News from July 16-20, 2003

Commerce Department Releases Report on IT Training

7/19. The Department of Commerce (DOC) released a report [233 pages in PDF] titled "Education and Training for the Information Technology Workforce: Report to Congress from the Secretary of Commerce".

Secretary of Commerce Donald Evans stated in a release that "In this report, we lay out the landscape, with the hope that policymakers in government, education, and business will find this information useful as they develop education and training policies and programs designed to ensure a world-class IT workforce for the United States ... We also hope that the information will help make choices clearer for IT workers seeking skills and managing their careers, and for employers seeking training for their workforce."

The Congress required the DOC to "conduct a review of existing public and private high-tech workforce training programs in the United States", and to "submit a report to Congress setting forth the findings of the study". See, Section 115 of the American Competitiveness in the 21st Century Act of 2000. This is S 2045 (106th Congress), which became Public Law No. 106-313. President Clinton signed the bill on October 17, 2000.

The primary purpose of this bill was to temporarily increase the annual cap on the number of H1B visas, which are issued to, among others, high tech workers.

The report reviews in detail information technology (IT) training programs in four year colleges, masters programs, two year colleges, business schools, and in a variety of non-academic settings. The report also reviews in detail what employers are looking for when they hire IT workers.

The report finds that "Employers seek workers who possess a specific combination of technical skills and experience, often coupled with a college degree, soft skills, and business or industry knowledge. Typically, employers prefer job candidates with the exact skill fit who require no additional training."

"There is no single path to prepare a worker for a professional IT job", the report states. "The IT education and training infrastructure has grown significantly in size and scope over the past decade. Today, there is a vast array of IT education and training opportunities, with different types of programs and curricula serving different purposes."

Some of the report's specific findings identify weaknesses in IT training. For example, the report states that "some IT workers who participated in this review said that universities and colleges -- particularly public institutions -- often have technical curricula, equipment, and software that are out of date."

The report also states that "Another problem for IT education and training providers is getting and retaining instructors skilled in the latest or "hot" technologies who can teach these skills to students. Schools have difficulty competing for these instructors against private companies that can pay higher wages."

The report also found that "Employers can obtain the skilled IT workers they need either by hiring workers who already have the skills or by training workers in those skills. ... Surveys by the Information Technology Association of America and the WSA (a large state-wide technology trade association based in Seattle) suggest that, when faced with difficulties in finding workers with needed skills, employers often do not consider training a high priority as a coping strategy." (Parentheses in original.)

The primary authors of the report are Carol Ann Meares and John Sargent of the Office of Technology Policy at the DOC.

9th Circuit Rules on Subject Matter Jurisdiction in Contract and Copyright Cases

7/18. The U.S. Court of Appeals (9thCir) issued its opinion [14 pages in PDF] in Scholastic Entertainment v. Fox, analyzing whether a case involving interdependent copyright and contract claims "arises under" the federal copyright laws for the purposes of 28 U.S.C. § 1338(a). The Appeals Court, following its precedent in T.B. Harms and other cases, affirmed the District Court's dismissal of the case for lack of subject matter jurisdiction.

Scholastic Entertainment makes and markets movies, TV, and video programming based on children's literary works. It entered into a contract with Fox Broadcasting Company (FBC) under which it agreed to produce a TV series based on the Goosebumps children's books, and to license the rights to exhibit and distribute the shows to Fox Broadcasting Company. The Appeals Courts wrote that "Fox was to air the initial exhibition of the shows on Fox Broadcasting and later distribute the series to other television outlets for a period of 15 years. In addition to the original exhibition fees, Scholastic was entitled to a portion of the profits made during the distribution phase."

Scholastic made 62 half hour TV programs and six one hour specials. Fox paid an initial exhibition fee of approximately $33 Million. Later, Scholastic learned that the Fox Family Channel (FFC), which was not a party to the contract, was airing the Goosebumps series. Neither FFC nor FBC compensated Scholastic for this.

Scholastic claimed that it was owed at least $2.7 Million as a result of the FFC airings because they constituted a distribution under the agreement. Fox claimed that the FFC airings were exhibitions for which Scholastic was not entitled to additional licensing fees. Eventually, Scholastic sent a letter terminating the contract. However, it stipulated that it would not relicense the programs to third parties

Scholastic filed a complaint in U.S. District Court (CDCal) against FBC, FFC, and other Fox entities alleging that the contract had been effectively terminated and that the ongoing use of the Goosebumps series constituted copyright infringement. The District Court dismissed the complaint.

