News from May 21-25, 2002

People and Appointments
5/25. President Bush announced that he intends to nominate Diana Furchtgott Roth to be a Director of the Federal Housing Finance Board for the remainder of a seven year term expiring February 27, 2004. She has served as Chief of Staff at the Council of Economic Advisors since March 2001. Before that, she was a Resident Fellow and Assistant to the President at the American Enterprise Institute. See, White House release.
DC Circuit Overturns FCC Unbundling and Line Sharing Orders
5/24. The U.S. Court of Appeals (DCCir) issued its opinion in USTA v. FCC, granting petitions for review of an FCC unbundling order and line sharing order.
Incumbent local exchange carriers (ILECs) and the U.S. Telecom Association (USTA), a group that represents them, challenged the Federal Communications Commission's (FCC) order requiring ILECs to lease a variety of unbundled network elements to competitive local exchange carriers (CLECs). They also challenged an FCC line sharing order that requires ILECs to lease to CLECs only a portion of local copper loops, rather than the whole line, for the purpose of offering DSL service.
The Appeals Court granted both petitions. It remanded both rules to the FCC for further proceedings. While the ILECs prevailed, the FCC already has underway a proceeding in which it is examining its unbundling rules.
FCC Chairman Michael Powell had this reaction: "The Court's decision today directs the Commission to undertake a more focused examination of the Act's unbundling obligations. The Commission is currently examining its unbundling framework, including line sharing rules, in its Triennial Review notice, which is presently open for public comment. We will be exploring many of the issues that the Court raised in its opinion in the coming months as we evaluate the record in this proceeding. While we continue to evaluate the Court's opinion and consider all the Commission's options, in the meantime, the current state of affairs for access to network elements remains intact." See, FCC release.
The ILECs are pleased with the decision. Verizon SVP Michael Glover stated in a release that "Verizon is pleased that the court of appeals recognized that the current overly broad unbundling requirements undermine investment and innovation by all competitors, and impose significant costs on the economy as a whole. The decision makes clear that unbundling requirements can be imposed only in specific market segments where there is proof that competitors truly need access to a particular element to enter and compete. Unbundling requirements cannot be justified where competitors already are using their own facilities to compete, as they do today using their own switches and high capacity transport."
Similarly, SBC stated in a release that "Today's ruling is a very positive step forward in developing healthy, sustainable and economically rational competition that will benefit consumers. The Court correctly rejected the FCC's ``more is better´´ approach when determining what network elements incumbents must make available, regardless of the economic impact and regardless of the actual competitive situation in a given market." See also, USTA release.
In contrast, AT&T stated in a release that "Today's decision seems out of step with recent positive developments promoting competition and will bring added uncertainty to an industry that is just beginning to show signs of a rebound. The customer benefits of a competitor's ability to lease portions of the Bells' networks are real and proven for millions of customers in states that have taken seriously the Act's pro-competition mandate." It added that "We will work diligently with the FCC to demonstrate that UNEs are an essential component without which the promised competition and customer benefits envisioned by Congress will not be realized."
SEC Chairman Addresses Electronic Offerings
5/24. Securities and Exchange Commission (SEC) Chairman Harvey Pitt gave a speech in Washington DC to the Investment Company Institute, 2002 General Membership Meeting. He addressed all electronic offerings.
He stated that "In approving an ``all electronic´´ variable annuity offering last fall, we faced the issue of access to disclosure documents exclusively over the Internet. Our decision there is only a beginning. We are anxious to undertake a fresh look at our prior guidance concerning electronic delivery of information under the federal securities laws. Our regulations must keep pace with product innovation as well as investor demands and needs."
Pitt also spoke about erosion of investor confidence in securities markets, and securities industry reform.
Rights of Way Barriers to Broadband Deployment
5/24. The Telecommunications Industry Rights of Way Working Group (I-ROW) wrote a letter [PDF] to the Federal Communications Commission (FCC) regarding the adverse effect of local governments' rights of way permitting on the deployment of broadband networks. The letter also advocates initiation of an FCC proceeding based upon Section 253 of the Communications Act.
I-ROW wrote that "broadband deployment is impeded when the permitting process is undefined and open ended, or worse, is misused to delay construction while the locality seeks to extract from the provider unreasonable, unlawful fees or in-kind compensation, or seeks to impose unlawful third tier local regulation on the provider's business and services. A locality charging fair and reasonable fees on a nondiscriminatory basis has no need to negotiate fees with each provider individually and, therefore, no reason to hold up the construction permitting process while fees or other terms unrelated to actual rights of way management are debated."
It added that "localities should be charging an amount calculated to: (1) administer the permitting process and any other actual and direct costs incurred by the locality directly resulting from the provider's use of the right of way; and (2) encourage, not deter broadband deployment."
I-ROW also wrote that "broadband and the underlying telecommunications networks necessary for these services are key economic drivers; thus, Congress recognized in enacting Section 253 as part of the 1996 Act that local, parochial interests should not be allowed to delay or unduly burden telecom deployment.  For this reason, Section 253 was written to preserve traditional local authority to manage the physical occupation of the public rights of way, and to collect fair and reasonable, non-discriminatory fees to offset the cost of that management, while empowering the Commission to preempt local requirements that exceed those bounds."
It concluded that the FCC should "commence a proceeding to address governmental practices and fees that constitute barriers to entry under Section 253(a), including (1) delays in granting permits that prevent providers from providing service, particularly those related to refusals to issue permits in an effort to extract above-cost fees and other concessions unrelated to rights-of-way management; and (2) the level of compensation that local governments may require consistent with the "fair and reasonable compensation" standard in Section 253(c), which the Commission would later apply in resolving Section 253(d) petitions and to guide the courts."
47 U.S.C. § 253 provides in part that "No State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service."
It also provides that "If, after notice and an opportunity for public comment, the Commission determines that a State or local government has permitted or imposed any statute, regulation, or legal requirement that violates subsection (a) or (b) of this section, the Commission shall preempt the enforcement of such statute, regulation, or legal requirement to the extent necessary to correct such violation or inconsistency."
Martin Stern, an attorney with the law firm of Preston Gates, and a member of I-ROW, is one of the two signers of the letter. He is also scheduled to speak at a Congressional Internet Caucus Advisory Committee panel discussion titled "Speeding Broadband Deployment By Balancing of Rights of Way Interests" today at noon. See, calendar.
I-ROW has submitted similar comments in FCC and NTIA proceedings. FCC and NTIA officials have also addressed rights of way issues in public speeches. For example, on February 12, 2002, NTIA Director Nancy Victory gave a speech titled "Together on the Right Track: Managing Access to Public Roads and Rights of Way" to the National Association of Regulatory Utility Commissioner's (NARUC) Committee on Telecommunications. She stated that "we are concerned that constraints on accessing public rights of way might be inhibiting broadband network construction."
