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Friday, August 24, 2012, Alert No. 2,436.
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FCC Approves Verizon Wireless SpectrumCo License Transfers

8/23. The Federal Communications Commission (FCC) released an order [88 pages in PDF] that approves multiple applications to transfer Advanced Wireless Services (AWS-1) licenses to Verizon Wireless, subject to data roaming and build out obligations. The order also asserts FCC authority to review agreements between the parties.

The FCC has statutory authority to review licenses transfers, under an undefined public interest standard. This matter does involve license transfers. Also, since shortly after passage of the Telecommunications Act of 1996, the FCC has leveraged its license review authority to also conduct antitrust reviews of mergers of license holding companies, as if it had statutory authority under the Clayton Act (15 U.S.C. § 18) to do so. However, this matter involves no merger. But, it does involve commercial agreements. The FCC in this matter leveraged its license review authority to conduct an antitrust review of these agreements, as if it had authority under Section 1 of the Sherman Act (15 U.S.C. § 1) to do so.

The order concludes, "The Commission has authority to review the Commercial Agreements and to impose conditions". This sets a precedent. (See, order at Paragraph 143.)

The Department of Justice's (DOJ) Antitrust Division approved these transactions last week. The DOJ and state of New York filed a complaint [19 pages in PDF] on August 16 in the U.S. District Court (DC) against Verizon, Verizon Wireless, Comcast, Time Warner Cable, Cox Communications, and Bright House Networks that alleges violation of Section 1 of the Sherman Act in connection with a series of agreements between Verizon and cable companies. But, the parties also simultaneously reached a settlement. See, story titled "DOJ Approves Verizon Cable Deals" and story titled "Genachowski Says FCC to Approve Verizon Cable Deals Subject to Concessions" in TLJ Daily E-Mail Alert No. 2,429, Wednesday, August 15.

In December of 2011 these companies entered into agreements, under which Verizon Wireless agreed to acquire unused Advanced Wireless Services (AWS) spectrum licenses from several cable companies, and Verizon and Verizon Wireless and cable companies agreed to market each other's services. The DOJ reviewed the entirety of the deals under its authority to enforce the Sherman Act. The FCC reviewed the license transfers, pursuant to statutory authority, and the associated agreements, without statutory authority.

The settlement with the DOJ provides that the cross marketing agreements are allowed, but must be amended, and be of limited duration -- four years. See, Stipulation and Order and proposed Final Judgment.

The FCC does not file lawsuits where is lacks statutory authority. Rather, it leverages it authority to review license transfers to extract concessions, and then announces its approval. In the present matter, it conditioned its approval upon commitments by Verizon Wireless to assume data roaming and build out obligations.

If the Court of Appeals overturns the FCC's data roaming rules, Verizon Wireless will still have data roaming obligations, under this order for five years.

Also, in order to obtain DOJ and FCC approvals, Verizon Wireless agreed to sell 700 MHz A and B block licenses to T-Mobile USA.

This FCC order approves the license transfers. One is the assignment of AWS-1 licenses held by Cox and SpectrumCo, which is a a joint venture among subsidiaries of Comcast, Time Warner Cable, and Bright House Networks, to Verizon Wireless. Another is a spectrum swap between Verizon Wireless and Leap. The third is a Verizon Wireless assignment of AWS-1 licenses to T-Mobile.

In its review of the agreements, the FCC order concludes that the agreements, "as originally drafted had the potential to reduce competition". However, the order continues, the DOJ consent decree "requires that the parties to the agreements alter them in multiple, fundamental ways that address the key potential harms to consumers and competition". Hence, the FCC order states that "we conclude that we do not need to impose further conditions at this time, except as discussed below."

The order elaborates: "we will continue to monitor closely any effects the Commercial Agreements have on the marketplace, and on the development of emerging product markets. To assist in that monitoring, we direct the Wireline Competition Bureau to take all actions necessary to open a docket for the public to file complaints or petitions alleging that the parties are acting in violation of the conditions imposed by this order or engaging in anticompetitive conduct relating to this transaction that implicates the public interest or otherwise violates the Act or Commission rules."

And, "We intend to exercise Commission jurisdiction fully and take corrective action whenever necessary". (The order addresses the agreements at paragraphs 139 through 169.)

