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August 22, 2006, Alert No. 1,436.
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FTC's Majoras Discusses Network Neutrality

8/21. Deborah Majoras, Chairman of the Federal Trade Commission (FTC), gave a speech [21 pages in PDF] regarding network neutrality at a conference hosted by the Progress and Freedom Foundation (PFF) in Aspen, Colorado.

She discussed recent and ongoing FTC activities related to the internet, announced the formation of an Internet Access Task Force, offered comments on the net neutrality debate, and asserted FTC jurisdiction over broadband internet access services.

Majoras was a keynote luncheon speaker at the PFF conference. However, the complete underlying text of her speech is an extensively footnoted paper. See also, FTC release.

Creation of Internet Access Task Force. She announced the creation of an "Internet Access Task Force", to be headed by the FTC's Maureen Ohlhausen, and staffed by FTC economists and attorneys. She said that it "will address important issues that are being raised by converging technologies and regulatory developments", and that its purpose "is to educate the Commission on the relevant issues and to inform our enforcement, advocacy, and education initiatives."

She added that members of this task force are already drafting a paper regarding "municipalities offering wireless Internet services", that will be publicly released "this Fall".

She also said that this new task force will study the network neutrality issue.

Majoras' Comments on Network Neutrality. Majoras spoke in detail about the possibility of imposing a net neutrality regulatory scheme. She offered a summary of the debate, but rendered no conclusions. She said that the new task force "is looking carefully at the issues". She also listed commented upon four principles that should be considered "before enactment of a comprehensive scheme".

She also expressed her "surprise at how quickly so many of our nation's successful firms have jumped in to urge the government to regulate. I rarely meet a person in business who does not profess support for a free market, who does not long for the government to keep its nose out of the business. But nonetheless, when fear of marketplace disadvantage arises, there is a tendency to quickly turn to government to seek protection or help. I do not dispute the sincerity of the concerns here. I, too, support a highly competitive Internet environment. I just question the starting assumption that government regulation, rather than the market itself under existing laws, will provide the best solution to a problem."

Deborah MajorasMajoras (at right) said that "``Network neutrality´´ has been variously defined and may mean different things to different people. On one level, it appears to mean that Internet users should have the freedom to access and use it as they choose, without any restriction by network providers. On another but related level, it means, at a minimum, the right of content providers to unfettered access to the many privately owned networks that comprise the Internet and may also mean that all data transmissions are assigned equal priority as they are passed along from network to network in cyberspace."

She continued that "Fear of restrictions or discrimination in access has led proponents of ``net neutrality´´ to seek legislation that would, for example, prohibit broadband providers from discriminating against any person’s ability to use a service to access or provide lawful content, from refusing to interconnect facilities with another service provider on reasonable and non-discriminatory terms, or from charging a fee for prioritizing transmission of particular types of data. Opposing such measures are major telecommunications firms, among others.

She elaborated that "The proposals address concerns, first, that a firm controlling both broadband transmission facilities and Internet access may discriminate against nonproprietary ISPs or unaffiliated providers of applications or content for competitive advantage. Such discrimination might take the form of hampered or blocked transmission aimed at gaining an advantage over competitors in either the horizontal ISP market or the complementary markets for applications and content.

In addition, she said that "the proposals apparently are designed to address a concern that network operators will charge providers of applications or content for network access, particularly access to higher-speed "lanes" on the Internet. One fear, apparently, is that larger, established firms will be able to pay for prioritized transport, while small, developing firms may not, leading to diminished innovation in applications and content. Implicit in this fear is the assumption that the creation of such fast lanes necessarily will hamper the remainder of the available "lanes" on the Internet."

She also offered four principles that should be considered "before enactment of a comprehensive scheme", and offered some hints as to her views as to how each of these principles might affect her conclusions regarding any proposed net neutrality scheme.

First, she said that "absent clear evidence of market failure or consumer harm, policymakers should not enact blanket prohibitions of particular forms of business conduct or business models or place requirements on how business is conducted." She also commented that while network neutrality proponents cite the FCC's Madison River proceeding, "we should be careful before using the actions of a single broadband provider, apparently facing little competition, as a sufficient basis to impose across-the-board regulation." (Footnote omitted.)

