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News from December 26-31, 2002

FCC Issues Order in Dominant Non-Dominant Proceeding

12/31. The Federal Communications Commission (FCC) released a Memorandum Opinion and Order [25 pages in PDF] in its proceeding titled "In the Matter of Review of Regulatory Requirements for Incumbent LEC Broadband Telecommunications Services". This is CC Docket No. 01-337. This is also known as the dominant non-dominant notice of proposed rulemaking (NPRM).

In this Order the FCC granted SBC forbearance from tariff regulation of advanced services that it provides through its advanced services affiliate. However, the FCC declined to grant SBC forbearance from dominant carrier regulation in the provision of advanced services.

The FCC wrote, "In this Order, we address SBC Communications Inc.'s (SBC's) petition for forbearance from the application of tariffing requirements to its provision of advanced services. We grant SBC’s petition to the extent it seeks forbearance from tariff regulation of advanced services that SBC provides through its advanced services affiliate, Advanced Solutions, Inc. (ASI), which provides intraLATA advanced services throughout the SBC region. We otherwise deny SBC's petition without prejudging in any way the issues in the rulemaking commenced under the Incumbent LEC Broadband Notice." (Footnotes omitted.)

SBC filed its petition for forbearance with the FCC on October 3, 2001. On December 12, 2001 the FCC adopted its NPRM [PDF] instituting the present proceeding. See also, December 12, 2001 FCC release.

This is just one of several proceedings at the FCC that relate to the regulatory classification of broadband services. The other three are the triennial review of unbundled network elements, the wireline broadband NPRM, and the cable modem service NPRM. See also, TLJ story titled "So, Just What Are All of These FCC Broadband Proceedings About Anyway?", December 12, 2002.

The FCC published a notice in the Federal Register (January 15, 2002, Vol. 67, No. 10, at Pages 1945 - 1947) regarding this dominant non-dominant NPRM. The notice stated that the FCC "seeks comment on changes, if any, the Commission should make to its traditional regulatory requirements for incumbent local exchange carriers' (LECs) broadband service. In particular, it asks: What the relevant product and geographic markets should be for broadband services; whether incumbent LECs possess market power in any relevant market; and whether dominant carrier safeguards or other regulatory requirements should govern incumbent LECs provision of broadband service."

Commissioner Kevin Martin wrote a dissenting statement which is attached to the FCC's order (which is hyperlinked above). He stated that the FCC's Order "fails to act on the heart of SBC's requested relief and puts off for another day any discussion, economic market analysis, or decision on whether SBC is nondominant in its provision of advanced services." He added that the FCC's order is also inconsistent with several recent opinions of the U.S. Court of Appeals.

Commissioner Martin has repeatedly complained about the FCC's delay in resolved its pending broadband proceedings. See, for example, speech [13 pages in PDF] of December 12. He also stated that he would like to see the FCC "treat DSL services similar to cable modem service".

Commissioners Michael Copps and Jonathan Adelstein wrote a joint concurring statement, in which they stated that they concurred, with "reluctance and disappointment". They added that "Some may read this Order to prejudge our decision in the broader proceeding in which we are examining whether incumbents are dominant in their provision of broadband. We want to express explicitly that this Order does not support such a conclusion."

FCC Releases Annual MVPD Report

12/31. The Federal Communications Commission (FCC) released its Ninth Annual Report [99 pages in PDF] in its proceeding titled "In the Matter of Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming". This is MB Docket No. 02-145.

This report on multichannel video programming distributors (MVPDs) covers cable television, direct broadcast satellite (DBS), home satellite dishes (HSD), multichannel multipoint distribution service (MMDS), satellite master antenna television (SMATV) and broadcast television. The report also addresses existing and potential distribution technologies for video programming, including the Internet.

The report states that the number of cable subscribers grew from 68.55 Million in June of 2001 to 68.8 Million in June of 2002, a .4% increase. The number of DBS subscribers grew from 16.1 Million to 18.2 Million, a nearly 13% increase. The FCC report attributes DBS growth in part to the passage of the Satellite Home Viewer Improvement Act of 1999 (SHVIA), which gave DBS operators authority to distribute local broadcast television stations in their local markets.

