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June 27, 2007, Alert No. 1,602.
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FTC Report on Broadband Policy Cautions Against Network Neutrality Mandate

6/27. The Federal Trade Commission (FTC) released a report [170 pages in PDF] titled "Broadband Connectivity Competition Policy". See also, FTC release.

It finds that "There is evidence that the broadband Internet access industry is moving in the direction of more, not less, competition, including fast growth, declining prices for higher-quality service, and the current market-leading technology (i.e., cable modem) losing share to the more recently deregulated major alternative (i.e., DSL). We nonetheless recognize that not every local broadband market in the United States may enjoy vigorous competition."

It recommends that "policy makers proceed with caution in evaluating proposals to enact regulation in the area of broadband Internet access. The primary reason for caution is simply that we do not know what the net effects of potential conduct by broadband providers will be on all consumers, including, among other things, the prices that consumers may pay for Internet access, the quality of Internet access and other services that will be offered, and the choices of content and applications that may be available to consumers in the marketplace."

It continues that "With respect to data discrimination, broadband providers have conflicting incentives relating to blockage of and discrimination against data from non-affiliated providers of content and applications. In the abstract, it is impossible to know which of these incentives would prove stronger for each broadband provider. Further, even assuming such discrimination were to take place, it is unknown whether the net effect on consumer welfare would be adverse. Likewise, it is not possible to know in the abstract whether allowing content and applications providers to pay broadband providers for prioritized data transmission will be beneficial or harmful to consumers."

The report adds that "Policy makers also should carefully consider the potentially adverse and unintended effects of regulation in the area of broadband Internet access before enacting any such regulation. Industry-wide regulatory schemes -- particularly those imposing general, one-size-fits-all restraints on business conduct – may well have adverse effects on consumer welfare, despite the good intentions of their proponents."

FTC Commissioner Jonathan Liebowitz wrote in a concurring statement [3 pages in PDF] that "There is a real reason to fear that, without additional protections, some broadband companies may have strong financial incentives to restrict access to content and applications."

He wrote, citing the FCC's Madison River proceeding, that "a broadband provider with monopoly power in a local market might use that power to block or degrade some applications or content that compete with applications or content the broadband company itself provides."

Groups that represent providers of broadband access services praised the FTC report.

Steve Largent, head of the CTIA -- The Wireless Association, stated in a release that "The Internet regulation scheme has forever been built on a hypothetical, ``what-if´´ scenario and today this flimsy theory has met yet another round of cold, hard, real-world facts that render it unworthy of our nation’s attention and resources."

Walter McCormick, head of the USTelecom, stated in a release that "The FTC found what consumers already know – that they have a variety of competitive choices from cable, DSL, wireless, satellite and other alternative providers for high-speed Internet services, and there is no problem that requires regulation of the Internet. We applaud the FTC’s thorough analysis and appreciate its commitment to ensuring that consumers continue to have access to a robust marketplace.”

Kyle McSlarrow, head of the National Cable & Telecommunications Association (NCTA), praised the report in a release.

Advocates of network neutrality mandates criticized the FTC report.

Gigi Sohn, head of the Public Knowledge, stated in a release that "the report falls far short in its analysis of a competitive market and the related issue of Net Neutrality. Despite the fervent wishes of the FTC staff, there is not a competitive market for high-speed Internet services. New technologies, particularly wireless technologies, are not soon going to have the same robust qualities or market penetration as the duopoly cable and telephone-company services."

Derek Turner of the Free Press stated in a release that "The same phone and cable companies whose anti-competitive policies created this sorry situation are now proposing to become gatekeepers over Internet content and services. But the FTC seems content to stand on the sidelines."

Turner added that "The FTC has an explicit duty to protect consumers. Yet this study includes no empirical research on competition in the local broadband market. They simply take the incumbents at their word that the U.S. broadband marketplace is competitive -- even though most U.S. consumers have at best two choices for broadband at home. The phone and cable companies have a tremendous incentive to favor their own applications and content at the expense of their competitors. In fact, that's exactly what their top executives have announced they plan to do."

