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November 19, 2007, Alert No. 1,677.
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House Republicans Urge FCC Not to Expand Cable Regulation

11/20. Rep. Joe Barton (R-TX) and 22 other House Republicans signed a letter [5 pages in PDF] to the five Commissioners of the Federal Communications Commission (FCC) urging the FCC not to impose expanded regulatory mandates on the cable industry.

They wrote that "We are writing in regard to reports that the Commission may be contemplating expanded mandates on the cable industry, such as government-mandated a la carte, multicast must-carry rules, new program carriage requirements, rate regulation of leased access, invasive interactive set-top box obligations, and a judicially questioned cable ownership cap."

They continued that "Press stories have also indicated that the Commission may try to invoke authority over the cable industry pursuant to an excessively broad reading of the ``70/70´´ provision of the 1984 Cable Act."

They argued that "Such actions are unsupported by the record of significant competition in the video programming marketplace, and would be harmful to innovation and consumers."

The signers of the letter are all members of the House Commerce Committee (HCC). The copy of the letter published in the HCC web site on Tuesday morning, November 20, does not include either Rep. Heather Wilson (R-NM), Rep. Chip Pickering (R-MS), or Rep. Fred Upton (R-MI). The House is in recess.

NCTA Writes to FCC Regarding 70/70 Test

11/14. Kyle McSlarrow, head of the National Cable & Telecommunications Association (NCTA) sent a letter to the five Commissioners of the Federal Communications Commission (FCC) regarding the 70/70 test in Section 612(g) of the Communications Act.

Section 612 of the Communications Act, as amended, is codified at 47 U.S.C. § 532. Subsection 532(g) provides, in full, that "Notwithstanding sections 541 (c) and 543 (a) of this title, at such time as cable systems with 36 or more activated channels are available to 70 percent of households within the United States and are subscribed to by 70 percent of the households to which such systems are available, the Commission may promulgate any additional rules necessary to provide diversity of information sources. Any rules promulgated by the Commission pursuant to this subsection shall not preempt authority expressly granted to franchising authorities under this subchapter."

Kyle McSlarrowMcSlarrow (at right) wrote that "According to recent press reports, the Commission is currently considering adopting a finding, in the 13th Annual Report on Video Competition, that the so-called ``70/70´´ test in Section 612(g) of the Communications Act has been met and using that finding to assert broad new authority to reregulate the cable industry. Putting aside the dubious practice of policymaking by press leaks of supposedly confidential FCC documents, the press reports underscore a recurring, disturbing pattern of attempts to set policies that harm consumers."

He asserted that "important factual inquiries are subject to sudden, inexplicable shifts in the FCC's methodology and conclusions".

He elaborated that "rather than reading a statutory grant of authority with an eye toward obvious legislative intent, the broadest conceivable reading -- straining credulity -- is made to maximize the Commission’s apparent authority. In this case, rather than limiting the effect of the 70/70 test to issues involving leased access, as Congress plainly intended, the Commission is to be asked to conclude that a statutory provision embedded in the 1984 Cable Act (when there was substantially less competition) is now authority for a roving mandate to completely reorder the video marketplace according to . . . whom exactly? Certainly not Congress." (Parentheses in original.)

He argued that "there is the relentless drive for more regulation and more government micromanagement without looking at what is actually happening in the marketplace. In this case, instead of just simply thinking through the obvious facts that the marketplace is more competitive than ever, more diverse than ever, and provides more services and more value than ever, the Commission is to be asked to endorse a false view of the video marketplace. That fictional view is even more astonishing because it ignores the reality that the marketplace consists of robust competition among cable, telephone, and satellite video providers, all of whom deliver hundreds of channels of programming."

"Only the Warren data show a penetration figure anywhere near – though still comfortably below – the 70% threshold. But the Warren data are obviously wrong in one important respect. Warren estimates 93 million homes passed by cable. According to public filings, however, the five largest cable operators alone passed nearly 100 million homes, as of June 2007." He added that "it is clear that the 70% penetration threshold has not been met. And in light of the steady growth of cable’s competitors in the video marketplace and the continued decrease in cable’s share of multi-channel video subscribers, it seems highly unlikely it ever will be."

(Also on November 14, FCC Commissioners Deborah Tate and Robert McDowell sent a letter [PDF] to Warren Communications regarding the 70% threshold.)

"The 70/70 test relates only to leased access. Not to cable ownership, not to program access, not to rate regulation, not to wholesale or retail bundling or packaging of cable programming -- not to anything else", wrote McSlarrow.