The Appeals Court summarized the issue. "Scholastic and Fox entered into a contract, the subject matter of which was the copyright protected television series Goosebumps. Upon learning of material breaches by Fox as a result of the FFC airings, Scholastic terminated the agreement. Scholastic's termination, if effective, would cause the reversion of all ownership rights to Scholastic, rendering Fox's continuing use of the series copyright infringement. Fox, on the other hand, claims that the contract is still in effect and that, pursuant to the agreement, it alone has the right to exhibit and distribute the series. Because Scholastic has stipulated that it will not relicense the Goosebumps series until a determination is made as to the status of the agreement, however, Scholastic cannot be guilty of copyright infringement. Therefore, this case hinges entirely on whether Scholastic's attempt to terminate the agreement was successful."

28 U.S.C. § 1338(a) provides that "The district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to patents, plant variety protection, copyrights and trademarks. Such jurisdiction shall be exclusive of the courts of the states in patent, plant variety protection and copyright cases." In contrast, contract law is a matter of state law.

The Appeals Court wrote that "Federal courts have consistently dismissed complaints in copyright cases presenting only questions of contract law."

It then applied the test outlined in T.B. Harms Co. v. Eliscu, 339 F.2d 823 (2d Cir. 1964). It described this as "the majority rule".

The Court wrote that "the T.B. Harms test requires the district court to exercise jurisdiction if: (1) the complaint asks for a remedy expressly granted by the Copyright Act; (2) the complaint requires an interpretation of the Copyright Act; or (3) federal principles should control the claims."

The Appeals Court applied this test, and concluded that "subject matter jurisdiction is lacking and that the district court did not violate Fox's due process rights by sua sponte dismissing the claims. Once Scholastic's claims were dismissed, the only remaining issue was the validity of the termination. Scholastic's success in terminating the agreement is a pure question of state contract law appropriate for adjudication in the California courts."

DC Circuit Rules in Starpower v. FCC

7/18. The U.S. Court of Appeals (DCCir) issued its opinion [13 pages in PDF] in Starpower v. FCC,

Starpower Communications, a competitive local exchange carrier (CLEC) operating in the state of Virginia, petitioned for review of a Federal Communications Commission (FCC) order holding that two interconnection agreements between Starpower and Verizon unambiguously do not require reciprocal compensation for telephone traffic bound for an internet service provider (ISP).

The Appeals Court held that the agreements are not unambiguous. Rather, they are "models of ambiguity". It granted Starpower's petition, and remanded to the FCC for further proceedings.

This is Starpower Communications, Inc., petitioner v. FCC, respondent, and Verizon, intervenor, No. 02-1131, a petition for review of a final order of the FCC.

People and Appointments

7/18. President Bush announced his intent to nominate Peter Lichtenbaum to be an Assistant Secretary of Commerce for Export Administration. He is currently a partner in the Washington DC office of the law firm of Steptoe & Johnson. See, White House release.

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7/18. PeopleSoft and J.D. Edwards announced that "PeopleSoft has purchased approximately 110 million shares, or 88% of the outstanding shares of J.D. Edwards pursuant to its exchange offer to acquire all of the outstanding shares of J.D. Edwards that expired at 12:00 midnight EDT, Thursday, July 17, 2003. PeopleSoft expects to acquire the remaining shares of J.D. Edwards before the end of August 2003. The companies also announced that Michael Maples, a member of J.D. Edwards' board of directors, was elected to the board of directors of PeopleSoft." See, J.D. Edwards release and PeopleSoft release.

7/18. A collection of interest groups sent a letter to Representatives and Senators regarding pending spam legislation. The signatories, which include the Electronic Privacy Information Center (EPIC) and the Consumer Federation of America (CU), argue that several items elements should be included in any spam bill. For example, they want legislation to define spam as "unsolicited, bulk, commercial email." Also, they support establishing an opt-in rule, rather that an opt-out rule, as is provided for in several pending bills. They write that "The rule for bulk, commercial emails should be that they can only be sent with the recipients' prior affirmative agreement, with an exception for previously existing business relationships." They also advocate allowing a private right of action: "Individuals as well as ISPs should have the legal right to bring action against spammers. This the approach that Congress took with telemarketers and junk faxes and it is the approach that has been taken in the states to address the spam challenge. Depriving individuals of the right to seek legal action weakens consumer rights and leaves too much discretion to government agencies." However, the letter does not address class actions. The letter also opposes federal preemption.