AG Gonzales Discusses International IP Enforcement

6/27. Attorney General Alberto Gonzales gave a speech in Seattle, Washington, regarding government enforcement of intellectual property laws.

He said that the Department of Justice (DOJ) is "committed more than ever before to aggressively enforcing the law in this area and to advocating for stronger legal protections from Congress for American entrepreneurs and their products".

The DOJ submitted draft legislation [29 pages in PDF] titled "Intellectual Property Protection Act of 2007" to the Congress on May 14, 2007. See also, DOJ summary of Gonzales' May 14, 2007,  speech to the U.S. Chamber of Commerce regarding intellectual property protection and this draft bill.

Alberto GonzalesGonzales (at right) continued that "We must strengthen our global law enforcement efforts, ensure strong intellectual property laws, increase resources devoted to IP law enforcement, and work to increase the number of international operations we conduct jointly with other countries."

He noted that "in 2006, we convicted 57 percent more defendants for criminal copyright and trademark offenses than in 2005. Of those convictions, the number of defendants receiving prison terms of more than two years increased even more sharply -- up 130 percent."

He also said that "when I travel abroad and meet with my counterparts in other countries, I make sure to include IP crimes in the discussion. Just last month, at a meeting of G8 Justice and Home Affairs ministers in Germany, my counterparts and I adopted a set of principles to enhance international cooperation in fighting IP crime, and we'll continue this work over the coming year."

Gonzales also touched on investigation and prosecution of cyber crimes, including the use of botnets.

ITIF Releases Report on IT Related Unfair Trade Practices

6/21. The Information Technology and Innovation Foundation (ITIF) released a report [41 pages in PDF] titled "The Rise of the New Mercantilists: Unfair Trade Practices in the Innovation Economy". The authors are the ITIF's Robert Atkinson and Julie Hedlund. See also, summary.

The report states that "many nations" are "erecting a whole host of unfair and protectionist policies focused on systematically disadvantaging foreign, including U.S., companies in global competition". These protectionist policies include "raising the relative price of foreign IT products and services by applying tariffs, taxes, subsidies, and excessive antitrust enforcement; acquiring foreign IT products and services without paying for them through digital theft and forcing U.S. companies to give up their intellectual property; and/or blocking or limiting access of foreign companies to markets through standards, government procurement, data privacy and other policies."

The report offers several recommendations. First, it states that most of these nations are members of the World Trade Organization (WTO). Hence, it argues that the "administration should vigorously and unequivocally enforce other nations' IT trade commitments under the WTO."

It also recommends that the Congress increase the appropriation for the Office of the U.S. Trade Representative (OUSTR), and that the OUSTR "should include the elimination of IT-based trade distortions among several important priorities when negotiating new bilateral trade agreements".

It also suggests that "Congress should encourage companies to build WTO cases by allowing them to take a 25 percent tax credit for expenditures related to bringing WTO cases".

The report also identifies some of the major IT protectionists, and their practices. It lists rampant intellectual property theft in the People's Republic of China (PRC) and Russia. It also states that the PRC "Developed a wireless encryption standard (the Wireless Local Area Network Authentication and Privacy Infrastructure (WAPI) standard) without international collaboration in order to limit foreign IT companies’ access to its market and give its domestic companies a competitive advantage."  (Parentheses in original.)

It also states that Korea unfairly subsidizes Hynix Semiconductor Inc., and that it "forced Microsoft to develop two different versions of its Windows software in order to give domestic producers of media players a competitive advantage".

It also states that France uses "copyright law to force U.S. companies to make their copyright software protection (digital rights management) interoperable". (Parentheses in original.)

People and Appointments

6/28. President Bush nominated Admiral Mike Mullen to be the next Chairman of the Joint Chiefs of Staff, and General James Cartwright to be the next Vice Chairman of the Joint Chiefs of Staff. See, transcript of White House ceremony.