Commissioner Robert McDowell wrote in his statement that "I disagree with the data roaming obligation undertaken by Verizon Wireless. As an initial matter, I cast a dissenting vote when the mandatory data roaming rule was adopted in 2010, citing primarily the Commission's lack of authority over broadband information services such as data roaming. Moreover, the record in the instant proceeding neither cites nor discusses any concrete examples where Verizon Wireless has failed to offer data roaming. On the other hand, today's order does nothing to disturb the appeal of the 2010 data roaming order, which is currently pending with the D.C. Circuit."

See, McDowell's dissent to the FCC's Second Report and Order [79 pages in PDF] that imposes common carrier like regulations for data roaming. The FCC adopted and released that order on April 7, 2011. It is FCC 11-52 in WT Docket No. 05-265. See also, story titled "FCC Adopts Data Roaming Rules" in TLJ Daily E-Mail Alert No. 2,219, April 7, 2011.

McDowell also wrote that "I cannot support the assertion that the Commission has jurisdiction over the commercial agreements at issue in this transaction. In this case, review of these documents should have fallen exclusively to the Department of Justice because the tasks pertain solely to antitrust matters."

He also wrote that "I have concerns regarding possible attempts to revisit these agreements in the future".

Commissioner Ajit Pai wrote in his statement that "the order should not and need not assert authority over the Commercial Agreements, which the Antitrust Division of the Department of Justice (DOJ) ably analyzed. It is a shibboleth that the Commission’s authority to review mergers or transactions is broad, but we must be mindful that broad is not boundless." See, Shibboleth [Wikipedia].

Pai also disagreed "with the imposition of a ``voluntary´´ data roaming commitment upon Verizon. First, such a condition is not voluntary in any meaningful sense of the word, insofar as the parties would not agree to it independently but know that its acceptance is a predicate for regulatory approval of these transactions. Moreover, the Commission’s authority to impose such a condition generally is doubtful."

Comcast's David Cohen stated in a release that, following these DOJ and FCC approvals, "Comcast will be able to market Verizon Wireless products and services across our entire footprint under a renewable agent agreement (for the first five years, we will be exclusive to Verizon Wireless, but Verizon Wireless will not be able to enforce the exclusivity provisions after five years)." (Parentheses in original.)

Cohen added that "Comcast and Verizon Wireless will be able to work together for at least five years in an R&D partnership to develop innovative technologies that integrate wireless and wireline products and services; after five years, we can continue that partnership with the agreement of the DOJ."

Cathy Sloan of the Computer and Communications Industry Association (CCIA) stated in a release that "The agreements between the nation's largest telephone company and the largest cable companies are unprecedented.  Rather than compete as the Telecom Act of 1996 intended, the nation's dominant broadband Internet access providers have chosen to collaborate. And now the FCC has given this bad deal its blessing."

Sloan added that "we are moving much closer to an unregulated duopoly in mobile wireless markets and a monopoly in residential Internet access".

Gigi Sohn, head of the Public Knowledge (PK), stated in a release that the agreements "turn former competitors into allies". She wrote that "The FCC rightly asserted jurisdiction over the joint marketing, wireless reseller, and JOE agreements. But it has merely set up a system where parties can file complaints. While this may allow parties to bring attention to anticompetitive or otherwise illegal conduct, it does nothing to affirmatively prevent it. The JOE is still a vehicle that empowers former competitors to suppress new rivals. The FCC should have protected competition by blocking the commercial agreements altogether."

Berin Szoka and Gregory Manne of the Tech Freedom stated in a release that this action by the FCC "sets a dangerous precedent. The FCC has authority to review license transfers but not other ``related´´ transactions. Nevertheless, it devotes fourteen pages of its order to just such a review of the commercial agreements. The fact that the FCC ultimately approved the agreements is no defense of its lengthy and misplaced critique of them. By not leaving review of such provisions to the DOJ under its more rigorous antitrust analysis, the FCC may ensure that future transfers and mergers aren’t even contemplated, even if they would benefit consumers. This effectively grants the FCC the unchecked power to stop transactions it doesn't even have the authority to review."

This order, titled "Memorandum Opinion and Order and Declaratory Ruling", is FCC 12-95 in WT Docket No. 12-4 and WT Docket 12-175. The FCC adopted it on August 21, 2012, and released it on August 23, 2012. See also, FCC release.

FTC Sends No Action Letters for Facebook's Acquisition of Instagram

8/22. The Federal Trade Commission (FTC) sent a letters to Facebook and Instagram informing them that the FTC will take no action at this time to block Facebook's acquisition of Instagram.