7/18. The Department of Agriculture's Rural Utilities Service (RUS) published a notice in the Federal Register announcing that it will notify applicants for FY 2003 grants for the provision of broadband transmission service in rural areas by September 15, 2003 of its award of grants. See, Federal Register, July 18, 2003, Vol. 68, No. 138, at Page 42680.

House CIIP Subcommittee Holds Hearing on Piracy Deterrence and Education Act

7/17. The House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property (CIIP) held a hearing on HR 2517, the "Piracy Deterrence and Education Act of 2003." This bill would enhance the government's resources for prosecuting intellectual property crimes, and involve the Federal Bureau of Investigation (FBI) and Department of Justice (DOJ) in educating and warning the public regarding internet based copyright infringement. See, full story.

Senate Commerce Approves Technology Administration Authorization Act

7/17. The Senate Commerce Committee approved S 1395, the "Technology Administration Authorization Act of 2003", with two amendments, one of which adds language authorizing funding for the Advanced Technology Program (ATP).

The bill authorizes appropriations for fiscal years 2004 through 2008 for the Department of Commerce's (DOC) Technology Administration (TA), which includes the National Institute of Standards and Technology (NIST), which accounts for the bulk of the authorization, the Office of Technology Policy (OTP), and Office of Space Commercialization (OSC).

The Committee approved one amendment that increases the authorization levels for construction and maintenance of facilities of the NIST.

The Committee approved a second amendment that adds to the bill an authorization for appropriations for the ATP. The Bush administration has proposed eliminating the ATP. See, story titled "Administration Releases Commerce Department Budget Estimates" in TLJ Daily E-Mail Alert No. 597, February 4, 2003.

This bill does not cover other technology related entities at the DOC, such as the U.S. Patent and Trademark Office (USPTO), the National Telecommunications and Information Administration (NTIA), and the Bureau of Industry and Security (BIS/BXA).

Free Trade Agreements Advance Through Committees

7/17. The House Ways and Means Committee approved HR 2739 [PDF], the "United States Singapore Free Trade Implementation Act", by a vote of 32-5, without amendment. It also approved HR 2738 [PDF], the "United States Chile Free Trade Implementation Act", by a vote of 33-5, without amendment. The House Judiciary Committee, which has jurisdiction over the visa provisions of the bills, approved the bills on July 16. These bills still require approval by the full House.

These are the first two free trade agreements to be considered by the Congress since the Congress gave the President trade promotion authority, which gives the President authority to negotiate free trade agreements that the Congress can then either approve or reject, but not amend.

Also on July 17, the Senate Finance Committee unanimously approved legislation implementing the U.S. Chile Free Trade Agreement (S 1416) and the U.S. Singapore Free Trade Agreement (S 1417). The Senate Judiciary Committee, which has jurisdiction over the visa provisions, also approved the bills on July 17. These bills still require approval by the full Senate. The Senate Finance Committee issued a release which states the Senate consideration is "expected as early as next week".

On July 14, The Cato Institute released a paper [16 pages in PDF] titled "Free Trade Agreements: Steppingstones to a More Open World". This paper examines the merits of negotiating free trade agreements. This paper concludes that "On balance, the bilateral and regional agreements proposed by the Bush administration would further our national interests. If crafted properly, those agreements would strengthen the U.S. economy by injecting new import competition into domestic markets and opening markets abroad more widely to U.S. exports. More important, they would encourage economic reform abroad and cement economic and foreign policy ties between the United States and key allies."

However, the paper also cautions that "Even though FTAs by definition result in lower trade barriers between member countries, they do not necessarily result in economic gains for all members or the world as a whole." That is, "customs unions can promote new trade among members, but they can also divert trade from more efficient producers outside the agreement." The paper, which was written by Daniel Griswold of Cato, elaborates that "If signed with a low-cost foreign producer, an agreement can result in trade creation by allowing the low-cost producer to enter the domestic market tariff free, reducing domestic prices, and displacing higher-cost domestic producers. But if signed with a relatively high-cost foreign producer, an agreement can result merely in trade diversion by allowing the higher-cost importer to displace lower-cost foreign importers simply because producers in the new FTA partner can import tariff free."

