News from July 11-15, 2002

Senate Passes Accounting Reform Bill
7/15. The Senate approved S 2673, the Public Company Accounting Reform and Investor Protection Act of 2002, by a vote of 97-0. The bill creates an independent board to oversee auditors of public companies, restricts auditors from providing many consulting services, requires CEOs and CFOs to be personally responsible for the accuracy of their companys' financial reports, and gives the Securities and Exchange Commission (SEC) more resources.
However, the bill contains no provision requiring companies to treat stock options as expenses. Sen. George Allen (R-VA), and others, had opposed such language, in part because it would discourage technology companies from offering their employees stock option plans.
The House passed a different accounting reform bill, HR 3763, the Corporate and Auditing Accountability, Responsibility, and Transparency Act of 2002, on April 24, 2002. Differences will have to be resolved in a conference committee.
Sen. Paul Sarbanes (D-MD), the sponsor of the Senate bill, stated that "For nearly seventy years, our framework of securities laws has proved remarkably effective at protecting investors. Recent events, though, have shown how urgently this framework needs reform. We must ensure that investors can once again trust corporate executives and their financial reports, and have confidence in the independence of accountants and analysts. We also must assure that the SEC has adequate funds to carry out its mandate."
SEC Chairman Harvey Pitt said in a release that "the Senate moved one step closer towards meaningful and effective oversight of accounting regulation in America." He added that "There is much to commend in the legislation that has passed in the House and Senate, and the SEC looks forward now to working with Congressional leaders in reconciling their proposals and passing a final bill that will help restore investor confidence and integrity in America's capital markets."
House Passes Cyber Security Enhancement Act
7/15. The House passed HR 3482, the Cyber Security Enhancement Act, by a vote of 385-3. See, Roll Call No. 296. The bill, which is sponsored by Rep. Lamar Smith (R-TX), contains provisions relating to sentencing guidelines for computer hacking crimes, authority of Internet service providers (ISPs) and others to voluntarily disclosure the content of communications to law enforcement and other government entities, appropriations for the National Infrastructure Protection Center (NIPC), and other topics. The bill further amends several sections of the criminal code that were amended by the USA PATRIOT Act late last year.
Industry groups, such as the Business Software Alliance (BSA), support the bill. Robert Holleyman, P/CEO of BSA, stated in a release that "The House today took a much needed step toward protecting this nation's networks and information infrastructure ... This bill makes it clear that cyber criminals will be punished."
The Center for Democracy and Technology (CDT) and the Free Congress Foundation (FCF) opposed Section 102 of the bill. Brad Jansen of the FCF stated that "H.R. 3842 is unnecessary and duplicative. It reduces the accountability of the government in implementing provisions of the USA PATRIOT Act, leaving the door open even wider to allowing abuses of civil liberties and privacy rights of law abiding Americans."
Section 101 of the bill requires the U.S. Sentencing Commission to amend the federal sentencing guidelines with respect to violations of 18 U.S.C. § 1030, which pertains to crimes involving intentionally accessing a computer without authorization, or in excess of authorized access.
Section 102 of the bill, which is the most controversial item, amends 18 U.S.C. § 2702(b), regarding voluntary disclosure of the contents of communications. Currently, the statute provides that "A person or entity may divulge the contents of a communication ... (6) to a law enforcement agency ... (C) if the provider reasonably believes that an emergency involving immediate danger of death or serious physical injury to any person requires disclosure of the information without delay." The bill would allow the disclosure "to a Federal, State, or local governmental entity, if the provider, in good faith, believes that an emergency involving danger of death or serious physical injury to any person requires disclosure without delay of communications relating to the emergency."
Hence, the bill lowers the standard that ISPs and others must meet before they voluntarily release information -- from "reasonably believes" to "good faith". It also removes the immediacy requirement. It also expands the set of entities to which information can be released -- from "law enforcement agency" to "to a Federal, State, or local governmental entity".
Section 103 provides, in full, that "Section 2520(d)(3) of title 18, United States Code, is amended by inserting ‘‘or 2511(2)(i)’’ after ‘‘2511(3)’’." This amends the computer tresspasser provision of the recently enacted USA PATRIOT Act to allow providers to rely on the good faith defense.
Section 104 of the bill authorizes the appropriation of $125,000,000 for the FBI's National Infrastructure Protection Center (NIPC) for fiscal year 2003.
Section 105 of the bill amends 18 U.S.C. § 2512, which pertains to the advertising of certain illegal devices. The statute prohibits the advertising of "any electronic, mechanical, or other device, knowing or having reason to know that the design of such device renders it primarily useful for the purpose of the surreptitious interception of wire, oral, or electronic communications." Section 105 of the bill specifically includes advertising on the Internet.
Section 106 of the bill amends 18 U.S.C. § 1030(c), which pertains to punishment of crimes involving intentionally accessing a computer without authorization or in excess of authorized access. For example, the bill would increase the maximum penalty to life imprisonment for crimes where the "offender knowingly or recklessly causes or attempts to cause death".
Section 107 of the bill ensures that providers of communications remain covered under 18 U.S.C. § 2703(e), a "no cause of action provision," which protects providers from law suits when they legally assist law enforcement with an investigation under the new emergency disclosure exception created in the USA PATRIOT Act.