Second, she said that "No industry-wide regulatory scheme should be imposed without first carefully weighing the costs, determining whether the greater harm occurs with or without regulation, and evaluating whether a lesser approach than regulatory constraints would be a better way to address the potential harm." She also commented that "we should look at whether any net neutrality or similar legislation could have the effect of entrenching existing broadband platforms and market positions, as well as adversely affecting the levels and areas of future innovation and investment in this industry. The end result could be a diminution, rather than an increase, in competition, to the detriment of consumers."

Third, she said that "we should start by acknowledging that competition generally produces the best results for consumers over time." She also commented that "I further ask why network providers would not continue to compete for consumers’ dollars by offering more choices, not fewer. We make a mistake when we think about market scenarios simply as dealings between and among companies; let us not forget who reigns supreme: the consumer."

Fourth, she said that "we should not forget that we already have in place an existing law enforcement and regulatory structure."

FTC Jurisdiction Over Broadband Services. Majoras also addressed whether the "FTC has jurisdiction over broadband Internet access services". She said that "``common carriers´´ that provide telecommunications services and are subject to the Communications Act are exempt from the FTC Act."

She continued that "broadband Internet access services are within the FTC’s jurisdiction. Certain types of Internet access services have long been treated as non-common carrier services subject to FTC jurisdiction. These include digital subscriber line (DSL) Internet access provided by ISPs that do not themselves own the transmission facilities used to provide Internet access, as well as dial-up or narrowband Internet access."

She also said that "Recent developments in the courts and at the FCC have clarified that certain other means of providing Internet access -- specifically, cable modem services and facilities-based broadband wireline services offered on a non-common carrier basis -- are information services rather than telecommunications services. In the Brand X decision, the Supreme Court upheld the FCC’s determination that cable modem Internet access service is an ``information service´´ and not a telecommunications service under the Communications Act. Subsequently, the FCC released its Wireline Broadband Internet Access Order, in which the agency reclassified wireline broadband Internet access service by facilities-based carriers as an information, rather than a telecommunications, service." (Footnotes omitted.)

Reaction. Gigi Sohn, head of the Public Knowledge, a Washington DC based interest group that advocates a legislatively imposed network neutrality mandate, responded in a release that since "98 percent of customers receive their service from either the telephone company or the cable company ... There are no market forces at work here, much as Chairman Majoras wishes there to be." Sohn added that network neutrality is essentially the same principles that "were in existence for telecommunications services".

Majoras and Gonzales Offer Contrasting Views of the Internet

8/21. Deborah Majoras, Chairman of the Federal Trade Commission (FTC), and Alberto Gonzales, the Attorney General, both gave speeches on Monday, August 21, 2006, in which they expressed divergent views of the uses and benefits of the internet. See, Majoras speech [21 pages in PDF] and Gonzales speech.

Majoras expressed a view of the internet as an enormously beneficial network. Majoras expressed faith in free markets and limited regulation. Gonzales expressed a dark and sinister view of the internet, where children are sexually solicited, perverts procure pornography, and criminals have anonymity. Gonzales called for more laws, in the U.S. and abroad.

Majoras said that "The Internet has created enormous benefits for consumers through increased convenience, choice, and efficiency. It empowers consumers by providing them easy access to large amounts of information, allowing them to quickly research and compare product attributes and prices and to purchase products and services from all over the country or even the world without leaving home. The expanded choices and increased information that the Internet offers have intensified competition in a number of markets, all of which benefits consumers. Retail book stores and music sellers must compete with on-line sellers; wine shops now must compete with wine sellers throughout the country; traditional real estate agents face competition from online agents and even home sellers themselves, thanks to the Internet; and virtually all sellers of retail goods must compete with the market for used goods, as consumers now can buy from and sell to one another with ease."

Gonzales said that "It is a wrenching reality that, every day, children are sexually solicited online. Every day. Every day, these criminals are looking for children to hurt. Every day, they are visiting chat rooms where our children think they are safe. Every day, they look at child pornography with hopes of performing those sick acts themselves, and perhaps documenting their crimes for bragging rights with other depraved individuals."