6/28. President Bush nominated Reed O'Connor to be a Judge of the U.S. District Court for the Northern District of Texas. O'Connor is a federal prosecutor. See, White House release and release of Sen. Jon Cornyn (R-TX) and Sen. Kay Hutchison (R-TX).

6/21. President Bush announced his intent to appoint Susan Allen, Ching-Wu Chu, Darleane Hoffman, Linda Katehi, and Rodney Brown to be members of the President's Committee on the National Medal of Science. All appointments are for a three year term expiring on December 31, 2009, except Brown, who would be appointed for the remainder of a three year term expiring on December 31, 2007, and for a three year term expiring on December 31, 2010. See, White House release.

More News

6/28. The U.S. Patent and Trademark Office (USPTO) published a notice in the Federal Register that announces that "upon the completion of development and testing of its new redundant design coding system,
but no earlier than sixty (60) days from the date of this Notice, the USPTO will: (1) Begin coding with the new coding system all new registrations of marks that include design elements; (2) stop adding design coded registrations to the paper search collection; and (3) begin microfilming the paper search collection of registered marks that include design elements. When microfilming is complete, the USPTO will remove the paper search collection of registered marks that include design elements. The microform collection will be available to the public in the Public Search Facility at 600 Dulany Street, Alexandria, Virginia. This will ensure that all information currently available in the paper search collection remains available to the public." See, Federal Register, June 28, 2007, Vol. 72, No. 124, at Pages 35429-35432.

6/27. The Department of Justice (DOJ) announced in a release that Citizens Communications "has agreed to remove restrictive terms from settlement agreements that Commonwealth Telephone Enterprises had previously entered into with two cable companies in Pennsylvania, Blue Ridge and Service Electric, in order to alleviate antitrust concerns raised" by the DOJ.

6/26. The U.S. District Court (DC) issued a Memorandum Opinion [PDF] in U.S. v. SBC and AT&T and U.S. v. Verizon and MCI, denying COMPTEL's and Michael Lovern's motions to intervene for the purpose of appealing the District Court's final judgment in the Tunney Act proceedings related the the merger of SBC and AT&T and the merger of Verizon and MCI. These cases are U.S. v. SBC Communications, Inc. and AT&T Corp., D.C. No. 05-2102, and U.S. v. Verizon Communications, Inc. and MCI, Inc., D.C. No. 05-2103, U.S. District Court for the District of Columbia, Judge Emmet Sullivan presiding.

6/25. The U.S. Court of Appeals (FedCir) issued its opinion [10 pages in PDF] in Microstrategy v. Business Objects, affirming the District Court's summary judgment of noninfringement and invalidity. This case pertains to business intelligence software that retrieves, organizes, and analyzes data stored in large databases to assist users making business decisions. This case is Microstrategy, Inc. v. Business Objects Americas, U.S. Court of Appeals for the Federal Circuit, App. Ct. No. 2006-1320, an appeal from the U.S. District Court for the District of Delaware, Judge Kent Jordan presiding.

6/23. Federal Reserve Board (FRB) Governor Frederic Mishkin gave a speech at Duke University in Durham, North Carolina, on June 23, 2007, titled "Globalization and Financial Development", in which he advocated free trade in goods and services, including the opening of financial markets. He stated that "Wealth is not something that can be attained by remaining closed off to the rest of the world. Poorer countries would do better by embracing globalization -- that is, opening their financial markets and their markets for goods and services to other nations so that funds, goods, and, often, the ideas that accompany them can flow in."

Washington Tech Calendar
New items are highlighted in red.
Thursday, June 28

The House will meet at 10:00 AM for legislative business. See, Rep. Hoyer's weekly calendar [PDF].

The Senate will meet at 9:30 AM. It will resume consideration of S 1639 [LOC | WW], a bill related to immigration and other matters.