Similarly, on October 25, 2001, FCC Chairman Michael Powell gave a speech on broadband policy at a NARUC convention. He listed several areas where regulatory barriers might be removed. He stated: "Another example is the regulations that govern rights of way, zoning, and building codes. I often hear venture capitalists and broadband providers complain that these local restrictions are some of the most vexing problems in bringing new services to consumers. No town likes a cell tower nestled among the fall foliage. Few cities welcome trenches through their streets during rush hour. Nonetheless, governments -- principally state and local -- control the terms and conditions of local upgrades and can be more pro-active in facilitating deployment in their community, if they initiate broadband initiatives that encompass judgments about these rules."
See also, October 26, 2001, speech by Bruce Mehlman, Assistant Secretary of Commerce for Technology Policy.
Recording Industry Sues Audiogalaxy for Copyright Infringement
5/24. Zomba Records, and other members of the Recording Industry Association of America (RIAA) and National Music Publishers Association (NMPA), filed a complaint [78 pages in PDF] in U.S. District Court (SDNY) against Audiogalaxy and Michael Merhej alleging contributory copyright infringement, vicarious copyright infringement, and other causes of action. See also, RIAA release.
The complaint states that "Like the now enjoined music file copying system and service run by Napster, Defendants have built, maintain, and control an integrated computer system and service, known as Audiogalaxy and accessible through a website,, that they knowingly, willfully and intentionally designed specifically to facilitate and encourage millions of individual anonymous users to copy and distribute infringing copies of copyrighted works by the millions, if not billions."
Bush and Putin Talk Trade and Information Technology
5/24. U.S. President Bush and Russian President Putin addressed trade issues, including trade in technology, during President Bush's trip to Russia.
The two nations issued a Joint Statement which included the following: "We welcome the positive trends in our cooperation in the area of information technologies, which is emerging as one of the priority areas of our bilateral relationship. The introduction of U.S. companies' advanced technologies in the Russian market, including through licensed modern software applications, contributes to economic growth in Russia. We support growing cooperation through services provided by Russian companies in designing software and high-tech products on the basis of Russia's existing scientific capabilities. We welcome the Information Technology Roundtable, which is providing for a comprehensive exchange of opinion between government agencies and businesses on removing barriers to business and protecting intellectual property rights in this area."
The U.S. and Russia also issued a Joint Declaration that covered free markets, Russian membership in the World Trade Organization (WTO), and the Jackson Vanik Amendment.
The economic cooperation section of the declaration provides that the U.S. and Russia "believe that successful national development in the 21st century demands respect for the discipline and practices of the free market. As we stated on November 13, 2001, an open market economy, the freedom of economic choice, and an open democratic society are the most effective means to provide for the welfare of the citizens of our countries."
The declaration continues that the two countries "will endeavor to make use of the potential of world trade to expand the economic ties between the two countries, and to further integrate Russia into the world economy as a leading participant, with full rights and responsibilities, consistent with the rule of law, in the world economic system. In this connection, the sides give high priority to Russia's accession to the World Trade Organization on standard terms."
The declaration also states that "Success in our bilateral economic and trade relations demands that we move beyond the limitations of the past. We stress the importance and desirability of graduating Russia from the emigration provisions of the U.S. Trade Act of 1974, also known as the Jackson Vanik Amendment. We note that the Department of Commerce, based on its ongoing thorough and deliberative inquiry, expects to make its final decision no later than June 14, 2002 on whether Russia should be treated as a market economy under the provisions of U.S. trade law. The sides will take further practical steps to eliminate obstacles and barriers, including as appropriate in the legislative area, to strengthen economic cooperation."
Bush and Putin also held a joint press conference. (See, transcript.) They were asked "when will the time come when the bulk of the exports from Russia would be high technology and high technology products, and not the primary products like oil and wood ...?" Putin responded that "what we need above all for Russia is an absolutely nondiscriminatory access to world markets and to U.S. markets. And we don't need preferences, we don't need subsidies, we don't need special favors. We just want normal, simple, ordinary, fair trade relations."
Bush stated that "The role of government is not to create wealth. The role of government is to create an environment in which the entrepreneur or small business or dreamer can flourish. And that starts with rule of law, respect of private property, less regulatory burdens on the entrepreneur, open banking laws so that all people have access to capital, and good tax policy."
He also stated that "there is an export tax on Russian goods. And the trouble with that, of course, is that no matter how good your goods are, if you price yourself out of the market, no one is going to buy. So that's a barrier. There's also barriers coming from Western countries that we've got to eliminate. Export controls on high tech goods are problematic, that we're now reviewing in the United States."
Finally, he stated that "it is very important for the infrastructure to be modernized as quickly as possible, so that information from around the world moves quickly, freely throughout Russia, so that an entrepreneur such as yourself are able to learn from other entrepreneurs being connected through the Internet, which is going to be a great source of ideas and potential wealth for Russia."
The two were also asked "What specific and concrete steps can we expect from the United States in order to support our accession to the World Trade Organization?"
Bush responded: "Starting with having a President who thinks you ought to be in the WTO and I think you ought to be. And I think the accession to the WTO ought to be based upon the rules that every other nation has had to live up to. Nothing harsher, nothing less harsh.
He added that "I'm for Russia going into the WTO. Just like I asked just like I asked Congress yesterday once in a press conference in Russia to get rid of Jackson Vanik. So, to answer your questions, I vote aye, assuming that the President the Russian government continues to reform her economy, open it up, make market based economy work."
More News
5/24. The Federal Communications Commission (FCC) released its Notice of Proposed Rulemaking (NPRM) in its proceeding titled "In the Matter of Section 272(f)(1) Sunset of the BOC Separate Affiliate and Related Requirements". It initiates an inquiry regarding the sunset of the statutory requirements under Section 272 imposed on Bell Operating Companies (BOCs) when they provide in-region interLATA services. This is WC Docket No. 02-112. The FCC adopted this NPRM at its May 16 meeting.
Senate Passes Trade Promotion Authority Bill
5/23. The Senate passed a bill that would give the President trade promotion authority (TPA) on a roll call vote of 66-30. This bill also includes the Andean Trade Preferences Act and language expanding existing trade adjustment assistance (TAA) programs. The House passed a different TPA bill on December 7, 2001. The next step in the process will be the appointment of a conference committee to reconcile differences between the two bills.
TPA, which is also known as fast track, gives the President authority to negotiate trade agreements that the Congress can approve or reject, but not amend. It would strengthen the negotiating position of the President.