He said that the internet has "provided elements that criminals love: a cloak of anonymity, speed of communication, and global access to potential victims. The Internet has provided pedophiles with limitless back rooms, dark shadows, and escape routes. It has made it hard to find the criminal but terribly easy to see the crime."

"The internet also allows them to brag about their crimes, creating a sick field of competition to see who can produce the most unthinkable photos or videos of rape and molestation. In their perverse eyes, this means the younger, the better", said Gonzales.

He called for new state laws and new laws in other countries, including laws providing greater subpoena powers, and longer prison sentences.

Majoras spoke at a conference hosted by the Progress and Freedom Foundation (PFF) in Aspen, Colorado. Gonzales spoke at a conference in Dallas, Texas, titled "18th Annual Crimes Against Children Conference". He also spoke theologically. He referred to the "predators who crush the very souls of their victims", and asked that "May God bless and guide your important work".

Bush Says Judge Taylor Wrote a Terrible Opinion Re NSA Surveillance

8/21. President Bush held a news conference at the White House in Washington DC. He spoke about the war on terrorism. He spoke briefly about electronic surveillance and the August 17, 2006, opinion [44 pages in PDF] written by Judge Anna Taylor of the U.S. District Court (EDMich) in ACLU v. NSA. He said "it was a terrible opinion". See, transcript.

Bush said this. "It's like the other day I was critical of those who heralded the federal judge's opinion about the terrorist surveillance program. I thought it was a terrible opinion, and that's why we're appealing it. And I have no -- look, I understand how democracy works: quite a little bit of criticism in it, which is fine; that's fine, it's part of the process. But I have every right, as do my administration, to make it clear what the consequences would be of policy, and if we think somebody is wrong or doesn't see the world the way it is, we'll continue to point that out to people."

He continued that "those who heralded the decision not to give law enforcement the tools necessary to protect the American people simply don't see the world the way we do. They see, maybe these are kind of isolated incidents. These aren't isolated incidents, they're tied together. There is a global war going on. And somebody said, well, this is law enforcement. No, this isn't law enforcement, in my judgment. Law enforcement means kind of a simple, singular response to the problem. This is a global war on terror. We're facing extremists that believe something, and they want to achieve objectives."

He concluded that Washington DC is "an amazing town", because people in Washington state both "you can't have the tools necessary ... to defend the people" and "how come you don't have the tools necessary to defend the people?" He said "that's the way we think around this town".

People and Appointments

8/22. Michael Petricone was promoted to Senior Vice President, Government Affairs, of the Consumer Electronic Association (CEA). See, CEA release.

8/21. Alan Durell was appointed Economic Fellow in the Securities and Exchange Commission's (SEC) Office of Economic Analysis, for a term ending in June of 2007. See, SEC release.

Washington Tech Calendar
New items are highlighted in red.
Tuesday, August 22

The House will next meet at 2:00 PM on Wednesday, September 6. See, Republican Whip Notice.

The Senate will next meet at 11:00 AM on Tuesday, September 5.

8:30 AM - 4:30 PM. The U.S.-China Economic and Security Review Commission. will hold a hearing titled "China's Financial System and Monetary Policies: The Impact on U.S. Exchange Rates, Capital Markets, and Interest Rates''. See, notice in the Federal Register, August 15, 2006, Vol. 71, No. 157, at Pages 46978-46979. Location: Room 385, Russell Senate Office Building, Capitol Hill.

9:00 PM EDT and 7:00 PM MDT. Sumner Redstone (Viacom and CBS) will speak at the Progress and Freedom Foundation's (PFF) conference titled "Aspen Summit" in Aspen, Colorado. His speech will be webcast. See also, agenda for the three day conference in the Calendar of Events Outside of the Washington DC Area.

Deadline to submit comments to the U.S. Patent and Trademark Office (USPTO) regarding its "modified plan to remove the paper search collection of marks that include design elements from the USPTO's Trademark Search Facility and replace them with electronic documents. The USPTO has determined that the paper search collection is no longer necessary due to the availability and reliability of the USPTO's electronic search system." See, notice in the Federal Register, June 23, 2006, Vol. 71, No. 121, at Pages 36065-36068.