Section 108 of the bill amends 18 U.S.C. § 3125, regarding emergency use of pen registers and trap and trace (PRTT) devices. Currently, under 18 U.S.C. § 3125, law enforcement authorities may use PRTT devices for 48 hours in certain emergency situations, while court authority is being sought. Section 108 would expand the list of situations to include "an immediate threat to a national security interest" and "an ongoing attack on a protected computer (as defined in section 1030) that constitutes a crime punishable by a term of imprisonment greater than one year".
Section 109 of the bill raises penalties for illegally intercepting cell phone conversations, and increases penalties for unlawful access to stored communications.
Ridge Testifies on Information Security and FOIA
7/15. The House Select Committee on Homeland Security held another hearing on HR 5005, the Homeland Security Act of 2002. Tom Ridge, head of the President's Office of Homeland Security, testified. Ridge addressed information security and the proposed Freedom of Information Act exemption in his prepared testimony.
Ridge stated that "The President's proposal would transfer to the new Department the National Infrastructure Protection Center of the FBI, the National Communications System of the Department of Defense, the Critical Infrastructure Assurance Office of the Department of Commerce, the Computer Security Division of the National Institute of Standards and Technology, the National Infrastructure Simulation and Analysis Center of the Department of Energy, and the Federal Computer Incident Response Center of the General Services Administration.
Ridge also addressed the proposed Freedom of Information Act exemption of information regarding critical infrastructures voluntarily shared with the federal government. This is contained in Section 204 of the HR 5005 as introduced.
Ridge stated in his prepared testimony that "In order to build a system capable of protecting the Nation's critical infrastructure, the federal government must be able to gather information related to operational capacities and vulnerabilities and share resulting assessments or analysis with not only the private sector but also state and local officials. This problem is not new. Congressman Davis, along with many of his peers, has been focused on this issue for some time. Last week the Government Reform and Oversight Committee approved an amendment that the Congressman submitted providing a limited exemption for information voluntarily submitted to the government related to critical infrastructure. This amendment recognizes the need for an exemption while ensuring that the federal government's regulatory and enforcement efforts are in no way undermined. The Administration supports the intent and purpose of this amendment."
The House Select Committee on Homeland Security is scheduled to hold its third hearing on Tuesday, July 16, at 10:00 AM.
GAO Reports Weaknesses in Information Systems at FDIC
7/15. The General Accounting Office (GAO) released a report [PDF] titled "FDIC Information Security: Improvements Made but Weaknesses Remain". This report on the Federal Deposit Insurance Corporation (FDIC) identifies "weaknesses in its information systems controls that affect the corporation's ability to safeguard electronic access to critical financial and other sensitive information. These weaknesses place critical FDIC financial and sensitive personnel and bank examination information at risk of unauthorized disclosure, critical financial operations at risk of disruption, and assets at risk of loss."
For example, the GAO report finds that the "FDIC did not adequately limit access to data and programs by controlling mainframe access authority, providing sufficient network security, or establishing a comprehensive program to monitor access activities."
People and Appointments
7/15. The Senate confirmed Lavenski Smith to be a Judge of the U.S. Court of Appeals (8thCir).
More News
7/15. The Securities and Exchange Commission's (SEC) Division of Corporation Finance published Staff Legal Bulletin No. 14A, which announces that the SEC has changed its position regarding the application of Exchange Act Rule 14a-8, the shareholder proposal rule, to equity compensation plans. This will increase the opportunity of shareholders to approve or reject equity compensation plans. See, SEC release.
7/15. President Bush gave a campaign speech in Birmingham, Alabama at a Bob Riley for Governor event. He also gave a speech at the University of Alabama at Birmingham. He addressed trade promotion authority at both events. He said in the university speech that "We're good at a lot things in America, and we ought to be selling our products all around the world. It's time for Congress to quit talking and start acting, and giving me trade promotion authority so we can open up more markets and more people can find work right here in America."
State Department to Provide Internet Access to Afghan Government
7/13. The State Department announced that "U.S. Ambassador Robert P. Finn and Afghanistan’s Minister of Commerce, Sayed Mustafa Kazemi, signed an agreement in Kabul July 13 to provide the ministry with Internet connectivity and 10 computer terminals. The Center is expected to be functioning within one month. The grant for the equipment and Internet service, valued at $50,000, is provided through the U.S. Agency for International Development ..." See, release.
Senate Appoints Conferees on Trade Promotion Authority
7/12. The Senate appointed conferees to negotiate with the House conferees on trade legislation, including trade promotion authority. The Senate conferees are Sen. Max Baucus (D-MT), Sen. Jay Rockefeller (D-WV), Sen. John Breaux (D-LA), Sen. Charles Grassley (R-IA), and Sen. Orrin Hatch (R-UT). See, Cong. Rec., July 12, 2002, at Page S6728.
The House passed its bill HR 3005, the Bipartisan Trade Promotion Authority Act, by a vote of 215 to 214, on December 6, 2001. The Senate passed its bill, HR 3009, the Trade Act of 2002, on May 23, 2002. It includes trade promotion authority, renewal and expansion of the Andean Trade Preference Act, renewal of the Generalized System of Preferences, re-authorization and expansion of Trade Adjustment Assistance, and re-authorization of the U.S. Customs Service.