TPA would benefit technology companies that sell products abroad. The Semiconductor Industry Association (SIA) stated in a release that "Among the key trade negotiations that the U.S. will be able to pursue utilizing TPA are with the new round of World Trade Organization (WTO) talks, as well as work on reaching free trade agreements. The SIA has a number of key priorities within the context of the WTO talks, including such issues as eliminating tariffs on semiconductors and information technology goods around the world, strengthening intellectual property protection, and maintaining strong U.S. trade laws. TPA will also enable U.S. negotiators to pursue free trade agreements in areas like Latin America, where prohibitively high tariffs are maintained on many high technology goods."
The Senate bill includes an amendment (No. 3408), sponsored by Sen. Mark Dayton (D-MN) and Sen. Larry Craig (R-ID) that would create a procedure that would allow a point of order to exclude changes to trade remedy laws from TPA implementing legislation. The point of order could only be waived by a majority of Senators.
9th Circuit Reverses in USA v. Adamson
5/23. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in USA v. Adamson, in which the Appeals Court reversed a conviction for wire fraud and money laundering. The case arose out of the defendant's purchase and resale of used Hewlett Packard servers.
Adamson was an owner of a company that sold used computer equipment, including servers. This company purchased used HP servers from HP. The company also upgraded these servers through the use of an HP software utility called "SS_Config", which was password protected to prevent unauthorized use.
A grand jury of the U.S. District Court (EDCal) returned an indictment against Adamson alleging wire fraud and money laundering. The prosecution alleged that Adamson bribed the HP employee who handled the sale of the servers, and obtained from another HP customer a copy of SS_Config and its password. Adamson's company then obtained licenses from HP for the upgraded servers. The prosecution alleged that Adamson engaged in misrepresentation, an element of wire fraud, to induce HP to issue these licenses. However, the specific act of misrepresentation alleged in the indictment was different from the act of misrepresentation proved at trial, and contained in the jury instructions. The trial jury returned a guilty verdict. Adamson appealed.
The Appeals Court reversed. It wrote that "One of the primary purposes of an indictment is to inform a defendant of ``what he is accused of doing in violation of the criminal law, so that he can prepare his defense.´´ ... This purpose was not served here. If the indictment had not specified a different particular misrepresentation, one might say the variance was benign. Having specified a different particular misrepresentation, however, the indictment not only failed to inform the defendant of the actual misrepresentation that would be shown at trial, but it also affirmatively misled the defendant and obstructed his defense at trial." (Citation omitted.) The Appeals Court also found reversible error in the District Court's limitation of the cross examination of a witness. Reversed and remanded.
U.S. Courts Releases Annual Wiretap & Electronic Surveillance Report
5/23. The Administrative Office of U.S. Courts (AOUSC) released its annual wiretap and electronic surveillance report [11 pages in PDF]. It is titled "Report of the Director of the Administrative Office of the United States Courts on Applications for Orders Authorizing or Approving the Interception of Wire, Oral, or Electronic Communications". See also, AOUSC release [3 pages in PDF].
The report states that the total number of intercepts in 2001 was 1,491, that this represents a 25% increase over 2000, and that drug related matters constitute 78%. The report also states that 83% of intercepts were telephone wiretaps, and 6% were electronic intercepts (which includes e-mail surveillance). The report also states that "no federal wiretap reports indicated that encryption was encountered".
FISA/Terrorism Not Covered. This report covers intercepts concluded between January 1, 2001, and December 31, 2001. The report includes intercepts regulated by Title 18 of the U.S. Code (Crimes and Criminal Procedure). It does not include intercepts regulated by the Foreign Intelligence Surveillance Act of 1978 (FISA), which is codified in Title 50 of the U.S. Code (War and National Defense). See, 50 U.S.C. § 1801 et seq. FISA intercepts are restricted to foreign intelligence information. The FISA extends to "a group engaged in international terrorism". Groups such as Al Qaeda are subject to FISA surveillance. Hence, this report does not reference terrorism, except in the context of stating that the events of September 11, and mail delivery problems, delayed its release by 30 days.
The report states that "The three major categories of surveillance are wire communications, oral communications, and electronic communications. In the early years of wiretap reporting, nearly all intercepts involved telephone (wire) surveillance, primarily communications made via conventional telephone lines; the remainder involved microphone (oral) surveillance or a combination of wire and oral interception. With the passage of the Electronic Communications Privacy Act of 1986, a third category was added for the reporting of electronic communications, which most commonly involve digital display paging devices or fax machines, but also may include some computer transmissions. The 1988 Wiretap Report was the first annual report to include electronic communications as a category of surveillance."
Phone Wiretaps. "Telephone wiretaps accounted for 83 percent (1,171 cases) of intercepts installed in 2001. Of those, 944 wiretaps involved cellular/mobile telephones, either as the only type of device under surveillance (865 cases) or in combination with one or more other types of telephone wiretaps (79 cases)." (Parentheses in original.)
Electronic Surveillance. "The next most common method of surveillance reported was the electronic wiretap, which includes devices such as digital display pagers, voice pagers, fax machines, and transmissions via computer such as electronic mail. Electronic wiretaps accounted for 6 percent (84 cases) of intercepts installed in 2001. Microphones were used in 6 percent of intercepts (88 cases). A combination of surveillance methods was used in 4 percent of intercepts (62 cases)."
Encryption. The report also addresses the use of encryption. It states that "Public Law 106-197 amended 18 U.S.C. 2519(2)(b) in 2000 to require that reporting should reflect the number of wiretap applications granted in which encryption was encountered and whether such encryption prevented law enforcement officials from obtaining the plain text of communications intercepted pursuant to the court orders. In 2001, no federal wiretap reports indicated that encryption was encountered. For state and local jurisdictions, encryption was reported to have been encountered in 16 wiretaps in 2001; however, in none of these cases was encryption reported to have prevented law enforcement officials from obtaining the plain text of communications intercepted."
Commerce Department Official Addresses Nanotechnology
5/23. The Commerce Department's Phillip Bond gave a speech titled "Building Partnerships to Achieve the Promise of Newer Technology" at Rice University in Houston, Texas.
He stated that "I believe fervently in the economic potential and social advances that nanotechnology can bring", and that "nanotechnology has enjoyed significant R&D funding increases" because in Washington "there is deep bipartisan agreement".
He elaborated that "Nanoscience and nanotechnology -- especially in combination with bio-, info- and cognitive technologies -- have the power to unleash human potential. It is not inconceivable that these technology could truly achieve the miraculous: making the blind see, the lame walk, the deaf hear; curing AIDS, cancer, diabetes and other afflictions; ending hunger; and even supplementing the power of our minds, enabling us to think great thoughts, create new knowledge, and gain new insights."
However, he also cautioned that "these powerful technologies can be put to inappropriate uses and may create moral and ethical dilemmas beyond those we struggle with today. In the hands of terrorists, these technologies could be used to injure or kill millions. They could be used to pierce our privacy monitoring our communications, movements and associations. They could render all current encryption technologies powerless to protect national secrets or our personal privacy."