Senate Commerce Committee Approves E-911 Bill

7/17. The Senate Commerce Committee (SCC) approved S 1250, the "Enhanced 911 Emergency Communications Act of 2003 ", by unanimous voice vote, without amendment.

Sen. Conrad BurnsThe bill is sponsored by Sen. Conrad Burns (R-MT), who is a member of the SCC, and Sen. Hillary Clinton (D-NY). Sen. Burns (at right) stated that "It has been clear since September 11th that improving the overall safety of our country is something we need to do. We must ensure that first responders have the ability to communicate in real time and get their jobs done during an emergency, and our E9-1-1 bill will help do just that."

The bill would require the head of the National Telecommunications and Information Administration (NTIA) to create an Emergency Communications Task Force to facilitate coordination between federal, state, and local communications systems.

The bill also would authorize the appropriation of $500 Million per year for grants, to be administered by the NTIA, to enhance emergency communications services. The bill would require the NTIA to give preference to applicants who "(1) coordinate their applications with the needs of their public safety answering points; and (2) integrate public and commercial communications services involved in the construction, delivery, and improvement of emergency communications, including 911 services."

The bill also addresses diversion of E911 fees. It would also require the Federal Communications Commission (FCC) to review twice a year fees charged to customers for enhancing 911 services. States would be required to certify that no E911 fees are being used for other purposes. The FCC would be required to notify Congress of states that divert E911 funds. Finally, the NTIA would be required to withhold grant funds to states that are found by the FCC to divert E911 funds.

Secretary Evans Releases Proposed Bill to Place NTIA, NIST and Other Entities in One Administration

7/17. Secretary of Commerce Donald Evans sent a proposed bill to the Congress that would reorganize several, but not all, of the technology related entities at the Department of Commerce (DOC) into one unit. See, documents [11 pages in PDF] sent to Congress (cover letter, draft of proposed bill, and Statement of Purpose and Need). See also, DOC question and answer document [4 pages in PDF].

The bill provides that "There is established in the Department of Commerce a Technology and Telecommunications Administration. The Technology and Telecommunications Administration shall include --
  (1) the National Institute of Standards and Technology;
  (2) the National Telecommunications and Information Administration;
  (3) the National Technical Information Service; and
  (4) the Office of Technology Policy."

The new Administration would be headed by an Under Secretary, who "shall advocate technology and telecommunications policies at the federal, state, and local level that promote, among other important benefits, economic growth, job creation, national security and safety, a strong technology base, and a robust competitive telecommunications infrastructure."

Donald EvansSecretary Evans (at right) stated in his cover letter that "This bill modifies and modernizes the organizational structure of the Department of Commerce to enhance the formulation of technology, electronic commerce and telecommunications policy issues."

Currently, the Technology Administration (TA) includes three entities, the National Institute of Standards and Technology (NIST), the Office of Technology Policy (OTP), and the National Technical Information Service (NTIS). The NIST accounts for the bulk of the funding and personnel in the TA. The NIST conducts research, funds private sector research and development, and develops and promotes measurements and standards. It includes the Computer Security Division (CSD).

The National Telecommunications and Information Administration (NTIA) has spectrum management authority, domain name management responsibilities, and limited grant making authority. It also represents the administration on certain communications matters, and has been assigned by the Congress to write various communications and e-commerce related studies.

Secretary Evans' Statement of Purpose and Need recites that the e-commerce policy functions of the International Trade Administration (ITA) will be transferred to the new unit. However, this is not referenced in the draft bill. The Statement explains that "No legislative change is required to merge the ITA electronic commerce policy functions with the Technology and Telecommunications Administration as these functions are currently delegated to ITA by internal Departmental organizational order. The proposed reform will not impact ITA's responsibilities regarding trade negotiations and promotion as they pertain to electronic commerce."

The Statement of Purpose and Need states that "The Department of Commerce currently develops and implements technology, electronic commerce and telecommunications policy in three bureaus: TA, NTIA, and ITA. To complement the convergence in the private sector of technology and communications companies, Secretary Evans is proposing to reorganize Departmental personnel and management to formalize the coordination of domestic and international policy development for these inter-related sectors of the economy. The proposed structure would have the Under Secretary for Technology and Telecommunications oversee the expanded bureau."