The FTC sent one letter to Thomas Barnett (Covington & Burling) legal counsel for Facebook, and a substantially identically letter to Patricia Ziegler (Orrick Herrington), legal counsel for Instagram. Barnett is a former Assistant Attorney General in charge of the Department of Justice's (DOJ) Antitrust Division.

Both letters state that "The Commission has been conducting an investigation to determine whether the proposed acquisition of Instagram, Inc. by Facebook, Inc. may violate Section 7 of the Clayton Act or Section 5 of the Federal Trade Commission Act."

The letters add that "Upon further review of this matter, it now appears that no further action is warranted by the Commission at this time. Accordingly, the investigation has been closed. This action is not to be construed as a determination that a violation may not have occurred, just as the pendency of an investigation should not be construed as a determination that a violation has occurred. The Commission reserves the right to take such further action as the public interest may require."

Section 7 of the Clayton Act, which is codified at 15 U.S.C. § 18, is the statute that gives the FTC and DOJ authority to block mergers and acquisitions that may substantially lessen competition, or tend to create a monopoly.

Section 7 of the Clayton Act provides, in part, that "No person engaged in commerce or in any activity affecting commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no person subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another person engaged also in commerce or in any activity affecting commerce, where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly."

Section 5 of the FTC Act, which is codified at 15 U.S.C. § 45, is an anti-fraud consumer protection statute, which the FTC, under the Chairmanship of Jonathan Leibowitz, asserts is also an antitrust statute.

The FTC has statutory authority to enforce antitrust laws under the Sherman Act and Clayton Act. Moreover, there are well developed bodies of judicial case law that construe and give meaning to the various sections of the Sherman Act and Clayton Act. In contrast, Section 5 of the FTCA has hardly been invoked as an antitrust statute for decades. There is no body of case law that gives meaning to Section 5 as an antitrust statute. There now is almost nothing to put companies on notice as to what might constitute a violation of Section 5 in the antitrust context. There is almost nothing to constrain the FTC. This is what makes Section 5 so attractive to this FTC. See also, story titled "Commentary on Antitrust Processes" in TLJ Daily E-Mail Alert No. 2,118, August 4, 2010.

Update on DOJ Domain Name Seizures

8/24. TLJ published a story titled "DOJ/FBI Seize Domain Names by Warrant" in TLJ Daily E-Mail Alert No. 2,433, August 21, 2012. After publication a Department of Justice (DOJ) spokesman returned a call from TLJ to state that the DOJ will not release the seizure order(s), or any other orders or pleadings in this case, or cases.

Nor will the DOJ disclose whether a grand jury has returned any indictment(s), or the DOJ has served or filed any complaint, information, or other charging document(s). Nor will the DOJ disclose any information other than that which it has already disclosed in it news release.

The activities and operations of the federal government in seizing domain names, and related actions to prevent users from accessing domain names of infringing web sites, are relevant to several ongoing legislative and policy debates. The DOJ's secrecy in the present matter may be directed at limiting public understanding, and advocacy in ongoing policy debates.

Interest groups in the US, including the Electronic Frontier Foundation (EFF), Public Knowledge (PK) and Center for Democracy and Technology (CDT), have engaged in judicial advocacy regarding the seizure of domain names. For example, the EFF, PK and CDT filed an amicus curiae brief with the U.S. District Court (SDNY) in Puerto 80 Projects, S.L.U. v. Department of Homeland Security Immigration and Customs Enforcement, regarding the DHS/ICE seizure of and in 2010. See also, August 4, 2011, order of the District Court, and amicus curiae brief filed with the U.S. Court of Appeals (2ndCir) by the EFF, PK and CDT. That case is D.C. No. 11 Civ. 3983 (PAC) and App. Ct. No. 11-3390-cv.

Groups have also filed comments regarding federal domain name seizures with the Executive Office of the President's (EOP) Office of the Intellectual Property Enforcement Coordinator, or IPEC, to assist it in preparing the "Joint Strategic Plan Against Counterfeiting and Infringement". See, stories in TLJ Daily E-Mail Alert No. 2,428, August 14, 2012.