Sen. Grassley, the ranking Republican on the Senate Finance Committee, stated in a release that "This is a good development ... A conference on this historic legislation has lagged for too long. We need to get started. Our trading partners are moving on without us. Our workers and our economy need trade promotion authority to succeed. Now we have to get it done. With enough political will, I'm confident we can complete this conference by the August recess. I want the bill on the President's desk this year."
Trade promotion authority, as passed by the House, would give the President authority to negotiate trade agreements that the Congress could approve or reject, but not amend.
House Judiciary Committee Schedules Mark Up of TEACH Act
7/12. The House Judiciary Committee has scheduled a mark up of S 487, the Technology, Education and Copyright Harmonization Act, or TEACH Act, for Wednesday, July 17.
This bill would amend copyright law to extend the exemption for distance learning to cover the Internet and other digital delivery media. The bill would benefit rural schools where students are dispersed, colleges that are offering online courses to distant students, and busy adults who cannot attend their brick and mortar classroom sessions.
Title 17, Section 106, contains the basic protection for copyrighted works. It provides that "the owner of copyright under this title has the exclusive rights to do and to authorize any of the following: (1) to reproduce the copyrighted work in copies ..." However, Section 110 provides exemptions relevant to education. First, there is the exemption for face to face instruction. Second, there is the distance learning exemption, which was first enacted in 1976 with closed circuit TV based classroom type education in mind. S 487 expands this exemption to encompass Internet based classroom type education.
The Senate passed this bill by unanimous consent on June 7, 2001. The House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property promptly held a hearing, and then, on July 11, 2001, approved the bill by a vote of 12 to 0.
The delay in consideration by the full committee may be associated with an effort by library groups and Rep. Rick Boucher (D-VA) to expand the scope of the exemption to include nonprofit libraries.
PFF Hosts Panel Discussion on Spectrum Issues
7/12. The Progress and Freedom Foundation (PFF) hosted a panel discussion on spectrum issues on Capitol Hill. The speakers were Ed Thomas (head of the FCC's Office of Engineering and Technology), Mike Gallagher (Deputy Director of the NTIA), Kevin Krufky (office of Sen. Sam Brownback), Rudy Baca (Precursor Group), and Steven Berry (SVP for Governmental Affairs at the CTIA). The event was titled "When Wireless Grows Up: Mandates vs. Markets for a ‘Mature’ Industry".
Ed Thomas reviewed the work of the FCC's Spectrum Policy Task Force. Gallagher recited several broad principles that guide the NTIA (such as cooperation among federal agencies, efficiency, stronger receiver standards, and innovative use of spectrum) that he has addressed elsewhere. See, for example, speech of July 11.
Krufky stated that "it is time for Congress to step in and create a new framework" for spectrum. He said that "in the last fifty years we have done nothing." He also said that the wireless services sector needs more spectrum, and that "giving more ownership rights is more important". He also stated that the U.S. should be more aggressive in international proceedings pertaining to spectrum management.
Steve Berry stated that the U.S. wireless service providers need more spectrum to be able to provide Third Generation (3G) wireless services. He outlined the status of various spectrum bands under consideration for reallocation for 3G services. He then expressed his views about the incumbent user of some of the bands -- the Department of Defense (DOD).
Berry stated that "the DOD is in a time warp." He said that it "has not done particularly well in their past management" and that "DOD has to upgrade to new technologies". He also stated that the DOD "needs to use sound spectrum management" and that, to date, it has been "fairly pathetic".
Berry also advocated repealing the excise tax on phones, and lifting ownership caps.
Baca predicted that "probably we are going to see increasing regulatory forays and mandates" for the wireless sector. He also predicted that consolidation is not likely in the wireless industry.
The panel also discussed 802.11. WiFi, or 802.11b, is an IEEE standard for wireless Ethernet networks. It operates on unlicensed spectrum in the 2.4 GHz band at speeds of up to 11 mbps. See, FCC Rules, at Sec. 15.247, "Operation within the bands 902-928 MHz, 2400-2483.5 MHz, and 5725-5850".
Baca stated that "I think that it is a tenuous economic model." He cited, for example, that 802.11 networks "are so incredibly leaky."
In contrast, Gallagher stated that "there is tremendous promise because it relies upon the ingenuity of the American people." He stated, for example, that "you can turn a Pringles can into an 802.11 antenna that can reach for miles", and alerted the audience that there is a website that provides instructions.
802.11b operates at .5 watts, and has a range of up to about 300 feet under ideal conditions. Also, the data transfer rate declines with distance. However, using a pair of Pringles cans as directional antennas can boost the range to over 10 miles at an 11 mbps transfer rate. The Pringles can antennas can also be used to locate and access other peoples' wireless networks. See, however, 18 U.S.C. § 1030.
Sen. Hollings Writes Michael Powell Re Telecom Bankruptcies and Continuity of Service
7/12. Sen. Ernest Hollings (D-SC), the Chairman of the Senate Commerce Committee, wrote a letter to Federal Communications Commission (FCC) Chairman Michael Powell regarding bankruptcies and potential bankruptcies in the "telecom sector".