McSlarrow concluded that "Manipulating data to justify an unsupportable interpretation of regulatory authority does a serious disservice to consumers at a time when the FCC actually has many other important duties it is clearly bound to perform. Real damage is done to the administrative system, and unnecessary litigation is generated, when agency fact-finding and policymaking are conducted in this way."

The relevant FCC proceeding is titled "Annual Assessment of the Status of Competition in the Market for theDelivery of Video Programming" and numbered MB Docket No. 06-189.

McSlarrow wrote in a separate statement that "The reality is that tens of millions of Americans today are saving tens of billions of dollars each year by purchasing video, data and voice services from cable. By contrast, the proposals made by the Chairman for an a la carte mandate and other intrusive regulation will raise prices and reduce programming diversity according to every single credible study. Chairman Martin’s various ``leased access´´ and ``must-carry´´ proposals amount to a bandwidth grab that will limit available channel space for new programmers and new services."

The FCC's next scheduled meeting is on Tuesday, November 27, 2007.

FCC Releases Order Approving AT&T Dobson Merger

11/19. The Federal Communications Commission (FCC) released its Memorandum Opinion and Order [59 pages in PDF] approving the merger of AT&T and Dobson Communications, subject to conditions. The Department of Justice (DOJ), which possess statutory antitrust merger review authority, has already approved the merger.

The FCC approved the transfer of licenses associated with AT&T's acquisition of Dobson Communications, subject to divestitures in several local markets, and other conditions. The FCC also uses this order to announce a revision to its method of analyzing wireless mergers. It will include the 700 MHz spectrum in the initial spectrum screen.

This order imposes an "interim cap" on high cost competitive Eligible Telecommunications Carrier (ETC) support, which "like the cap established as a condition of the ALLTEL-Atlantis transaction, is based on AT&T and Dobson's level of competitive ETC support as of June 2007".

However, this is subject to an exception. "AT&T and Dobson will not be subject to the interim cap condition to the extent AT&T and Dobson (1) file cost data showing their own per-line costs of providing service in a supported service area upon which their high cost universal service support would be based, and (2) demonstrate that their networks are in compliance with section 20.18(h) of the Commission’s rules specifying E911 location accuracy as measured at a geographical level defined by the coverage area of each Public Safety Answering Point (PSAP)."

See also, story titled "FCC Imposes Universal Service and E911 Location Accuracy Requirements on Alltel" in TLJ Daily E-Mail Alert No. 1,669, November 5, 2007.

This order follows the analysis applied by the FCC in other wireless mergers. It treats the product market as "mobile telephony services" and the geographic markets as local markets. This order does not consider competition between wireless and wireline services.

In addition, this order adds that "we no longer limit our examination to spectrum in the cellular, SMR, and broadband PCS bands. Instead, we update our analysis to include 700 MHz spectrum in the initial spectrum screen given its availability and suitability on a nationwide basis for the provision of mobile telephony services."

It continues that "As a result, our initial spectrum screen for the proposed transaction is 95 MHz, rather than 70 MHz that we previously have used. In addition, while we decide it is premature to include AWS-1 (1710-1755 MHz and 2110-2155 MHz) and Broadband Radio Service (``BRS´´) spectrum in the initial screen, we will consider such spectrum in our case-by-case analyses to the extent such spectrum is available in any local market not eliminated by our screen." (Parentheses in original.)

Commissioner Robert McDowell wrote in a statement [PDF] that "While it is certainly important that we update our analytical tools from time to time, this action is decidedly premature and introduces an unnecessary level of complexity into the Commission's market analyses. I also wonder how the new framework will affect participation in the forthcoming auction of 700 MHz spectrum."

He added that "The fact is that the capabilities of the 700 MHz band spectrum are irrelevant until the band is licensed, cleared of incumbent users, built out, and used to provide services to America’s consumers. Moreover, I wonder whether the distinctions for the purposes of this market screen between the cellular, PCS, SMR, 700 MHz, AWS-1 and BRS spectrum bands are still necessary or appropriate."

Commissioner Michael Copps wrote in his statement that this "radically inflates the screen to 95 megahertz -- in essence, finding that there is nothing per se problematic from a competitive standpoint with a single entity holding up to 94 megahertz of spectrum in a given market. This sets a truly dangerous precedent." He too added that the 700 MHz auction has yet to occur, the winning bidders are not known, and equipment is not yet available.

Michael CoppsCopps (at right) also complained that "Since the Commission's short-sighted decision a few years ago to eliminate the CMRS spectrum aggregation limit, we have seen a wave of consolidation among wireless incumbents and a general drawing down on the storehouse of wireless competition that industry investment and wise FCC policy throughout the 1990s created. I continue to have concerns about ever-increasing concentration in the wireless sector."