The report also found that "Over the last year, the number of subscribers to MMDS and large dish satellite service (HSD) continue to decline. The participation of incumbent local exchange carriers in the distribution of video programming also continue to decline. The number of subscribers to open video systems (``OVS´´) and private cable has remained relatively stable, although their market share remains small."

The report states that "cable rates continued to rise ... 6.3% compared to a 1.1% increase in the Consumer Price Index". However, the report also states that "the number of video and non-video services offered increased, and programming costs increased."

The report also states that "Consolidation within the cable industry continues as cable operators acquire and trade systems. The ten largest operators served about 85% of all U.S. cable subscribers."

The report also addresses the convergence of MVPDs and Internet service. It states that "Cable operators continue to build-out the broadband infrastructure that permits them to offer high-speed Internet access. The most popular way to access the Internet over cable is still through the use of a cable modem and personal computer, though a small number of users continue to access the Internet through their television and a specially designed set-top box, rather than the personal computer. Virtually all of the major MSOs offer Internet access via cable modems in portions of their service areas. Like cable, the DBS industry is developing ways to bring advanced services to their customers. For example, DirecTV currently offers one-way and two-way satellite delivered Internet service under the brand name DirecWay. Many MMDS and private cable operators also offer Internet access services. In addition, broadband service providers continue to build advanced systems specifically to offer a bundle of services, including video, voice, and high-speed Internet access."

Robert Sachs, P/CEO of the National Cable Television Association (NCTA), stated in a release that "The report confirms there's increasing competition in the multichannel video marketplace, where three out of four consumers choose cable, while one in four choose a competitor, and where all consumers benefit through great new services, content, and technology."

People and Appointments

12/31. Gary Winnick resigned as Chairman of the Board of Directors of Global Crossing. The company, which filed a Chapter 11 bankruptcy petition on January 28, 2002, also stated in a release that "It is anticipated that independent directors Jeremiah D. Lambert and Myron E. Ullman, III will be elected as Co-Chairmen of the Board of Directors, also effective today."

MSC.Software Seeks FTC Approval of Divestiture to EDS

12/30. MSC.Software filed petition [8 page PDF scan] with the Federal Trade Commission (FTC) for approval its proposed divestiture of Nastran software to EDS.

The petition is titled "Petition of MSC.Software Corporation for Approval of Proposed Divestiture". It was filed in the FTC's administrative proceeding titled "In the Matter of MSC.Software Corporation". This is FTC Docket No. 9299.

On August 14, 2002, the FTC filed an administrative complaint against MSC alleging violations of Section 5 of the Federal Trade Commission Act (FTCA) and Section 7 of the Clayton Act in connection with its 1999 acquisitions of Universal Analytics, Inc. (UAI) and Computerized Structural Analysis & Research Corp. (CSAR).

MSC sells simulation software, and related services and systems. The FTC stated that MSC was the dominant supplier of Nastran software, which is an engineering simulation software program used in the aerospace and automotive industries, with an estimated 90% of worldwide revenue; UAI and CSAR each had sales of about 5% of worldwide revenue. MSC then acquired UAI and CSAR.

In August, the FTC and MSC also entered into an Agreement Containing Consent Order [22 pages PDF] which provides that MSC must divest at least one copy of its current advanced Nastran software, including the source code. The divestiture will be through royalty free, perpetual, non-exclusive licenses to one or two acquirers who must be approved by the FTC.

MSC nows requests that the FTC approve a divestiture of certain assets to Unigraphics Solutions, a wholly owned subsidiary of Electronic Data Systems (EDS). The FTC stated in a release that "These assets include a perpetual, worldwide, royalty-free, non-exclusive license to the August 14, 2002 version of the software program MSC.Nastran, to certain other assets related to that software program, and to all intellectual property rights of any kind acquired by MSC as a result of MSC's acquisitions of Universal Analytics, Inc. (UAI) and Computerized Structural Analysis & Research Corp. (CSAR)."

MSC stated in a release that "The financial terms of the transaction between MSC.Software and EDS will not be disclosed at this time."