He wrote that "millions of consumers risk significant disruption of their basic telephone and data services", and asked what the FCC is doing to assure that there is no interruption in service.
He wrote that "The Communications Act provides explicit authority to the Federal Communications Commission to prevent service disruption. Section 214(a), in part, provides: ``No carrier shall discontinue, reduce, or impair service to a community, or part of a community, unless and until there shall first have been obtained from the Commission a certificate that neither the present nor future public convenience and necessity will be adversely affected thereby ...´´"
He also wrote that "To assure that all possible steps are being taken to prevent such debilitating disruptions, please provide any contingent plans that exist or steps the FCC has taken to ensure uninterrupted service. In addition, please discuss what, if any, coordination has occurred between the Commission and the state Public Utility Commissions. Moreover, should you believe that the FCC needs additional statutory authority to appropriately address this issue, please include that in your response."
In addition, Andy Davis, Communications Director for the Commerce Committee, announced that "the Committee is putting together a hearing on the issues facing the telecom industry in the wake of the WorldCom, Global Crossing and Qwest financial problems. The Committee's examination will extend beyond the accounting failures and address the impact on service and the telecom industry as a whole." He added that the hearing will be held during the week of July 29.
Qwest Files Section 271 Applications for Four Western States
7/12. Qwest Communications filed a Section 271 application with the Federal Communications Commission (FCC) for authorization to provide in region interLATA service in the states of Montana, Utah, Washington and Wyoming. See, Qwest release.
The FCC issued a public notice [PDF] setting August 1 as the deadline for public comments. This is WC Docket No. 02-189.
Court Grants Preliminary Injunction in Washington Post v. Gator
7/12. The U.S. District Court (EDVa) heard oral argument on plaintiff's motion for preliminary injunction in Washington Post v. Gator. The Court announced from then bench that it will issue a preliminary injunction order against the Gator Corporation on Monday, July 15.
Judge Hilton stated at the conclusion of the oral argument that "I find that there is a sufficient showing that there is a violation of the mark ..." He added that "irreparable harm is presumed". He concluded that "plaintiffs are entitled to a preliminary injunction" and that he would issue a written injunction order on Monday, July 15. Judge Hilton did not rule from the bench on other legal theories, such as copyright infringement and misappropriation.
The Washington Post, and other major news publishers with web sites, alleged web based trademark infringement, copyright infringement, and related claims in their complaint [99 pages in PDF] and motion for preliminary injunction. See also, Memorandum in Support of Plaintiffs' Motion for Preliminary Injunction [35 pages in PDF].
The plaintiffs, which include the Washington Post Newsweek Interactive Company, Washington Post Company, New York Times Company, Gannett Satellite (USA Today), Globe Newspaper Company (Boston Globe), Dow Jones & Company (Wall Street Journal), Smart Money, Tribune Interactive (LA Times and Chicago Tribune), and Knight Ridder Digital (Miami Herald and Philadelphia Inquirer), publish news stories and other original content. Defendant Gator displays content from plaintiffs' web sites. It also sells advertising to run on top of the plaintiffs' web pages.
The complaint states that Gator is "a parasite on the Web that free rides on the hard work and investments of Plaintiffs and other website owners. Gator makes money by placing advertisements for third parties on the Plaintiffs' websites without Plaintiffs' authorization."
The complaint continues that "Gator Corp. free rides on the valuable intellectual property rights of the Plaintiffs and the substantial investment Plaintiffs have made, and continue to make, to draw millions of visitors to their websites."
Plaintiffs plead trademark infringement, unfair competition, trademark dilution, copyright infringement, contributory copyright infringement, misappropriation, interference with prospective economic advantage, unjust enrichment, and violation of the Virginia Business Conspiracy Act.
Janet Collum, of the law firm of Cooley Godward, argued the case for Gator. She is resident in the firm's Palo Alto office, and chair of the litigation group. Mike Klisch, of the firm's Reston office, and others, were also present. Terence Ross, of the law firm of Gibson Dunn and Crutcher, argued the case for the publishers. He is a partner in the firm's Washington DC office, and a member of both its litigation and intellectual property sections. Hill Wellford sat second chair.
Ross came to court with two gigantic exhibits -- one showing a news story web page as displayed in one of his client's web sites, and the other showing the same web page as displayed by Gator, with a pop up ad.
Judge Claude Hilton, Chief Judge for the Eastern District of Virginia, presided. He was familiar with the arguments made in the briefs, and was active in questioning counsel.
For example, when counsel for Gator argued that alleged irreparable harm suffered by the publishers was a "legal fiction", Judge Hilton asked, "you think they are not entitled to the presumption that there is harm ...?"
When Collum argued that Gator had not infringed the publishers' marks, Judge Hilton asked "doesn't the charts that they just showed me show that you are using their marks ...?"
When Collum argued that there was no trademark infringement because "our ads don't care what is in the background", Judge Hilton stated, "maybe your ads have to come up when there is nobody's trademark in the background ... so you won't have your message on somebody else's mark".
Tech Law Journal spoke with Ross after the hearing. He stated that he is "satisfied, but not surprised" with the Court's ruling. He also stated that trial would likely occur in November of this year, and "certainly by the end of the year." However, he added that it could be expedited.
