Appeals Court noted that the Supreme Court created a limited class of cases that may be reviewed. The Supreme Court held that for a remand to be unreviewable, the District Court must act within the authority granted to it by § 1447(c). See, Quackenbush v. Allstate Ins. Co., 517 U.S. 706 (1996).

28 U.S.C. § 1447(c) provides, in part, that "A motion to remand the case on the basis of any defect other than lack of subject matter jurisdiction must be made within 30 days after the filing of the notice of removal ..."

The Appeals Court concluded that "this Court lacks jurisdiction under § 1447 if the district court based its remand order on either a lack of subject matter jurisdiction or a defect in removal procedure." It wrote that "Here, the district court based its remand decision on two factors. Principally, it ruled that Entergy’s removal petition was untimely based on § 1446(b). It also rejected Entergy’s argument that it could base the removal petition on Fear Farm’s intervening federal claim, which is to say that the district court did not have subject matter jurisdiction. These two grounds constitute allowable § 1447(c) reasons for remand. As a consequence, this Court lacks jurisdiction to review the district court’s order."

This case is Arthur Schexnayder, et al. v. Entergy Louisiana, Inc., et al., App. Ct. No. 03–31138.

People and Appointments

12/16. Suzanne Mencer, Executive Director of the Department of Homeland Security's (DHS) Office of State and Local Government Coordination and Preparedness, announced that she will resign effective January 31, 2005. See, DHS release.

12/16. The Securities and Exchange Commission (SEC) announced the formation of an advisory committee named "Securities and Exchange Commission Advisory Committee on Smaller Public Companies". The committee will examine the impact of the Sarbanes Oxley Act and other aspects of the federal securities laws on smaller public companies. The SEC also announced the appointment Co-Chairs of the committee: Herbert Wander of the law firm of Katten Muchin Zavis Rosenman (KMZR), and James Thyen, P/CEO of Kimball International, a manufacturer of furnishings and electronics. The SEC also announced that is will appoint between 9 and 19 more members to the committee. See, SEC release and KMZR release [PDF].

More News

12/16. Covad Communications Group announced that its signed an agreement with Verizon "enabling Covad to continue to provide line sharing services to digital subscriber line (DSL) subscribers throughout Verizon territory for a four-year period." See, Covad release. Also, Federal Communications Commission (FCC) Chairman Michael Powell and Commissioner Kathleen Abernathy released a joint statement [PDF] in which they wrote that "We applaud Verizon and Covad for reaching a commercial agreement to provide for continued DSL line sharing. We have been strong proponents of such commercial arrangements, and they take on added importance and urgency as a result of the Commission's elimination of mandatory line sharing last year. This agreement and others that were reached previously will enhance choice and competition in the broadband marketplace, to the great benefit of consumers. We hope that other incumbent carriers and competitors continue to pursue negotiations to preserve line sharing as a viable model."

12/16. Security software company Symantec and storage software company Veritas announced "a definitive agreement to merge in an all-stock transaction. Based on Symantec's stock price of $27.38 at market close on December 15, 2004, the transaction is valued at approximately $13.5 billion." See, release. The merger is subject to approval by shareholders and government regulators.

12/15. Sprint and Nextel Communications announced that their Boards of Directors "have unanimously approved a definitive agreement for a merger of equals. The combination will create ... a leading wireless carrier augmented by a global IP network that will offer consumer, business and government customers compelling new broadband wireless and integrated communications services. The new company, which will be called Sprint Nextel, also intends to spin off to its shareholders Sprint's local telecommunications business following the merger." See, Nextel release. See also, Sprint release. The merger is subject to approval by shareholders and government regulators.

12/8. Several government agencies, technology companies, financial institutions, and other entities formed a joint initiative, titled Digital PhishNet, to address phishing attacks. The initiative's web site states that its goals are "to identify, arrest and hold accountable, those that are involved in all levels of phishing attacks to include spammers, phishers, credit card peddlers, re-shippers and anyone involved in the further abuse of consumers' personal information. This operation will draw upon the vast resources available to its national and international members in order to successfully achieve its goals." See also, Microsoft release.

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