9:30 AM - 12:00 NOON. The Center for Public Integrity (CPI) and Progress & Freedom Foundation (PFF) will host an event titled "Conference on Broadband Statistics". The first panel is titled "What Do We Know About Availability and Use of Broadband in the United States?". The speakers will be Joseph Waz (Comcast), Derek Turner (Free Press), Robert Atkinson (Information Technology & Innovation Foundation), John Horrigan (Pew Internet & American Life Project), Kenneth Flamm (University of Texas at Austin), and Dennis Weller (Verizon Communications). The moderator will be Drew Clark (CIP). The second panel is titled "What Kinds of Broadband Data Collection Policies Should the U.S. Employ?" The speakers will be Beth Shiroishi (AT&T), Mark Lloyd (Center for American Progress), Drew Clark (CPI), Laura Taylor (ConnectKentucky), Clair Kaye (Cumberland Internet Inc.), and Colin Crowell (office of Rep. Ed Markey (D-MA)). The moderator will be Scott Wallsten (PFF). For more information, contact Steve Carpinelli (CPI) at 202-481-1225 or Brooke Glass (PFF) at 202-969-2952. Location: National Academy of Sciences, 2100 C St., NW.

10:00 AM. The Senate Judiciary Committee (SJC) may hold an executive business meeting. The agenda again includes consideration of S 1145 [PDF | LOC | WW], the "Patent Reform Act of 2007". The SJC rarely follows its published agenda. See, notice. Location: Room 226, Dirksen Building.

10:00 AM. The House Small Business Committee will hold a hearing titled "Assessing the Impact of the Copyright Royalty Board Decision to Increase Royalty Rates on Recording Artists and Small Webcasters". For more information, contact Kate Gilman or Austin Bonner at 202-225-4038. Location: Room 2360, Rayburn Building.

12:15 - 1:30 PM. The Federal Communications Bar Association's (FCBA) Wireless Committee will host a lunch titled "CPNI Compliance". The speakers will be Bennett Ross (Wiley Rein), Marcus Maher (Associate Bureau Chief of the FCC's Wireline Competition Bureau), and Melissa Ngo (EPIC). See, notice [PDF]. Reservations and cancellations are due by 12:00 NOON on June 26. Location: Latham & Watkins, 10th floor, 555 11th St., NW.

1:00 PM. The Fiber to the Home Council (FTTH) will host a web seminar titled "Content and the Future of Broadband".

6:00 - 8:00 PM. The DC Bar Association will host a panel discussion titled "Meet the FTC and FCC Legal Advisors". See, notice. For more information, call 202-626-3463. The price to attend ranges from $10-$15. Location: City Club of Washington at Franklin, 1300 I St., NW, McPherson Square.

Friday, June 29

The House will meet at 9:00 AM for legislative business. See, Rep. Hoyer's weekly calendar [PDF].

9:30 AM. Subcommittees of the House Foreign Affairs Committee and the House Education and Labor Committee will hold a hearing titled "International Students and Visiting Scholars: Trends, Barriers, and Implications for American Universities and U.S. Foreign Policy". See, notice. Location: Room 2172, Rayburn Building.

Saturday, June 30

Trade promotion authority expires.

Sunday, July 1

Opening date for sending a Notice of Internet Availability of Proxy Materials to shareholders. See, the Securities and Exchange Commission's (SEC) rule [119 pages in PDF] regarding voluntary internet availability of proxy materials. See also, notice in the Federal Register, January 29, 2007, Vol. 72, No. 18, at Pages 4147-4173. And see, story titled "SEC Adopts E-Proxy Rule Changes" in TLJ Daily E-Mail Alert No. 1,506, December 15, 2006.

Monday, July 2

The House will not meet on July 2-6 due to the Independence Day District Work Period. See, House 2007 calendar.

The Senate will not meet on July 2-6 due to the Independence Day District Work Period. See, Senate 2007 calendar.

11:00 AM. The Heritage Foundation will host an event titled "Irrational Politics: What's Happening to Free Trade?". See, notice. Location: Heritage, 214 Massachusetts Ave,  NE.