Ross also issued a release in which he stated that "Today's decision is an important first step for the plaintiffs. The judge has found that through its continuing practices, Gator is violating the intellectual property rights of these Web sites. This is only a first step in the legal process, but it sends a clear signal that the plaintiffs are likely to succeed on the merits of their claims against Gator."
Counsel for Gator declined to speak with TLJ, and did not respond to e-mail questions.
Powell and Consumer Electronics Association Continue Debate on DTV
7/12. The Consumer Electronics Association issued a release in which it stated that it wrote a letter to Federal Communications Commission (FCC) Chairman Michael Powell responding to his statement [PDF] of June 11 regarding transitioning to DTV.
Powell wrote on June 11 that "The missing piece of the DTV puzzle is the consumer electronics industry. We have not yet received a final response from the manufacturers on the phased-in inclusion of DTV tuners in new sets. I hope they will join their industry colleagues and come forward with real and tangible commitments to advance the transition."
FCC Chairman Powell also released a statement [PDF] on Friday, July 12. He wrote that "The CE industry's response on DTV tuners is so limited, and loaded down with so many conditions, that I believe it amounts to no commitment at all. Not only does the CE industry demand that certain issues be resolved before they will act, they demand they be resolved to their satisfaction. Other industries could have made similar demands. Thankfully, they did not. I hope that the CE industry will reconsider its position and join with its industry colleagues in the effort to make progress today while we continue to work on issues that will take longer to resolve."
However, Powell also wrote, "I commend Zenith for its courage in publicly supporting a phased-in tuner requirement and the persuasive case it makes for why such a requirement will benefit consumers."
NTIA Director Writes Powell Re Analog Wireless Rules
7/12. Nancy Victory wrote a letter to Michael Powell in which she recommended that the Federal Communications Commission (FCC) eliminate its rules requiring that "that each cellular carrier continue to provide an AMPS-type analog service so long as the carrier continues to have analog customers or roamers on its system."
She elaborated that "Given the widespread availability of digital cellular technologies, which are undeniably more spectrally efficient and secure than analog transmissions, it seems contrary to the public interest for the Commission to continue to mandate the use of this old technology. Further, not only is the original rationale for the requirement (to ensure nationwide roaming) no longer necessary, but the continued mandate to use this less efficient technology constrains innovation and places cellular carriers at a distinct disadvantage vis-à-vis their PCS competitors."
Victory is director of the National Telecommunications and Information Administration (NTIA), a part of the Department of Commerce. Powell is Chairman of the FCC.
FCC Grants Waiver for GPR UWB Devices
7/12. The Federal Communications Commission's (FCC) Office of Engineering and Technology (OET) announced that it adopted an order "establishing a waiver procedure that will permit the continued operation of Ground Penetrating Radar (GPR) devices and wall imaging devices. Under the new procedure, eligible users may operate under a blanket waiver to Part 15 regulations provided that they register their devices with the Commission. The waiver will be contingent on no evidence of harmful interference to authorized services. The Order denies a Motion for Interim Stay of Enforcement of the Commission's UWB rules filed by the Ground Penetrating Radar Industry." See, FCC release [PDF].
Rep. Billy Tauzin (R-LA), Chairman of the House Commerce Committee, who had requested such a waiver, issued a release regarding the FCC's decision. He stated that "Based on the information we have received from the FCC, we are pleased that the Commission has decided to grant a blanket waiver for Ground Penetrating Radar (GPR) devices. We look forward to reviewing the order, but if it grants a blanket waiver to all GPR devices that operate at the Class B limits, as we hope, the Commission will have corrected a serious flaw in its original ultra-wideband order."
DOJ Official Addresses Antitrust Compliance
7/12. William Kolasky gave a speech titled "Antitrust Compliance Programs: The Government Perspective" to the Practicing Law Institute in San Francisco, California.
He stated that "investigating and prosecuting hard core cartels has always been, and remains, our number one enforcement priority. Cartels -- whether in the form of price fixing, output restrictions, bid rigging, or market division -- raise prices and restrict supply, enriching producers at consumers' expense and acting as a drag on the entire economy. In our view, these are crimes, pure and simple, and those who perpetrate them are criminals who belong in jail."
He then spoke about "how to design a compliance program to prevent and detect antitrust crimes."
Kolasky is a Deputy Assistant Attorney General in the Antitrust Division of the Department of Justice.
People and Appointments
7/12. The U.S. Chamber of Commerce hired Walter Shaub as science advisor to oversee science, technology and data quality issues. see, release.
Powell Pressures Consumer Electronics Industry on DTV Transition
7/11. Federal Communications Commission (FCC) Chairman Michael Powell released a statement on DTV transition. He wrote that "In April I challenged several industries to take specific steps to move the DTV transition forward. The plan challenged major broadcast and cable networks to create more compelling digital content, equipment manufacturers to produce more television sets with digital tuners, and broadcasters, cable operators and satellite providers to make digital content more accessible to consumers." See, Chairman Powell's April statement [PDF].
He continued that "Virtually every industry -- cable, broadcast and satellite -- has either fully embraced my plan, or made real commitments to advance the transition. I deeply appreciate these efforts."