Also, there are legislative proposals, such as those contained in the PROTECT IP Act and Stop Online Piracy Act, that would mandate the disabling of access, by a variety of means, to foreign domain names used for infringing activities. See, HR 3261 [LOC | WW], the "Stop Online Piracy Act" or "SOPA", and S 968 [LOC | WW], the "Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act of 2011", "PROTECT IP Act", or "PIPA".

In This Issue
This issue contains the following items:
 • FCC Approves Verizon Wireless SpectrumCo License Transfers
 • FTC Sends No Action Letters for Facebook's Acquisition of Instagram
 • Update on DOJ Domain Name Seizures
 • AT&T Rebuts PK/FP Net Neutrality Allegations
Washington Tech Calendar
New items are highlighted in red.
Friday, August 24

12:00 NOON - 1:30 PM. The DC Bar Association will host a presentation titled "Building Momentum: Advanced LinkedIn for Lawyers". The speaker will be Tasha Coleman (Upward Action). Free. No CLE credits. See, notice. For more information, call 202-626-3488. The DC Bar has a history of barring reporters from its events. Location: DC Bar Conference Center, 1101 K St., NW.

1:00 - 2:30 PM. The American Bar Association (ABA) will host a webcast and telecast panel discussion titled "The America Invents Act: The Boundaries of Prior Art". The speakers will be Steve Chang (Banner & Witcoff), Susanne Jones (O'Brien Jones), and Janet Hendrickson (Senniger Powers). Prices vary. CLE credits. See, notice.

Day two of a two day event hosted by the American Intellectual Property Law Association (AIPLA) titled "AIPLA Patent Prosecution Practical Patent Prosecution Training for New Lawyers". See, notice. For more information, contact aipla at aipla dot org or call 703-415-0780. Location: Alexandria, VA.

Monday, August 27

Day one of four of the Republican National Convention.

Deadline to submit comments to the Office of the U.S. Trade Representative (OUSTR) regarding the complaints filed with the World Trade Organization (WTO) by the US, Japan and EU against the People's Republic of China (PRC) regarding its rare earth materials export policies. See, notice in the Federal Register, Vol. 77, No. 146, Monday, July 30, 2012, at Pages 44706-44707.

Tuesday, August 28

Day two of four of the Republican National Convention.

Wednesday, August 29

Day three of four of the Republican National Convention.

9:30 AM - 1:00 PM. The Department of Commerce's (DOC) National Telecommunications and Information Administration (NTIA) will hold one in a series of meetings regarding consumer data privacy in the context of mobile applications. See, notice in the Federal Register, Vol. 77, No. 149, Thursday, August 2, 2012, Pages 46067-46068. Location: Auditorium, DOC, Hoover Building, 14th Street and Constitution Ave., NW.

12:00 NOON. The World Wide Web Consortium's (W3C) Tracking Protection Working Group will meet by teleconference. The call in number is 1-617-761-6200. The passcode is TRACK (87225).

2:00 - 4:00 PM. The Small Business Administration (SBA) will host a webcast program on the Small Business Innovation Research (SBIR) and Small Business Technology Transfer Program (STTR) reauthorization act. See, notice in the Federal Register, Vol. 77, No. 151, Monday, August 6, 2012, at Page 46909.

Thursday, August 30

Day four of four of the Republican National Convention.

6:00 - 9:15 PM. The DC Bar Association will host a presentation titled "Can They Fire Me For Putting That on Facebook?". The speakers will be Diane Seltzer (Seltzer Law Firm), Julienne Bramesco (Clearspire Law Co.), and Lily Garcia (Clearspire Law Co.). The price to attend ranges from $89 to $129. Reporters are barred from attending most DC Bar events. CLE credits. See, notice. For more information, call 202-626-3488. Location: DC Bar Conference Center, 1101 K St., NW.

Deadline to submit post meeting comments to the President's National Security Telecommunications Advisory Committee (NSTAC) regarding its August 16 meeting. The agenda includes discussions of (1) the Nationwide Public Safety Broadband Network (NPSBN), (2) the DHS's National Cybersecurity and Communications Integration Center (NCCIC), and (3) the proposal to develop a separate out of band data network supporting communications among carriers, ISPs, vendors, and additional critical infrastructure owners and operators during a severe cyber incident that renders the internet unusable. See, notice in the Federal Register, Vol. 77, No. 146, Monday, July 30, 2012, at Pages 44641-44642.