Commissioner Jonathan Adelstein wrote in his statement that "we do not know what the complete impact of the 700 MHz auction will be, how that spectrum will be distributed and whether any single party, including the acquiring party in this proceeding, might get a disproportionate share of the spectrum. For these reasons, I am unable to fully support this aspect of the item."

This MO&O is FCC 07-196 in WT Docket No. 07-153.

4th Circuit Affirms Dismissal of Go's Antitrust Action Against Microsoft

11/19. The U.S. Court of Appeals (4thCir) issued its opinion [15 pages in PDF] in Go Computer v. Microsoft, affirming the judgment of the District Court, which dismissed the antitrust complaint as barred by the statute of limitations.

Go Computer, Inc. and Jerrold Kaplan filed a complaint in U.S. District Court (DMd) in 2005 against Microsoft alleging violation of federal antitrust laws. The District Court dismissed the complaint. The statute of limitations on federal antitrust actions is four years. See, 15 U.S.C. § 15b. Yet, the alleged injuries to Go occurred in the early 1990s.

Kaplan founded a company named Go Computer, Inc. back in 1987 to produce a handheld computer with a touch screen and an operating system named PenPoint. See, Wikipedia entry for PenPoint.

The complaint alleges that Microsoft engaged in anticompetitive conduct by pressuring Intel and OEMs not to cooperate with Go, and by stealing its trade secrets.

Go ceased operations in January of 1994. It transferred its assets to EO Corporation, which ceased operations in July of 1994, when its main shareholder, AT&T, ended its funding. EO was dissolved in 1997. Its assets were transferred to Lucent Technologies, now Alcatel-Lucent, which still owns PenPoint.

Kaplan founded another company named Go Computer, Inc. in 2005. It acquired from Lucent an assignment of its antitrust claims, pursuant to a judgment splitting agreement. Kaplan and Go then filed the present action.

Kaplan and Go asserted a series of arguments which taken together would extend the deadline for filing suit from four to eleven years. The District Court rejected the arguments, and the Court of Appeals affirmed.

The Court of Appeals wrote that an antitrust action accrues, and the limitation period begins to run, when the injury takes place. The last alleged injury took place in 1994.

The Court wrote that Go was on notice as of 1992, and decided not to litigate for business and strategic reasons.

Go raised the argument of fraudulent concealment, based in part on a letter from Microsoft's Bill Gates asserting that Microsoft had not engaged in any wrongdoing. The Court wrote that "wrongdoing is not a straightforward matter of fact, and it is not fraud to deny it."

This case is Go Computer, Inc. and Jerrold Kaplan v. Microsoft Corporation, U.S. Court of Appeals for the 4th Circuit, App. Ct. No. 06-2278, an appeal from the U.S. District Court for the District of Maryland, at Baltimore, D.C. No. 1:00-md-01332-JFM, Judge Frederick Motz presiding. Judge Harvey Wilkinson wrote the opinion of the Court of Appeals, in which Judge T.S. Ellis joined. Judge Hamilton wrote a concurring opinion.

Go Computer was represented by the law firm of Kellogg Huber. Microsoft was represented by the law firm of Sullivan & Cromwell.

Washington Tech Calendar
New items are highlighted in red.
Tuesday, November 20

The House will not meet.

The Senate will meet in pro forma session only.

9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in Robert Biggerstaff v. FCC, App. Ct. No. 06-1191, a petition for review of the FCC's unsolicited fax rules. See, FCC's brief [65 pages in PDF]. Judges Ginsburg, Rogers and Griffith will preside. Location: 333 Constitution Ave., NW.

1:00 PM. The Copyright Alliance will host telecast news conference to "announce a new initiative to raise awareness among presidential candidates and campaigns of issues important to the U.S. copyright sector". The dial-in number is 800-351-4894. The passcode is 75042. For more information, contact Gayle Osterberg at 202-669-0689 or gayle at 133publicaffairs dot com.

1:00 - 3:00 PM. The Architectural and Transportation Barriers Compliance Board's (ATBCB) Telecommunications and Electronic and Information Technology Advisory Committee will meet by teleconference. See, notice in the Federal Register, November 1, 2007, Vol. 72, No. 211, at Pages 61827-61828.

Thursday, November 22

Thanksgiving 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.

Monday, November 26

1:00 - 4:00 PM. Day one of a two day meeting to the Department of Transportation's (DOT) Intelligent Transportation Systems Program Advisory Committee (ITSPAC) See, notice in the Federal Register, November 13, 2007, Vol. 72, No. 218, at Pages 63956-63957. Location: DOT, Conference Room 6, Lobby Level, West Building, 1200 New Jersey Ave., SE.