Secretary Evans originally made this proposal on February 13, 2003. He did not at that time forward the draft of proposed legislation. See, story titled "Don Evans Proposes Combining Tech Related Entities at Commerce Department" in TLJ Daily E-Mail Alert No. 604, February 14, 2003.

There are other technology and innovation related entities at the DOC that are not affected by this reorganization, including the U.S. Patent and Trademark Office (USPTO) and the Bureau of Industry and Security (BIS). The BIS administers the export control regime, which grants export licenses for, among other things, dual use items, such as software and encryption products, and high performance computers.

1st Circuit Rules Insurance Policy Does Not Cover CLEC

7/17. The U.S. Court of Appeals (1stCir) issued its opinion in Global Naps v. Federal Insurance Company, a case regarding the scope of coverage of an insurance policy issued to a CLEC.

Global Naps is a competitive local exchange carrier (CLEC) in New York and New England. Verizon is the incumbent local exchange carrier (ILEC) in this region. Global Naps and Verizon had a dispute over reciprocal compensation. Global Naps filed an administrative complaint with the New York Public Services Commission.

In a separate lawsuit, Verizon filed a complaint in U.S. District Court (EDNY) against Global Naps alleging nine causes of action relating to Global Naps billings for reciprocal compensation, including violations of the Telecom Act, the Massachusetts Deceptive Trade Practices Act, breach of contract, unjust enrichment, and violation of RICO.

In the RICO count Verizon alleged that Global NAPs' prosecution of its administrative complaint before the New York PSC was a "predicate act" supporting RICO liability. It alleged that "Defendants' prosecution and maintenance of the New York PSC proceeding relating to the number of MOUs involved was itself a fraud, designed to confuse Bell Atlantic and conceal the nature of Defendants' racketeering activity." Verizon did, however, plead malicious prosecution.

Global Naps held an insurance policy issued by Federal Insurance Company that covered "a suit seeking damages for ... personal injury", including "malicious prosecution".

In the present lawsuit, Global Naps filed a complaint in U.S. District Court (DMass) against Federal Insurance Company seeking reimbursement under the policy of litigation expenses incurred defending Verizon's lawsuit.

The District Court granted summary judgment to Federal Insurance Company on the issue of coverage. The Appeals Court affirmed.

People and Appointments

7/17. The Senate Commerce Committee approved the nomination of Pamela Harbour to be a Commissioner of the Federal Trade Commission (FTC) by a voice vote. The nomination still requires approval by the full Senate.

7/17. The Senate confirmed Allyson Duncan to be a Judge of the U.S. Court of Appeals (4thCir) by a vote of 93-0. See, Roll Call No. 289.

7/17. The Senate confirmed Louise Flanagan to be a Judge of the U.S. District Court for the Eastern District of North Carolina.

7/17. William Aylesworth, CFO of Texas Instruments (TI), will retire at the 2003. He will be replaced by Kevin March, TI's Controller. See, TI release.

7/17. TI named Richard Templeton to its Board of Directors. He is TI's Chief Operating Officer. See, TI release.

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7/17. The Federal Communications Commission (FCC) released an Order, which it adopted on July 14, that adopts a consent decree terminating an Enforcement Bureau investigation into possible violations by T-Mobile USA of the enhanced 911 (E911) Phase II provisions of Section 20.18 of the FCC rules with respect to its GSM network and the FCC Order granting T-Mobile a waiver of the E911 Phase II rules for its GSM network. The order also fines T-Mobile $1.1 Million. The order states that "T-Mobile shall make its voluntary contribution to the United States Treasury". See, FCC release.

7/17. The Federal Communications Commission (FCC) released an Order, which it adopted on July 15, that adopts a consent decree terminating Enforcement Bureau investigations into whether BellSouth provided, marketed or sold in-region, interLATA services prior to FCC approval of § 271 applications, and whether BellSouth violated the non-discrimination requirements of §§ 271 or 272 by improperly rejecting competitive local exchange carrier (CLEC) local service requests. See, FCC release. BellSouth stated in a release that "The incidents were few in number, were inadvertent, were discovered by BellSouth, were reported to the FCC by BellSouth, and were stopped by BellSouth immediately upon discovery."

7/17. SBC filed Section 271 applications with the Federal Communications Commission (FCC) for permission to provide in region interLATA services in the states of Illinois, Indiana, Ohio and Wisconsin. See, SBC release.