Deadline to submit initial comments to the Copyright Office (CO) in response to its Notice of Inquiry (NOI) regarding the operation of, and continued necessity for, the cable and satellite statutory licenses under the Copyright Act.. See, notice in the Federal Register, April 16, 2007, Vol. 72, No. 72, at Pages 19039-19055. See also, technical correction notice in the Federal Register, April 24, 2007, Vol. 72, No. 78, at Page 20374.

Deadline for those persons who are scheduled to testify at the Copyright Office's (CO) hearings on July 23 through July 26, 2007, regarding the operation of, and continued necessity for, the cable and satellite statutory licenses to submit to the CO copies of their prepared testimony. See, notice in the Federal Register, May 23, 2007, Vol. 72, No. 99, at Pages 28998-29000.

Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its request for comments updating its record on the Center for the Study of Commercialism's (CSC) Petition for Reconsideration regarding stations that air home shopping programming and their status. See, notice in the Federal Register, May 17, 2007, Vol. 72, No. 95, at Pages 27811-27813.

Wednesday, July 4

Independence Day.

The Federal Communications Commission (FCC) and other federal offices will be closed. See, Office of Personnel Management's (OPM) list of federal holidays and 5 U.S.C. § 6103.

Friday, July 6

Deadline to submit comments to the National Institute of Standards and Technology's (NIST) Computer Security Division (CSD) regarding its Draft Special Publication 800-44 Version 2 [PDF] titled "Guidelines on Securing Public Web Servers".

Effective date of the rules changes contained in the Federal Communications Commission's (FCC) Memorandum Opinion and Order [PDF] in its proceeding titled "In the Matter of Facilitating Opportunities for Flexible, Efficient, and Reliable Spectrum Use Employing Cognitive Radio Technologies". This item responds to two petitions for reconsideration of the FCC's 2005 cognitive radio report and order submitted by Cisco Systems and Marcus Spectrum Solutions. This item is FCC 07-66 in ET Docket No. 03-108. See also, notice in the Federal Register, June 6, 2007, Vol. 72, No. 108, at Pages 31190-31192.

Monday, July 9

There will be no votes in the House.

8:30 AM - 12:00 NOON. The Electronic Transaction Association (ETA) will host an event titled "Second Annual ETA Payments Education and Discussion Forum". The ETA states that this event "is designed to provide Congressional staff, regulators, and law enforcement with a working knowledge of the acquiring side of the electronic payments business. Topics will include an overview of the roles/responsibilities of entities in the payments system; the components of an electronic transaction; and industry efforts to protect cardholder data." See, notice [PDF] and program agenda [PDF]. For more information, and to RSVP, contact Rob Drozdowski at 202-828-2635 x203 or rob dot drozdowski at electran dot org. A continental breakfast will be served. There is no charge. Location: Columbus Room, Union Station.

10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in SRI International v. Internet Security, App. Ct. No. 2007-1065, a patent infringement case. Location: Courtroom 201, 717 Madison Place, NW.

10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Cybersettle v. National Arbitration Forum, App. Ct. No. 2007-1092, a patent infringement case. Location: Courtroom 203, 717 Madison Place, NW.

2:00 PM. The U.S. Court of Appeals (FedCir) will hear oral argument in Dolby Labs v. Lucent Technologies, App. Ct. No. 2006-1583, a patent infringement case. Location: Courtroom 201, 717 Madison Place, NW.

2:00 - 3:30 PM. The U.S. Chamber of Commerce's Coalition Against Counterfeiting and Piracy (CACP) will meet. For more information, contact counterfeiting at uschamber dot com or 202-463-5500. Location: U.S. Chamber, 1615 H St., NW.

Deadline to submit petitions to deny and initial comments to the Federal Communications Commission (FCC) regarding its review of the proposed merger of XM Satellite Radio Holdings and Sirius Satellite Radio. See, Public Notice [5 pages in PDF] (DA 07-2417).

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