Wednesday, August 23

8:30 AM - 2:30 PM. The American Electronics Association (AeA) will host an event titled "AeA Annual Government - Industry Executive Interchange". See, notice. Prices to attend range from $195-$295. Location: The Spy Museum, 800 F St., NW.

9:30 AM - 4:30 PM. Day one of a two day meeting of the U.S.-China Economic and Security Review Commission to consider drafts of material for the 2006 Annual Report. The agenda includes discussion of export controls and China's WTO compliance. See, notice in the Federal Register, August 16, 2006, Vol. 71, No. 158, at Page 47328. Location: Conference Room 381, Hall of The States, 444 North Capitol St., NW.

12:00 NOON - 3:00 PM. The DC Bar Association will host a panel discussion titled "DR-CAFTA: The United States-Dominican Republic-Central America Free Trade Agreement A Roundtable with the Ambassadors". The speakers will include ambassadors to the U.S. from Dominican Republic, Guatemala, Honduras, Nicaragua, El Salvador, and Costa Rica. The price to attend ranges from $15-40. For more information, call 202-626-3488. See, notice. Location: Arnold & Porter, 555 12th St., NW.

1:30 - 3:30 PM. The Department of State will host a meeting to hear public views on issues related to the possible expansion of the mandate of the International Mobile Satellite Organization (IMSO) to include new oversight and regulatory responsibilities that may affect U.S. and non-U.S. mobile satellite services providers. See, notice in the Federal Register, August 10, 2006, Vol. 71, No. 154, at Pages 45897-45898. Location: Harry S. Truman building, 2201 C St., NW.

CANCELLED. Federal Communications Commission (FCC) Auction 67 is scheduled to begin. This is the 400 MHz Air-Ground Radiotelephone Service auction. See, FCC notice of cancellation [PDF] and notice of cancellation in the Federal Register, May 17, 2006, Vol. 71, No. 95, at Page 28695.

Thursday, August 24

9:30 AM - 4:30 PM. Day two of a two day meeting of the U.S.-China Economic and Security Review Commission to consider drafts of material for the 2006 Annual Report. The agenda includes discussion of export controls and China's WTO compliance. See, notice in the Federal Register, August 16, 2006, Vol. 71, No. 158, at Page 47328. Location: Conference Room 381, Hall of The States, 444 North Capitol St., NW.

Friday, August 25

Deadline to submit comments to the National Institute of Standards and Technology's (NIST) Computer Security Division regarding its draft [159 pages in PDF] of Special Publication 800-53, Revision 1 (Second Public Draft), titled "Recommended Security Controls for Federal Information Systems".

Monday, August 28

Deadline to submit comments to the Department of Homeland Security (DHS) regarding its proposed rule changes that would amend its United States Visitor and Immigrant Status Indicator Technology (US-VISIT) rules to extend US-VISIT requirements to all aliens with the exception of aliens who are specifically exempted and Canadian citizens applying for admission as B1/B2 visitors for business or pleasure. See, notice in the Federal Register, July 27, 2006, Vol. 71, No. 144, at Pages 42605-42611.

Deadline to submit nominations of individuals for appointment to the National Institute of Standards and Technology's (NIST) Visiting Committee on Advanced Technology (VCAT). See, notice in the Federal Register, August 11, 2006, Vol. 71, No. 155, at Pages 46199-46200.

Tuesday, August 29

LOCATION CHANGE. 10:00 AM. The Internal Revenue Service (IRS) will hold a hearing regarding its notice of proposed rule making pertaining to the application of 26 U.S.C. § 199, which provides a deduction for income attributable to domestic production activities, to certain transactions involving computer software. See, notice in the Federal Register, June 1, 2006, Vol. 71, No. 105, at Pages 31128-31129, and notice in the Federal Register, July 31, 2006, Vol. 71, No. 146, at Page 43085. Location: IRS Auditorium (New Carrollton location), 5000 Ellin Road, Lanham, MD.

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