Senate Judiciary Committee Approves Cyber Security Bill
5/23. The Senate Judiciary Committee amended and approved S 1989, The National Cyber Security Defense Team Authorization Act. The bill, which is sponsored by Sen. Charles Schumer (D-NY), would "establish a team of representatives of various Federal departments and agencies" that would "identify segments of the infrastructure of the Internet (including software, hardware, and other physical infrastructure) that are vulnerable to terrorist attack", and then make recommendations on how to eliminate such vulnerabilities. The Committee approved one amendment that would add a subsection authorizing the appropriation of $10 Million.
Such a team already exists. It is headed by Richard Clarke, the President's Special Advisor for CyberSpace Security.
People and Appointments
5/23. The Senate Judiciary Committee approved the nomination of Brooks Smith to be a Judge of the U.S. Court of Appeals for the Third Circuit by a vote of 12-7. Republican members of the Committee, and Sen. Joe Biden (D-DE), Sen. John Edwards (D-NC), and Sen. Herb Kohl (D-WI) vote in favor. His nomination still requires confirmation by the full Senate.
5/23. Lisa Griffin was named Deputy Chief of the Federal Communications Commission (FCC) Enforcement Bureau Market Disputes Resolution Division (MDRD). Before joining the FCC, she was a partner in the law firm of Ross Dixon & Bell. See, FCC release.
5/23. Lori Holy was named an Attorney Advisor in the Federal Communications Commission's (FCC) Office of Legislative Affairs (OLA). She will focus on media and convergence issues. She previously worked at the National Association of Broadcasters (NAB). See, FCC release.
More News
5/23. North Carolina Utilities Commission (NCUC) endorsed BellSouth's application to provide in region interLATA services in the state of North Carolina. On May 22, the Alabama Public Service Commission endorsed BellSouth's long distance application. BellSouth's next step is to file a Section 271 applications with the Federal Communications Commission (FCC). On May 15, the FCC approved BellSouth's application to provide long distance services in Georgia and Louisiana.
5/23. The Federal Communications Commission (FCC) published a notice in the Federal Register summarizing its grant of BellSouth's Section 271 application to provide in region interLATA services in the states of Georgia and Louisiana. See, Federal Register, May 23, 2002, Vol. 67, No. 100, at Pages 36186 - 36188.
5/23. The Federal Communications Commission (FCC) published a notice in the Federal Register regarding its recently released order pertaining to "issues associated with the inability of a public safety answering point to call back an emergency caller for further critical information when that caller is dialing 911 using a non-service-initialized wireless telephone." The order is effective October 1, 2002. Public comment on the information collection is due by July 22, 2002. See, Federal Register, May 23, 2002, Vol. 67, No. 100, at Pages 36112 - 36117.
5/23. The Federal Trade Commission (FTC) published a notice in the Federal Register regarding its issuance of a final rule governing the safeguarding of customer records and information for the financial institutions subject to its jurisdiction, as required by Section 501(b) of the Gramm Leach Bliley Act. See, Federal Register: May 23, 2002, Vol. 67, No. 100, at Page 36483 - 36494. See also, FTC release of May 17.
5/23. The U.S. Patent and Trademark Office (USPTO) published a notice in the Federal Register that it is amending its rules "to provide that certain trademark documents sent by United States Postal Service (USPS) ``Express Mail Post Office to Addressee´´ service (Express Mail) will no longer be considered to have been filed with the USPTO on the date of deposit with the United States Postal Service, but will be deemed to have been filed on the date of receipt in the USPTO." This rule change takes effect on June 24, 2002. See, Federal Register, May 23, 2002, Vol. 67, No. 100, at Pages 36099 - 36102.
House Science Committee Approves NSF Authorization Bill
5/22. The House Science Committee amended and approved HR 4664, the Investing in America's Future Act of 2002, sponsored by Rep. Nick Smith (R-MI).
HR 4664 would authorize the appropriation of $5.5 Billion for FY 2003 for the National Science Foundation (NSF). Included in the funding authorization is $704 Million for networking and information technology research, $238 Million for the Nanoscale Science and Engineering Priority Area, and $60 Million for the Mathematical Sciences Priority Area.
The bill authorizes an increase in funding for the NSF of 15% in FY 2003, and similar increases in future years. If the funding authorized by this bill were actually appropriated, it would double the NSF's budget within five years.
Rep. Constance Morella (R-MD) stated that "If we expect the technological advances we have achieved in recent years to continue, we must fund the underpinning science and engineering more robustly. In addition, we must provide adequate resources to produce the next generation of scientists and engineers. As the premier supporter of the overall scientific enterprise, the NSF has the ability to balance the research and education dollars needed to achieve both of these goals".
See, HR 4664 [PDF], as reported by the Subcommittee on Research on May 9. The full Committee approved one amendment [PDF] on May 22 offered by Rep. Sherwood Boehlert (R-NY). It authorizes the appropriation of $50 Million for the Advanced Technological Education Program established under the Scientific and Advanced Technology Act of 1992, and $30 Million for the Minority Serving Institutions Undergraduate Program.
House Science Committee Approves Tech Talent Bill
5/22. The House Science Committee amended and approved HR 3130, the Undergraduate Science, Mathematics, Engineering and Technology Improvement Act, which is also known as the Technology Talent Act.
HR 3130 would authorize the appropriation of $25 Million for FY 2002 for the National Science Foundation (NSF) for a grant program. It provides that the NSF "is authorized to award grants, on a competitive basis to institutions of higher education with science, mathematics, engineering, or technology programs to enable the institutions to increase the number of students studying and receiving associates or bachelor's degrees in established or emerging fields within science, mathematics, engineering, and technology."
It is sponsored by Rep. Sherwood Boehlert (R-NY), the Chairman of the Committee, and Rep. John Larson (D-CT). Rep. Larson stated that "The pipeline which connects our country's economic and security needs with talented young minds is broken. This bill will help repair that pipeline by spurring the interest of our youth in pursuing fields that will propel both technological innovation and the future growth of our economy."
See, HR 3130 [PDF] as approved by the Subcommittee on Research on May 9. On May 22, the full Committee approved an amendment [PDF] offered by Rep. Joe Baca (D-CA) that requires the NSF to establish a grant program for minority serving institutions. The Committee also approved an amendment [PDF] offered by Rep. Lynn Woolsey (D-CA) that directs the NSF to "strive to increase the number of students receiving baccalaureate degrees, concentrations, or certifications in the physical or information sciences, mathematics, engineering, or technology who come from groups underrepresented in these fields", including women. Finally, the Committee approved an amendment [PDF] offered by Rep. Brian Baird (D-WA) that amends the Scientific and Advanced Technology Act of 1992.