Tuesday, November 27

The Federal Communications Commission (FCC) may hold an event titled "Open Meeting".

8:00 AM - 4:00 PM. Day two of a two day meeting to the Department of Transportation's (DOT) Intelligent Transportation Systems Program Advisory Committee (ITSPAC) See, notice in the Federal Register, November 13, 2007, Vol. 72, No. 218, at Pages 63956-63957. Location: DOT, Conference Room 6, Lobby Level, West Building, 1200 New Jersey Ave., SE.

8:30 AM - 5:00 PM. The Department of Homeland Security's (DHS) U.S. Citizenship and Immigration Services will hold a meeting regarding its E-Verify program, is an online tool for participating employers to seek information about the employment eligibility of new employees. See, notice in the Federal Register, Federal Register, November 7, 2007, Vol. 72, No. 215, at Pages 62863. Location: Washington Court Hotel, 525 New Jersey Ave., NW.

12:00 NOON - 2:00 PM. The DC Bar Association will host a panel discussion titled "Criminal, Regulatory and International Trade Approaches to the Internet Gambling Issue". The speakers will be Samuel Buffone (Ropes & Gray), Raul Herrera (Arnold & Porter), Frank Fahrenkopf (American Gaming Association), Kellie Larkin (Counsel to House Financial Services Committee), Bruce Zagaris (Berliner, Corcoran & Rowe). The price to attend ranges from free to $20. For more information, call 202-626-3488. See, notice. Location: Arnold & Porter, 555 12th St., NW.

12:00 NOON - 2:00 PM. The DC Bar Association will host a panel discussion titled "Privacy and Information Security: Emerging Issues for Businesses and Consumers". The speakers will be Robin Campbell (Crowell & Moring), Molly Crawford (FTC's Division of Privacy and Identity Protection), John Parmigiani, Robyn Diaz (MedStar Health), and Sondra Mills (DOJ's Office of Consumer Litigation). The price to attend ranges from $25 to $35. For more information, call 202-626-3463. See, notice. Location: DC Bar Conference Center, B-1 Level, 1250 H St., NW.

1:00 - 3:00 PM. The Architectural and Transportation Barriers Compliance Board's (ATBCB) Telecommunications and Electronic and Information Technology Advisory Committee will meet by teleconference. See, notice in the Federal Register, November 1, 2007, Vol. 72, No. 211, at Pages 61827-61828.

2:00 PM. Day one of a two day conference hosted by the American Enterprise Institute (AEI) titled "The History, Impact, and Future of Private Equity: Ownership, Governance, and Firm Performance". At 2:00 PM, Glenn Hubbard (Columbia Business School) will give a speech. At 2:15 PM, Josh Lerner (Harvard Business School) will give a speech titled "Private Equity, Venture Capital, and Modern Capital Markets". At 2:50 PM, there will be a panel titled "Private Equity’s History and Impact on Corporate Governance". The speakers will be Steven Kaplan (University of Chicago), Kenneth Lehn (University of Pittsburgh), John Chapman (AEI), and Alex Brill (AEI). At 4:15 PM, there will be a panel titled "Private Equity’s Impact: Productivity and Labor Market Effects". The speakers will be Steven Davis (University of Chicago), Douglas Cumming (York University), Donald Siegel (UC Riverside), and John Chapman (AEI). At 7:00 PM, Michael Jensen (Harvard Business School) will give the dinner speech. See, notice. Location: AEI, 1150 17th St., NW.

People and Appointments

11/19. Fran Townsend resigned as Assistant to the President for Homeland Security and Counterterrorism. See, White House release and statement by Michael Chertoff.

11/15. The Senate Judiciary Committee (SJC) approved in one unanimous voice vote, without debate, four judicial nominees: Joseph Laplante (to be a Judge of the U.S. District Court for the District of New Hampshire), Reed O'Connor (U.S.D.C., Northern District of Texas, Dallas Division), Thomas Schroeder (U.S.D.C., Middle District of North Carolina), and Amul Thapar (U.S.D.C., Eastern District of Kentucky).

More News

11/9. Securities and Exchange Commission (SEC) Commissioner Annette Nazareth gave a speech in Boca Raton, Florida. She stated, among other things, that "The telecommunications revolution has created a world in which borders have almost no relevance. After all, computers know nothing of borders -- and money flows without regard to geography. In a fully electronic trading world, one can appreciate the difficulty of maintaining high national standards in a borderless trading environment." She also stated that "Our securities regulatory regime has constrained, to some degree, the ability of our investors to access foreign markets and foreign securities seamlessly and cost effectively."

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