However, he added that "The missing piece of the DTV puzzle is the consumer electronics industry. We have not yet received a final response from the manufacturers on the phased-in inclusion of DTV tuners in new sets. I hope they will join their industry colleagues and come forward with real and tangible commitments to advance the transition."
Rep. Tauzin Writes Powell Re Waiver of UWB Rules for GPR
7/11. Rep. Billy Tauzin (R-LA), the Chairman of the House Commerce Committee, and six other members of the Committee, wrote a letter to Federal Communications Commission (FCC) Chairman Michael Powell regarding FCC rules affecting ground penetrating radar.
The seven Congressmen wrote "to express our strong concerns regarding the consequences of the recent FCC revision of Part 15 of the Commission's rules regarding ultra wideband (UWB) transmission systems (FCC 02-48 released April 22, 2002).  Specifically, the new rules could have the effect of eliminating numerous existing businesses that employ Ground Penetrating Radar (GPR). In order to prevent this, we believe that the FCC should immediately provide a blanket waiver for the manufacture and operation of GPR equipment at the Class B emissions limit with no other restrictions."
They also pointed out that "By its very nature, GPR is pointed at the ground (not into the air) for limited periods of time, thus making any interference unnoticeable."
See, FCC's First Report and Order [118 pages in PDF] in the proceeding titled "In the matter of Revision of Part 15 of the Commission’s Rules Regarding Ultra Wideband Transmission Systems", and numbered ET Docket 98-153.
NTIA Director Addresses Broadband, Spectrum and ICANN Issues
7/11. Nancy Victory, head of the National Telecommunications and Information Administration (NTIA), gave speech at the GBDe Sherpa meeting in Washington DC in which she addressed broadband, spectrum management and ICANN reform.
She again addressed the theme that rights of way obstacles are delaying broadband deployment. She said that "The Administration has also been working to identify and eliminate unnecessary government impediments to broadband competition and deployment. One issue where NTIA is taking the lead is on rights of way management. This is one issue where all sectors of the broadband industry -- Bell Operating Companies, CLECs, cable providers, overbuilders, and wireless providers -- actually share the same point of view. All participants are concerned that restrictions by certain municipalities and federal government landowners on accessing public rights of way and tower sites might be inhibiting or at least delaying broadband network construction."
She also predicted that "the FCC will be taking action in one or all of the broadband proceedings by the end of the year."
She next addressed spectrum management by the NTIA and other federal agencies. She said that the various government agencies must work collaboratively, and "develop policies that encourage spectrum efficiency".
She also said that government "must establish forward looking policies that enable technological advances and eliminate legacy regulations that stand in the way of innovation", such as "creating secondary markets that would permit parties to ``lease´´ their spectrum to others", and unlicensed spectrum bands.
She also stated that ICANN should focus on core DNS management responsibilities. She said that "ICANN was formed by private sector interests in 1998 to bring more coordination and sustainability to the domain name management system, as the Internet grew into a large-scale global network. The Department entered into a Memorandum of Understanding with ICANN to carry out these functions. Recently, there have been calls for ICANN to review its mission, structure and processes for their efficacy and appropriateness in light of the needs of today's Internet. ICANN itself has initiated its own process of reform. The Department believes these discussions are healthy and essential to ensuring the best path for stable and secure Internet management in the future. My goal is to ensure that ICANN reforms take place in a timely manner, are focused on core DNS management activities, and instill confidence and legitimacy in ICANN's operations."
Also, on July 8, Michael Gallagher, Deputy Director of the NTIA, gave a speech at a Center for Strategic and International Studies event on spectrum management. He addressed government management, Third Generation wireless services, ultra wide band, receiver standards, introduction of some market like approaches, and the international spectrum management process.
SEC Official Addresses Accounting, Governance, and Reporting
7/11. Alan Beller, Director of the Securities and Exchange Commission's (SEC) Division of Corporation Finance, gave a speech to the American Society of Corporate Secretaries in Toronto, Ontario.
He reviewed recent accounting scandals involving Enron, WorldCom and other companies. He then addressed increased accountability for corporate CEOs and CFOs, including certification of annual and quarterly reports, corporate governance issues, and expanding the reporting requirements on Form 8-K.
With respect to filing requirements, Beller stated that "In this era of investor access to sophisticated trading and information technology and instant communications, investors demand and require more current information regarding the most important events about a company. Today we are facing an environment where preventing unfair informational advantage, which has historically been the objective of many of the Commission's disclosure requirements, is not enough. We must promote affirmative current disclosure to enable investors to make the best capital allocation and investment decisions."
House Commerce Committee Adds Cyber Security Program to Homeland Security Bill
7/11. The House Commerce Committee amended and approved those portions of HR 5005, the Homeland Security Act, that may fall within its jurisdiction. The Committee approved its Committee Print [PDF] by a unanimous voice vote.
This version of the bill adds new cyber security responsibilities for the Under Secretary for Information Analysis and Infrastructure Protection of the new Department of Homeland Security (DHS). It creates an Under Secretary for Research, Development, and Technology Systems. It transfers the Computer Security Division to the DHS. And, it leaves out any reference to the creation of any new Freedom of Information Act exemption.
Cyber Security. The version of the bill approved by the Committee contains additional language in Title II, which pertains to information analysis and infrastructure protection. It adds a new Section 205, titled "Federal Cybersecurity Program".