Powell Addresses Broadband Deployment
5/22. The Federal Communications Commission (FCC) hosted a discussion of regulatory issues affecting broadband deployment. The speakers included FCC Chairman Michael Powell, Commissioners Kathleen Abernathy, Michael Copps and Kevin Martin, Michael Binder (Industry Canada), Jeong Seon Seol (Korean Embassy), and Simon Towler (British Embassy).
Powell reviewed the FCC's approach to regulation affecting broadband in his opening remarks. He stated that the FCC "is taking a concerted comprehensive approach to bring regulatory clarity to what is at best a murky and confusing policy area. Of course, our actions in this area will first and foremost be grounded in the Communications Act, taking into account the statutory objectives of competition, universal service, and consumer protection. We have clearly set out the principles that guide our action in the broadband space."
"First, we will promote the ubiquitous availability of broadband infrastructure to all Americans. This is Congress' vision, and it is universally recognized that the promise and the potential of broadband are ones that every American and world citizen should enjoy. But, as we must, a word of caution, as we strive to achieve this worthy goal. If history is any guide, revolutions and infrastructure build outs, take time."
"Second, the Commission will conceptualize any platform that is capable of fusing communications power with computing power to provide high bandwidth intensive content to meet the demands of consumers. That is, we recognize that broadband is not merely cable modem service service, or DSL. We work to empower any technology that will help close the gap of time and distance in acquiring information."
"Third, at this stage in the development, any broadband regulatory environment must serve to promote investment and innovation. Substantial risk investment and capital is needed either to upgrade legacy networks, or to develop new ones to support broadband capability and applications. Broadband capable networks must, whether through market forces, or government mandate, preserve a proper climate for innovation."
"Fourth, and finally, sound regulatory policy should, where appropriate, harmonize regulatory rights and obligations that are attached to the provision of similarly situated services across platforms. The convergence of industry is where advanced networks allow entities in traditionally distinct market segments to enter each others' market, and into new similar markets, demands that we rationalize our regulatory regime to address these changes."
"Having set out our guiding principles, my colleagues and I have over the past six months initiated several major broadband proceedings to clarify the regulatory environment for new services, and the lower costs and risks associated with the deployment of new infrastructure. Clearer, more enlightened rules are vital to promote the infrastructure and devices that will bring the power of the information age home to every American. The Commission has also recognized that it must look in at itself and revolutionize the way that we operate in order to respond effectively to rapid changes and convergences. It is important to emphasize that while we have committed significant resources to initiating or completing these rulemakings, the legal and regulatory issues implicated here have yet to be resolved. But they must be resolved, if we collectively intend to facilitate the ubiquitous availability of broadband to all Americans," said Powell.
Industry Canada's Michael Binder then gave a presentation on broadband deployment in Canada. Powell and Binder then engaged in a two person dialogue.
Content v. Information. Powell discussed the content and information available over broadband networks. He stated that "I think one of the things that has convinced me of its long term importance, is -- forget all the applications, forget all the content provided by Disney -- and think just about what it means in terms of the value of simple information. Anything that closes the time and distance in which an individual can access information truly opens up a whole new world of possibilities that were traditionally constricting. Everything from commercial transactions, when, basically, most of the time, in a car sale situation, most of the price, is information that you don't know, what the car really costs, that the dealer knows, that you don't know, and the negotiation is a laborious effort to find out."
Powell continued: "I think that the more individuals, as consumers, and individual citizens can get information when they want it, when they need it, and quickly, I think that information component, which I think is the grease of society, opens up all kinds of possibilities that we can't imagine. But, it is a challenge. And, the content issue is one of the things that we struggle with in the United States, is, consumers say the same thing, ``We value it; bring it to us´´. At the same time, when you provide valuable content and charge a penny for it, they won't."
Mass Market v. Community Institutions. Powell stated that "In Canada, you put an enormous effort ... a significant amount of funds towards schools and libraries. The United States has done the same thing, and commits nearly 2.8 Billion dollars a year to wire schools and classrooms in the United States. And, it makes me wonder if not one of the smart broadband approaches is the focus on key community institutions -- schools, libraries, city hall, universities, community institutions -- as a way of driving the infrastructure, as opposed to immediately seeing it as an individualized consumer mass market product."
Ubiquity v. Competition. Powell also discussed the goals of ubiquity and competition in an off the cuff discussion with Michael Binder. Powell stated that "the tension and the tradeoff -- tradeoffs that one has to struggle with -- between ubiquitous deployment of infrastructure and competition. If we remember our experiences with the phone system, in many ways, governments around the world made the judgment that to get infrastructure to everyone, we should have a natural monopoly. We should have a government owned company. In the United States, it was a government sanctioned monopoly. In most of the world it was an actual government institution. And, we desire that ubiquity so quickly, or sufficiently important, that, that that was the choice that was made. Because, of course, monopolies can be very efficient, if that is your overall objective."
"On the other hand, I think, rightly, governments around the world have become much more enlightened about the benefits of competition, even in the telecommunications space, and have liberalized, or have attempted to introduce greater amounts of competition. And, a lot of times, what I feel the debates are, in tension with, is, how important is broadband really quickly, in terms of pressure people, towards larger carriers, bigger infrastructure, less cognizant of some competitive tradeoffs, and then others who think less so, in the competitive ... And that tension I think is going to be a big part of how countries resolve this. Which is why I think expectations are critical. Because, if one is too hasty I think that it would lead to being less concerned about the competitive aspects and more concerned about getting there. And, I struggle with that all the time."
Powell did not take questions from the audience. Powell declined to respond to questions from reporters afterwards.
Groups Write European Parliament Re Electronic Privacy
5/22. A collection of groups wrote a letter to members of the European Parliament regarding the proposed European Union Directive on the protection of privacy in the electronic communications sector.
They wrote that "We urge you to vote against general and exploratory data retention of individuals' electronic communications by law enforcement authorities. We recommend that you vote in favour of the position on Article 15(1) of the European Parliament Committee on Citizens' Freedoms and Rights, Justice and Home Affairs (the "LIBE Committee"). .We strongly recommend that you do not vote for any amendment on Article 15 that would leave EU Member States governments free to decide on the fundamental issue of data retention."
The signatories include the Electronic Privacy Information Center (EPIC), the Center for Democracy and Technology (CDT), and others.
House Subcommittee Holds Hearing on Whois Database
5/22. The House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property held a hearing titled "The Accuracy and Integrity of the Whois Database".
Rep. Howard Coble (R-NC), the Chairman of the Subcommittee, said in his opening statement that "The Whois Database refers to a series of information directories providing the identity of a website’s origin or operator. Regrettably, the Internet all too often is a crime scene and is riddled with bogus domain registration information leaving law enforcement at a loss to protect the public."