Deadline to submit requests to the U.S. International Trade Commission (USITC) to testify at its September 12 hearing on the probable economic effect of providing duty free treatment for imports under the U.S.-Trans-Pacific Partnership Free Trade Agreement. See, notice in the Federal Register, Vol. 77, No. 155, August 10, 2012, at Pages 47880-47882.

Friday, August 31

Deadline to submit comments to the National Institute of Standards and Technology's (NIST) Computer Security Division (CSD) regarding its draft SP 800-94 Rev. 1 [111 pages in PDF] titled "Guide to Intrusion Detection and Prevention Systems (IDPS)".

Deadline to submit comments to the National Institute of Standards and Technology's (NIST) Computer Security Division (CSD) regarding its draft SP 800-83 Rev. 1 [45 pages in PDF] titled "Guide to Malware Incident Prevention and Handling for Desktops and Laptops".

Deadline to briefs and statements to the U.S. International Trade Commission (USITC) in advance of its September 12 hearing on the probable economic effect of providing duty free treatment for imports under the U.S.-Trans-Pacific Partnership Free Trade Agreement. See, notice in the Federal Register, Vol. 77, No. 155, August 10, 2012, at Pages 47880-47882.

EXTENDED TO OCTOBER 31. Deadline to submit applications to the U.S. Patent and Trademark Office (USPTO) under its Humanitarian Awards Pilot Program. See, original notice in the Federal Register, Vol. 77, No. 26, February 8, 2012, at Pages 6544-6548. See also, extension notice in the Federal Register, Vol. 77, No. 160, August 17, 2012, at Pages 49782-49783.

Monday, September 3

Labor Day. This is a federal holiday. See, OPM list of 2012 federal holidays.

AT&T Rebuts PK/FP Net Neutrality Allegations

8/22. AT&T published a short piece in its web site titled "Enabling FaceTime Over Our Mobile Broadband Network". The author is AT&T's Bob Quinn.

It responds to the allegations made by the Public Knowledge (PK) and Free Press (FP) last week that AT&T has violated the Federal Communications Commission's (FCC) December 2010 rules regulating the network management practices of broadband internet access service (BIAS) providers. This is also know as the network neutrality order and open internet order.

See, story titled "PK and FP Allege AT&T Wireless BIAS Offerings Violate FCC Net Neutrality Rules " in TLJ Daily E-Mail Alert No. 2,430, August 16, 2012.

AT&T states that "FaceTime is a video chat application that has been pre-loaded onto every AT&T iPhone since the introduction of iPhone 4. Customers have been using this popular app for several years over Wi-Fi. AT&T does not have a similar preloaded video chat app that competes with FaceTime or any other preloaded video chat application. Nonetheless, in another knee jerk reaction, some groups have rushed to judgment and claimed that AT&T’s plans will violate the FCC’s net neutrality rules. Those arguments are wrong."

AT&T continues that the BIAS order includes "a no-blocking requirement under which they are prohibited, subject to reasonable network management, from blocking applications that compete with the provider’s voice or video telephony services.

"The FCC's net neutrality rules do not regulate the availability to customers of applications that are preloaded on phones. Indeed, the rules do not require that providers make available any preloaded apps. Rather, they address whether customers are able to download apps that compete with our voice or video telephony services. AT&T does not restrict customers from downloading any such lawful applications, and there are several video chat apps available in the various app stores serving particular operating systems. ... Therefore, there is no net neutrality violation."

AT&T also argued that "Although the rules don’t require it, some preloaded apps are available without charge on phones sold by AT&T, including FaceTime, but subject to some reasonable restrictions. To date, all of the preloaded video chat applications on the phones we sell, including FaceTime, have been limited to Wi-Fi. With the introduction of iOS6, we will extend the availability of the preloaded FaceTime to our mobile broadband network for our Mobile Share data plans which were designed to make more data available to consumers. To be clear, customers will continue to be able to use FaceTime over Wi-Fi irrespective of the data plan they choose. We are broadening our customers’ ability to use the preloaded version of FaceTime but limiting it in this manner to our newly developed AT&T Mobile Share data plans out of an overriding concern for the impact this expansion may have on our network and the overall customer experience."

The PK's John Bergmeyer promptly responded in a release that "The FCC's Open Internet rules do not distinguish between pre-loaded and downloaded apps. They prevent carriers from blocking certain kinds of apps -- period. AT&T is blocking FaceTime for all of its iPhone customers who do not subscribe to its premium 'Mobile Shared' plans, and this runs afoul of the rules."

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