The FTC still has to approve the proposed divestiture. Public comments on the proposed divestiture are due by February 3, 2003. For more information, contact Daniel Ducore of the FTC's Bureau of Competition at 202 326-2526.

FTC Charges Quicken Loans with Violation of FCRA

12/30. The Federal Trade Commission (FTC) filed an administrative Complaint [8 pages in PDF] against Quicken Loans, an online lender, alleging that it violated the Fair Credit Reporting Act (FCRA). The FTC and Quicken Loans also settled the matter. See, Agreement Containing Consent Order [7 pages in PDF],

Section 615 of the FRCA, 15 U.S.C. § 168lm, requires lenders that take adverse action based in whole or in part on information in a consumer's credit report to notify the consumer of the action taken, including providing the name, address, and telephone number of the consumer reporting agency from which the consumer's credit report was obtained, and the consumer’s right to obtain a free copy of the credit report, and his right to dispute the accuracy or completeness of information.

Quicken Loans is the home loan lender of Intuit. It offers loans to consumers through its web site. The complaint alleges that Quicken Loans did not provide consumers with the required notice of adverse actions.

Quicken Loans and the FTC also simultaneous entered into an agreement settling the matter. Under the agreement, Quicken Loans agrees to provide notice of adverse actions. The agreement does not impose a fine.

Howard Beales, Director of the FTC's Bureau of Consumer Protection, stated in a release that "Consumers who are denied credit or other benefits based on their credit report have a right to know, and lenders have a legal responsibility to tell them ... An adverse action notice is the key to maintaining the accuracy of sensitive personal information and the signal to check your credit report for accuracy."

More News

12/30. The Consumers Union issued a wide ranging list of recommendations for the Congress and state legislatures pertaining to the collection and use of personal information, and identity theft. The list includes: "Give consumers control over the sharing of personal financial information among companies" and "Restrict the commercial use of social security numbers as identification numbers." See, CU release.

More News

12/28. The Superior Court of the State of California for the County of Los Angeles issued a notice of a proposed settlement in Smiley v. ICANN, Case No. BC 254659, and ePrize v. NeuLevel, Case No. BC 257632. This is the .biz domain name lottery class action litigation. The complaints allege that NeuLevel became unjustly enriched and violated unfair competition and consumer protection laws by distributing domain names in the .biz registry through an illegal lottery. The ICANN published a copy of the notice in its web site.

Court Allows EPIC Discovery on Whether OHS is Agency for FOIA Purposes

12/26. The U.S. District Court (DC) issued an opinion [14 page PDF scan] in EPIC v. Office of Homeland Security, a Freedom of Information Act (FOIA) case.

The Electronic Privacy Information Center (EPIC) submitted a request on March 20, 2002 for records to the Office of Homeland Security (OHS) pursuant to the FOIA, 5 U.S.C. § 552. The OHS did not produce the requested records. The EPIC filed a complaint with the District Court against the OHS and Tom Ridge.

The position of the OHS is that it does not have to comply with FOIA requests because the FOIA only applies to "agencies". The FOIA, as interpreted by the courts, does not require advisers to the President, as opposed to agencies, to comply. The OHS filed motions to dismiss and for summary judgment. It filed no affidavits or other sworn testimony in support. Instead, it submitted copies of Presidential directives and an executive order. In response, the EPIC sought discovery on issues relating to whether or not the OHS is an agency within the meaning of the FOIA. The OHS opposed such discovery.

In the present order, the Court denied the motions to dismiss and for summary judgment. It wrote that the OHS "briefs and exhibits filed in support do not foreclose the possibility that OHS is an agency. ... Given that Defendants have failed to provide evidence that is definitive on the issue of the OHS's agency status and the fact the relevant evidence on this issue rests solely with the Defendant, if this Court is to rule on Defendants' Motion to Dismiss it ``must give the plaintiff the opportunity to discover evidence ...´´" (Citation omitted.)

The Court ruled that the EPIC may have sixty days "in which to complete discovery related solely to whether or not OHS is an agency." The Court added that "Discovery may not extend into the merits of this case ..."

Go to News from December 21-25, 2002.

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