Rep. Howard Berman (D-CA), the ranking Democrat on the Subcommittee, said in his opening statement that the Internet "has proven invaluable as a tool for fraud, pormography, and piracy. These crimes are exacerbated by fraudulent contact information in a domain name registration -- without accurate information, it is difficult for law enforcement officials to trace the perpetrator of a crime, and it is difficult for a consumer to make an informed decision about the integrity of a particular web site."
On May 2, 2002, Reps. Coble and Berman introduced HR 4640, a bill to amend the criminal code to provide that "Whoever knowingly and with intent to defraud provides material and misleading false contact information to a domain name registrar, domain name registry, or other domain name registration authority in registering a domain name shall be fined under this title or imprisoned not more than 5 years, or both".
Howard Beales, Director of the Federal Trade Commission's (FTC) Consumer Protection Bureau, wrote in his prepared testimony that "Internet fraud enforcement efforts require quick identification of problems, quick identification of perpetrators, and the ability to gather information about international entities and organizations. Accurate Whois data is essential to these efforts, and inaccurate data can significantly frustrate them."
See also, prepared testimony of other witnesses: Michael Palage, Cameron Powell, and Steven Metalitz.
Juster Addresses Cyber Security
5/22. Under Secretary of Commerce Kenneth Juster gave a speech titled "Economic Security and Critical Infrastructure Protection" in New York City. Juster is head of the Bureau of Industry and Security, which was previously named the Bureau of Export Administration.
He stated that "One of the important lessons learned from September 11 is that for many terrorists -- including Osama in Laden and al-Qaeda -- the targets of attack are our economy and our way of life. ... By attacking our economy and our infrastructures, terrorists hope to drive us inward -- to undermine our national will, compel us to abandon our global engagement, and cause us to retreat into isolationism."
"Protection of our critical infrastructures is an essential element of our overall approach to homeland security. Critical infrastructures refer to those industries, institutions, and distribution networks that provide a continual flow of goods and services essential to the nation's defense and economic security, the functioning of its government, and the welfare of its citizens. These infrastructures relate to information and communications", said Juster.
He continued that "The very information systems and networks that facilitate commerce and industrial operations also leave us potentially more vulnerable to a new type of threat -- that of cyber attacks.
"Securing the nation's critical infrastructures against cyber attacks goes well beyond the government's traditional role of physical protection through defense of national airspace and national orders. Because there are no boundaries in cyberspace, and because approximately 90 percent of the nation's critical infrastructures are privately owned and operated, government action alone cannot secure them. Securing our critical infrastructures must, therefore, be a shared responsibility."
He also stated that "Companies must institutionalize the process of identifying critical assets, assessing their vulnerabilities, and managing the risks associated with those vulnerabilities. I can envision the insurance industry and the legal community establishing over time a market environment that provides incentives for companies to do this."
He also discussed bills that are pending in the Congress to create "an exemption under the Freedom of Information Act for information on critical infrastructures that is shared with the government as well as creating an antitrust exemption for cooperation among companies on matters of critical infrastructure protection."
(See, HR 2435, the Cyber Security Information Act, sponsored by Rep. Tom Davis (R-VA) and Rep. Jim Moran (D-VA), and S 1456, the Critical Infrastructure Information Security Act, sponsored by Sen. Bob Bennett (R-UT).)
However, he added that "There is not going to be an avalanche of information flowing to the federal government from private industry merely because legislation creates a new exemption to the Freedom of Information Act."
He spoke at a conference hosted by the Information Technology Association of America (ITAA) and Prudential Securities on e-security and homeland defense.
People and Appointments
5/22. California Governor Gray Davis announced the appointments of Amy Hogue, Gregory Keosian, and Charles Palmer as Judges of the Los Angeles County Superior Court. Hogue is a partner in the Los Angeles office of the law firm of Pillsbury Winthrop. She practices in the areas of intellectual property and media. She has represented NBC, CBS and ABC and book and magazine publishers in defamation and invasion of privacy actions. She has also handled cases involving trade secrets, copyrights, privacy rights, employment disputes, breach of contract, fraud and business torts.
5/22. Kris Anne Monteith has been named Associate Bureau Chief for Intergovernmental Affairs in the Federal Communications Commission's (FCC) Consumer and Governmental Affairs Bureau (CGB). She has worked for the FCC since 1997. Before that she worked for the law firms of McDermott Will & Emery and Keller and Heckman. See, FCC release [PDF].
More News
5/22. The Arizona Corporation Commission approved the last of the 14 federal checklist items necessary for Qwest's entry into the long distance market in Arizona. Qwest announced that it "plans to file its application to offer long distance service in Arizona with the FCC within the next few weeks". See, Qwest release.
5/22. The Senate may vote on final passage of trade promotion authority (TPA) legislation on Thursday, May 22. On Wednesday morning, President Bush gave a brief speech just before he left on his trip to Europe. He stated that "I hope the United States Senate finishes debate on the trade promotion authority and passes the bill. It's going to be important for our friends around the world to see this commitment to trade. Trade is in the interests of our workers. Trade is in the interests of job creation. And trade is in the interests of developing nations as well as developed nations. And so I want to thank those in the United States Senate, both Republicans and Democrats, who have worked hard on this bill. I hope they finish the debate and pass this important legislation. It'll be a strong positive message." The House passed its TPA bill, HR 3005, on December 7, 2001.
5/22. Sen. Diane Feinstein (D-CA), Sen. Jon Kyl (R-AZ), Sen. Jeff Sessions (R-AL), and Sen. Charles Grassley (R-IA) introduced S 2541, a bill to amend the criminal code to establish penalties for aggravated identity theft. It was referred to the Senate Judiciary Committee.
5/22. The Federal Trade Commission (FTC) filed a complaint [PDF] in U.S. District Court (SDCal) against Micro Star Software, Inc., a software marketing company, alleging that it misled consumers regarding a 30 day trial offer and its continuity program, in violation of the FTC Act, the Telemarketing Sales Rule (TSR), and the Unordered Merchandise Statute. The FTC and Micro Star simultaneously filed a Consent Decree [PDF] which requires payment of $90,000 civil penalty, disclose of all material terms and conditions of trial offers and continuity program memberships, and monitoring of the behavior of telemarketing representatives.
6th Circuit Rules in Domain Name Dispute
5/21. The U.S. Court of Appeals (6thCir) issued its opinion in Bird v. Parsons, a case involving the application of trademark, cyber squatting, and copyright law to the registration of domain names. It affirmed the District Court's dismissal for failure to state a claim.
Background. Darrell Bird brought this pro se case. He has a computer software business named Financia, Inc. He registered the tradename "Financia" with the U.S. Patent and Trademark Office in 1984. He also holds the Internet domain Marshall Parsons registered the Internet domain "" through the registrar, Dotster, which is also a defendant.