Rep. Billy Tauzin (R-LA), the Chairman of the Committee, stated that this "will be a resource to other Federal agencies to help identify and correct weaknesses in critical Federal computer systems." He said that it was drafted with input from Rep. Heather Wilson (R-NM), Rep. Jane Harman (D-CA), and others.
This section provides that "The Secretary, acting through the Under Secretary for Information Analysis and Infrastructure Protection, shall establish and manage a program to improve the security of Federal critical information systems ..."
It further provides that the duties under this section are "(1) to evaluate the increased use by civilian executive agencies of techniques and tools to enhance the security of Federal critical information systems, including, as appropriate, consideration of cryptography; (2) to provide assistance to civilian executive agencies in protecting the security of Federal critical information systems, including identification of significant risks to such systems; and (3) to coordinate research and development for critical information systems relating to supervisory control and data acquisition systems, including, as appropriate, the establishment of a test bed."
This new section also provides that "the Secretary shall establish, manage, and support a Federal information system security team whose purpose is to provide technical expertise to civilian executive agencies to assist such agencies in securing Federal critical information systems by conducting information security audits of such systems, including conducting tests of the effectiveness of information security control techniques and performing logical access control tests of interconnected computer systems and networks, and related vulnerability assessment techniques."
FOIA Exemption. Section 204 of the bill, as introduced, provides, in full, that "Information provided voluntarily by non-Federal entities or individuals that relates to infrastructure vulnerabilities or other vulnerabilities to terrorism and is or has been in the possession of the Department shall not be subject to section 552 of title 5, United States Code." The version passed by the House Commerce Committee leaves out this section.
Rep. John Shimkus (R-IL) said that "freedom of information might be a freedom to publish, which might be a freedom to target. And I think that that is a valid concern, especially as we talk about cyber security, in working with corporate entities."
Rep. Billy Tauzin (R-LA), the Chairman of the Committee, then explained the reason that Section 204 is not in the committee version of the bill. He said that there is concern "about publishing unnecessary road maps for those who might want to harm this country." He then said that "we understand that the administration is working with the House in regards to that issue, and we will have language for us by the time we get to the floor. And, I suspect, we will have a chance to revisit this at the proper time. The gentleman's concerns are indeed valid."
Harman Amendment. Rep. Jane Harman (D-CA) offered, but withdrew, an amendment that would have established a single point of entry at the new DHS for private sector entities with commercial technologies for homeland security.
Her amendment would have amended Title III of the bill, pertaining to research and development. Specifically, it would have amended Section 301, which lists the responsibilities of the Under Secretary for Research, Development, and Technology Systems, by adding a new paragraph 8.
Her amendment provides that the Under Secretary shall have responsibility for "serving as a single point of entry for private sector entities with commercial technologies for homeland security, through which the Secretary -- (A) identifies homeland security commercial technological needs and capabilities to improve federal, state, or local homeland security activities; (B) reviews solicited and unsolicited homeland security commercial technology proposals; (C) directs homeland security commercial technology proposals to appropriate Federal entities for additional review, purchase, or use; and (D) advises the Secretary on the development or streamlining of homeland security procurement policies."
Computer Security Division. President Bush's original proposal provided for the transfer of the National Institute of Standards and Technology's (NIST) Computer Security Division (CSD) to the new DHS. On July 10, the House Science Committee (HSC), passed a version of the bill that would keep the CSD at the NIST. The House Commerce Committee's bill follows the President's proposal of transferring the CSD to the DHS. The Computer & Communications Industry Association (CCIA) and Members of Congress who are active on technology issues have opposed transferring the CSD to the DHS.
Markey Amendments. Much of the time at the two hour mark up was devoted to consideration of an amendment offered by Rep. Ed Markey (D-MA) regarding radioactive materials. After a lively and lengthy debate, it was ultimately ruled not germane to the underlying bill.
Rep. Markey also offered, but withdrew, a second amendment [PDF] that would have added a new Section 206 to provide that "The Secretary shall require that the private sector provide at least 50 percent of the costs of private sector compliance with Federal requirements with respect to the security of critical infrastructure owned and operated by the private sector."
Government Reform Committee Revises FOIA Exemption in DHS Bill
7/11. The House Government Reform Committee marked up HR 5005, the Homeland Security Act of 2002. This Committee's version of the bill includes a new Section 214 which provides, among other things, a Freedom of Information Act exemption for certain critical infrastructure information voluntarily shared with the federal government. It would replace Section 204 of the bill as introduced.
Section 214 provides, in part, that "Notwithstanding any other provision of law, critical infrastructure information (including the identity of the submitting person or entity) that is voluntarily submitted to a covered Federal agency for use by that agency regarding the security of critical infrastructure and protected systems, if analysis, warning, interdependency study, recovery, reconstitution, or other informational purpose, when accompanied by an express statement specified in paragraph (2) -- (A) shall be exempt from disclosure under section 552 of title 5, United States Code (commonly referred to as the Freedom of Information Act); (B) shall not be subject to any agency rules or judicial doctrine regarding ex parte communications with a decision making official; (C) shall not, without the written consent of the person or entity submitting such information, be used directly by such agency, any other Federal, State, or local authority, or any third party, in any civil action arising under Federal or State law if such information is submitted in good faith; (D) shall not, without the written consent of the person or entity submitting such information, be used or disclosed by any officer or employee of the United States for purposes other than the purposes of this subtitle, except ..." in certain enumerated situations.