District Court. Bird filed a complaint in U.S. District Court (SDOhio) against Parsons, Dotster, and others, alleging trademark infringement, unfair competition, and trademark dilution, in violation of 15 U.S.C. §§ 1114(1)(a), 1125(a), and 1125(c), respectively. He also alleged violation of the Anticybersquatting Consumer Protection Act of 1999 (ACPA), 15 U.S.C. § 1125(d), and copyright infringement in violation of 17 U.S.C. § 106. The District Court dismissed for failure to state a claim, and lack of personal jurisdiction over certain defendants.
Appeals Court. The Appeals Court ruled that the District Court erred on the jurisdictional issue. However, since the Appeals Court found that Bird had failed to state a claim upon which relief can be granted on each of his substantive claims, it affirmed the District Court.
The Court noted that the ACPA requires "a bad faith intent to profit from that mark", and that Bird failed to plead allegations amounting to bad faith by defendants. On the copyright infringement claim, the Court stated that the text that was copied -- financia -- is not only a single word, but also lacks originality, and hence, is not entitled to copyright protection.
House Passes Dot Kids Domain Bill
5/21. The House passed HR 3833, the Dot Kids Implementation and Efficiency Act of 2002, by a vote of 406-2. See, Roll Call No. 174.
The bill would require the Department of Commerce's National Telecommunications and Information Administration (NTIA) to operate a .kids second level domain within the .us country code domain. Currently, the NTIA has contracted with NeuStar to act as the registry of the .us country code.
The bill would amend the NTIA Organization Act, 47 U.S.C. § 902, to provide that "The NTIA shall require the registry selected to operate and maintain the United States country code Internet domain to establish, operate, and maintain a second level domain within the United States country code domain that provides access only to material that is suitable for minors and not harmful to minors".
The bill would also require that the registrar enter into written agreements with registrants "to prohibit two-way and multiuser interactive services in the new domain, unless the registrant certifies to the registrar that such service will be offered in compliance with the content standards ... and does not compromise the safety or security of minors."
Also, registrars would be required to enter into written agreements with all users of the new domain "to prohibit hyperlinks in the new domain that take new domain users outside of the new domain." Thus, a web site in the new domain could not hyperlink to children's web sites in the .com domain.
The bill is sponsored by Rep. John Shimkus (R-IL), Rep. Ed Markey (D-MA), and 38 others. It was reported by the House Commerce Committee earlier this year. Rep. Billy Tauzin (R-LA), the Chairman of the Committee, stated in a release that "This legislation will ensure that our country's children will have safer experiences on the Internet. We believe the '' domain will be hugely successful, and we hope that all parents will take advantage of its benefits."
See also, TLJ story, "House Commerce Committee Approves Dot Kids Bill," TLJ Daily E-Mail Alert No. 408, April 11, 2002.
House Passes Bill to Expand Wiretap Authority
5/21. The House passed HR 1877, the Child Sez Crimes Wiretapping Act of 2001, by a vote of 396-11. See, Roll Call No. 175.
This bill would amend 18 U.S.C. § 2516 to expand the list of predicate offenses that may serve as the basis for the issuance of a wiretap order.
Spectrum Management and 3G Services
5/21. Steve Berry, SVP for Government Affairs at the CTIA, spoke at a luncheon hosted by the Federal Communications Bar Association's (FCBA) Young Lawyers Committee in Washington DC. He stated that "one of the more difficult problems that the wireless industry is facing now ... is spectrum management".
He addressed the needs of the wireless industry for spectrum for Third Generation (3G) services, which are intended to bring broadband Internet access to portable devices. He said that "we don't have a spectrum management process that is designed for major movements of spectrum". He added that "the NTIA and FCC are really good at managing that spectrum that they have", but not at reassigning spectrum. He concluded that "our spectrum management process is broken; it is not working, for major realignments". He suggested that only the Congress will be able to address spectrum for 3G services.
Nevertheless, Berry stated that the U.S. has the opportunity to take the lead in 3G technology. He said that the Europeans made mistakes by going to auction and "sucking capital out of the market", and by setting technology standards.
Berry also offered some recommendations for procedural and structural reform, such as creating an interagency senior advisory group to facilitate decision making on controversial spectrum matters, developing a rolling long term spectrum planning process, and creating an independent review mechanism similar to the Base Realignment and Closure Commission.
Librarian of Congress Rejects CARP's Proposed Rates for Webcasting
5/21. The Librarian of Congress, at the recommendation of the Register of Copyrights Marybeth Peters, issued an order rejecting the Copyright Arbitration Royalty Panel's (CARP) February 20 determination proposing rates and terms for licenses in the proceeding titled "In the Matter of Digital Performance Right in Sound Recordings and Ephemeral Recordings".
On February 20, 2002, the CARP released its report [143 pages in PDF] recommending rates and terms for the statutory license for eligible nonsubscription services to perform sound recordings publicly by means of digital audio transmissions, also known as webcasting, pursuant to 17 U.S.C. § 114, and to make ephemeral recordings of sound recordings for use of sound recordings under the statutory license set forth in 17 U.S.C. § 112. May 21 was the deadline for the Librarian of Congress to accept or reject the CARP's recommendation.
The CARP recommended that both webcasters and commercial broadcasters pay a performance fee of 0.07˘ per performance, and 9% of performance fees due, for simultaneous Internet retransmissions of over the air AM or FM radio broadcasts. It recommended that the performance fee be 0.14˘ per performance and 9% of performance fees due for all other Internet transmissions.
It further recommended that non commercial broadcasters pay a performance fee of 0.02˘ per performance for simultaneous Internet retransmissions of over the air AM or FM radio broadcasts, and 0.05˘ for other Internet transmissions, including up to two side channels of programming consistent with the public broadcasting mission of the station.
At that time, record industry representatives complained that the rates were too low, while webcasters said they were too high. The May 21 order does not state the basis for rejecting the CARP's recommendation.
The body of the order states, in full: "On February 20, 2002, the Copyright Arbitration Royalty Panel (CARP) reported its determination to the Librarian of Congress in the above- captioned proceeding. In accordance with 17 U.S.C. 802(f), the Librarian is given 90 days from date of delivery of a CARP report to review the determination and issue a decision setting forth the final royalty fee and terms of payment. However, if the Librarian rejects the CARP's determination, section 802(f) provides an additional 30 days for the Librarian to render his final determination. The Register of Copyrights recommends, and the Librarian agrees, that the CARP's determination must be rejected. A final decision will be issued no later than June 20, 2002."
The Recording Industry Association of America (RIAA) responded in a release: "The Librarian has rejected the arbitration panel’s determination, but we do not know why or what decision the Librarian will ultimately make based on the evidence presented. Since both sides appealed the panel’s determination, anything is possible. We look forward to the conclusion of this process on June 20th, and to the day when artists and labels finally get paid for the use of their music."
John Simson of SoundExchange stated in a release that "Given the complexity of the issues, I am not surprised by the Librarian's decision. I remain confident that we can find creative solutions to enable webcasting to thrive while providing recording artists and those who invest in sound recordings a fair and equitable royalty in return. Over the past three years, webcasters have paid for bandwidth, rent, hardware, software and other business expenses. It is time that they finally start to pay the Artists and record companies whose creative output is the most important component of their business."
FRB Governor Addresses Technology, Privacy and Banking
5/21. Federal Reserve Board Governor Mark Olson gave a speech titled "A Look at the Banking Industry in 2002.
Olson stated that "The major driver of future change will undoubtedly continue to be technological changes. With all the changes in technology to this point, experts tell us we are nowhere near the limits of technological improvement. As new options become available, decisions regarding the use of technology may be the most critical decision that bank management will make. That banks first identify a business strategy and then make technology decisions to support that strategy has become increasingly critical. The range of choices is not limited to large institutions. Even the smallest institutions can offer real time online account access to their customers and can have access to data on customer profitability, which allows them to better develop and price their products."
He continued that "Greater technological sophistication has two other important ramifications for banks. First, it allows your nonbank competitors to improve both the speed to market and the quality of their financial products. Second, it continues to concern customers who more and more ask for assurances about the privacy of their financial information. Privacy issues continue to be topics for potential state and federal legislation. Though the banking industry is rightfully concerned about the effects of these legislative initiatives, it must remember that privacy is a political issue because it reflects the genuine concern of bank customers. Providing the assurance of financial privacy is a vital part of managing technological change in the banking industry."
Olson spoke at the 107th Annual Convention of the Maryland Bankers Association, Palm Beach, Florida.
SEC Initiates Actions Against Software Companies
5/21. The Securities and Exchange Commission (SEC) announced a series of civil, administrative and criminal actions against former officers of three northern California software companies in connection with accounting practices. See, SEC release.
The SEC filed a civil complaint in U.S. District Court (NDCal) against David Malmstedt and Mark Huetteman, former executives at Legato Systems, alleging violation of federal securities laws for causing Legato to recognize revenue on unconsummated "sales". Legato is a Delaware corporation based in Mountain View, California, that develops and markets software for managing the data storage functions of computer networks.
The SEC also filed a civil complaint in U.S. District Court (NDCal) against Unify Corporation, and two of its former executives, Reza Mikailli and Gary Pado, alleging violation of federal securities laws in connection with the improper recognition of revenue. Unify is a software company based in Sacramento, California, that manufactures and sells database management software. See, SEC release.
The SEC also filed a civil complaint in U.S. District Court (NDCal) against Alan Anderson alleging violation of federal securities laws for forging contracts, e-mails, purchase orders, letters, and an audit confirmation in order to boost Quintus' financial results. The SEC also announced that the U.S. Attorneys Office (NDCal) has charged Anderson with one count of securities fraud. See, SEC release.
In addition, on May 20, the SEC announced that it initiated administrative proceedings against former officers of Legato Systems, Quintus, and Unify for perpetrating financial accounting frauds. See, SEC release. See for example, Order Instituting Public Cease and Desist Proceedings, Making Findings and Issuing a Cease and Desist Order in its proceeding titled "In the Matter of: Legato Systems, Inc. and Stephen Wise". Stephen Wise was Legato's Chief Financial Officer.
DC Circuit Rules in ACS of Anchorage v. FCC
5/21. The U.S. Court of Appeals (DCCir) issued its opinion in ACS of Anchorage v. FCC, a case regarding regulatory classifications of calls to Internet service providers (ISPs).
ACS is the incumbent local exchange carrier (ILEC) in Anchorage, Alaska. ACS classified ISP related traffic as interstate for the purpose of apportioning costs, which had the effect of increasing its reported interstate costs, thereby making its expected rate of return lower than it otherwise would have been. General Communications, Inc. (GCI) filed a complaint with the Federal Communications Commission (FCC) alleging, among other things, that ACS had improperly calculated its interstate costs by treating ISP calls as interstate, and had violated its proscribed rate of return. The FCC issued an order, siding with GCI. It found that ACS exceeded its permissible rate of return, and directed ACS to pay damages.
ACS filed a petition for review with the Appeals Court, raising three issues, including the ISP calls classification issue. (ACS also argued that the FCC erred in failing to treat its 47 U.S.C. § 204(a)(3) tariff filings as a bar to damages; it also contested the rate selected for prejudgment interest.)
ACS argued that since the FCC has found that ISP calls are interstate for jurisdictional purposes under its end to end analysis in a proceeding regarding reciprocal compensation, it should also find that ISP calls are interstate for the purpose of apportioning costs (separations) between interstate and intrastate communications. However, the Appeals Court wrote that while "generally speaking, separations will follow jurisdiction", in this case, "practical considerations may justify divergent treatment -- at least temporarily". The Appeals Court held that the FCC's classification was not arbitrary or capricious, and hence, denied the petition for review on this issue.
See also, FCC's Order on Remand and Report and Order [PDF], In the Matter of Implementation of the Local Competition Provisions in the Telecommunications Act of 1996 Intercarrier Compensation for ISP-Bound Traffic (CC Docket Nos. 96-98 and 99-68), adopted April 18, 2001.
The Appeals Court did, however, grant the petition for review on the Section 204 issue, and remanded on the prejudgment interest issue.
More News
5/21. The U.S. Court of Appeals (5thCir) issued its opinion in David Abrams v. Baker Hughes, a class action securities case involving the pleading requirements of the Private Securities Litigation Reform Act (PSLRA). The District Court dismissed for failure to state a claim, on the basis that the plaintiffs failed to adequately allege particularized facts to establish the necessary element of scienter. The Appeals Court affirmed.
5/21. The U.S. Postal Service (USPS) published a notice in the Federal Register containing a proposed rule to require, in most instances, that participants in USPS proceedings file documents electronically over the Internet. The USPS requests public comments by June 21 on this proposed rule -- on paper. See, Federal Register, May 21, 2002, Vol. 67, No. 98, at Pages 35766 - 35774.
5/21. Sen. Byron Dorgan (D-ND) and Sen. John Ensign (R-NV) introduced S 2537, a bill to facilitate the creation of a new, second level Internet domain within the U.S. country code domain that provides access only to material that is suitable for minors and not harmful to minors. The bill was referred to the Senate Commerce Committee, of which both Sen. Dorgan and Sen. Ensign are members. The House passed its version of this bill, HR 3833, the Dot Kids Implementation and Efficiency Act of 2002, on May 21 by a vote of 406-2.

Go to News from May 16-20, 2002.