Select Committee Holds Hearing on Homeland Security Act
7/11. The House Select Committee on Homeland Security held a hearing on HR 5005, the Homeland Security Act. Secretary of State Colin Powell, Secretary of Defense Donald Rumsfeld, Secretary of Treasury Paul O'Neill, and Attorney General John Ashcroft testified in support of the creation of the new Department of Homeland Security.
See, prepared testimony of witnesses: Colin Powell, Paul O'Neill, Paul Wolfowitz (Deputy Secretary of Defense), and John Ashcroft. See also, prepared statements of Committee members: Rep. Dick Armey
(R-TX), Rep. Tom DeLay (R-TX), Rep. J.C. Watts (R-OK), Rep. Deborah Pryce (R-OH), Honorable Rob Portman (R-OH), Rep. Nancy Pelosi (D-CA), Rep. Martin Frost (D-TX), Rep. Robert Menendez (D-NJ), Rep. Rosa DeLauro (D-CT).
House Passes Enterprise Integration Act
7/11. The House passed HR 2733, the Enterprise Integration Act, by a vote of 397-22. See, Roll Call No. 293. It would authorize the National Institute of Standards and Technology (NIST) to work with major manufacturing industries on an initiative of standards development and implementation for electronic enterprise integration.
The bill's sponsor, Rep. James Barcia (D-MI), stated that the bill "will lead to dramatically shortened design cycle times and reduce the costs of manufacturing complex products. Information on design flaws will be instantly transmitted from repair shops to manufacturers and their supply chains. Companies will be able to exchange information of all types with their suppliers at the speed of light."
The bill also authorizes the appropriation of $47 Million over four years to the NIST.
Senate Judiciary Committee Delays Action on Anticounterfeiting Bill
7/11. The Senate Judiciary Committee held an executive business meeting. The agenda included mark up of S 2395, the Anticounterfeiting Amendments of 2002. The Committee lacked a quorum, and held over the matter. However, the Committee did circulate an amendment in the nature of a substitute which substantially revises the bill. The bill prohibits trafficking in, and tampering with, authentication features of copyrighted works.
Abernathy Addresses Nascent Services Doctrine
7/11. Federal Communications Commission (FCC) Commissioner Kathleen Abernathy gave a speech titled "The Nascent Services Doctrine" to the Federal Communications Bar Association in New York City on July 11.
She stated that "I have developed the Nascent Services Doctrine. This doctrine holds that regulators should exercise restraint when faced with new technologies and services. Such restraint should facilitate the development of new products and services without the burden of anachronistic regulations, and in turn promote the goal of enhancing facilities based competition. Once the new facilities based competitor has demonstrated its viability, regulators must reexamine the overall regulatory scheme applicable to all providers in the marketplace in light of the new provider to assess whether existing regulations can be modified or repealed."
People and Appointments
7/11. The Senate Commerce Committee scheduled a hearing for Jonathan Adelstein, Senate Majority Leader Tom Daschle's (D-SD) choice to be a Commissioner of the Federal Communications Commission (FCC). The hearing will be held on Tuesday, July 16 at 2:30 PM.
7/11. Alden Adkins was named Associate Director of the Securities and Exchange Commission's (SEC) Division of Market Regulation. He succeeds Belinda Blaine, who left the SEC last month. He previously worked for the law firm of Bingham McCutchen. Before that, he worked for the National Association of Securities Dealers. And before that, he worked at the SEC. See, SEC release. (Bingham Dana, a Boston based firm, and McCutchen Doyle, a California firm, merged on July 1, 2002 to form Bingham McCutchen. See, release [PDF].)
7/11. President Bush nominated Alia Ludlum to be a judge of the U.S. District Court for the Western District of Texas. See, White House release. She is a former prosecutor. She is currently a U.S. Magistrate Judge in Del Rio, Texas.
7/11. The Senate Judiciary Committee approved without objection the nomination of John Rogers to be a judge of the U.S. Court of Appeals (6thCir).
7/11. President Bush nominated Ben Bernanke a Member of the Board of Governors of the Federal Reserve System for the unexpired term of fourteen years from February 1, 1990.
7/11. President Bush nominated Donald Kohn to be a member of the Board of Governors of the Federal Reserve System for a term of fourteen years from February 1, 2002.
More News
7/11. Rep. Mike Oxley (R-OH), Chairman of the House Financial Services Committee, wrote a letter [PDF] to Michael Powell, Chairman of the Federal Communications Commission (FCC) regarding FCC oversight of WorldCom and other telecommunications carriers.
7/11. The Federal Communications Commission's (FCC) Daily Digest for July 11 states that the FCC's Office of Plans and Policy (OPP) released OPP Working Paper No. 36 titled "The Potential Relevance to the United States of the European Union's Newly Adopted Regulatory Framework for Telecommunications". However, the provided hyperlink [PDF] is not active. For more information, contact the author, Scott Marcus, at 202 418-0611.

Go to News from July 6-10, 2002.