Senate Commerce Committee Holds Hearing on Internet Tax Bill

7/16. The Senate Commerce Committee held a hearing on proposed legislation to make permanent the moratorium on taxes on Internet access. The Senate bills, S 52 and S 150, which are both titled the "Internet Tax Nondiscrimination Act", would permanently extend the moratorium on internet access taxes and multiple and discriminatory internet taxes, created by the 1998 Internet Tax Freedom Act (ITFA). The bills would also eliminate the grandfather provision that allows states that had taxes in 1998 to continue those taxes.

Sen. Ron Wyden (D-OR), the sponsor of S 52, was the sponsor of the original ITFA passed in 1998. Sen. George Allen (R-VA) is the sponsor of S 150.

Sen. John McCain (R-AZ), the Chairman of the Committee, said in his opening statement that "It is my hope that we can reach a consensus to enable the enactment of another extension."

He also argued against joining the issues of taxing internet access to state collection of sales taxes from remote vendors. He said that "I believe that we can and should keep the Internet tax moratorium distinct from the simplified sales tax debate. I do, however, expect to address in a separate hearing later this year the sales tax issue -- and the Streamlined Sales Tax Project (SSTP) in particular. The sales tax question is a matter of significant importance and I look forward to seeing if there is evidence that the States participating in the SSTP have advanced towards true sales tax simplification."

Sen. Wyden said that "there should be technological neutrality". That is, "you should treat the online world the same way you treat the offline world." He added that the issue of the internet tax moratorium contained in the ITFA is distinct from the sales tax issue.

Sen. Conrad Burns (R-MT) said that "taxing internet access would be a short sighted policy". He commented that people in his state of Montana rely on e-commerce more than the country as a whole.

Sen. Frank Lautenberg (D-NJ) presented the argument in favor of taxation. He said that states are facing a fiscal crisis. He said that "sales and use taxes generate $150 Million per year", and that this makes up one third of state and local revenues. He continued that states will loose tax revenue because of the internet. He concluded that "government has got to have the revenue."

Joseph Ripp, Vice Chairman of AOL, urged passage of one of these two bills. He first addressed the problems of complying with the tax rules of thousands of state and local governmental entities. He wrote in his prepared testimony that "Even for a major national provider like AOL, the prospect of complying with thousands of state and local tax regimes was daunting. The tax rules varied greatly from jurisdiction, to the extent any meaningful tax rules had been published at all. Furthermore, many of these rules based the amount of taxes and the fact of taxation on customer location, a fact that is often impossible to determine for members using the most popular dialup access method. While these rules may have had some applicability to telephone companies, which have years of experience complying with public utility regulation, they are burdensome and inapplicable to a company such as AOL."

He also argued that "Passage of S. 150 & S. 52 will promote digital opportunities for the 50 percent of Americans who do not currently have Internet access services. Taxes would only increase their costs and frustrate the national goal of providing these services for all Americans." He also argued that passage of one of these bills would promote competition among ISPs, stimulate the technology sector, and promote competitiveness in digital content and online software and services.

Paul Misener, VP for Global Public Policy at, spoke in support of making the moratorium permanent. He also stated in his prepared testimony that "the issue of whether and how Congress should permit states to require out-of-state sellers to collect tax on sales to in-state consumers is often confused and conflated with the ITFA Moratorium policy. It is, however, a completely separate matter. And, unlike the policy choices Congress made to establish, then extend the Moratorium, the remote sales tax collection issue simultaneously presents Congress with the gravity of a fundamental constitutional right and the nearly mind-numbing detail of state sales taxation."

Billy Hamilton, the Deputy Comptroller at the Texas Comptroller of Public Accounts, testified in opposition to legislation to extend the moratorium. He argued that the original ITFA was passed in 1998 to protect a fledging industry. He wrote in his prepared testimony that "The ``fledgling industry´´ argument is no longer relevant. The purchase or supply of Internet access services in the states that tax services has not been adversely affected and use of the Internet continues to grow exponentially." He also argued that internet taxation is a state issue.

He said that it Congress extends the moratorium, it should do so for no more than two years. He also opposed elimination of the grandfather clause. He also argued that "The definition of ``Internet access´´ contained in the Act should be rewritten to insure equity among various types of access providers and among types of communications services. It should also eliminate opportunities to bundle otherwise taxable content into a single package of Internet access in a manner that would prevent states and localities from imposing their taxes on the otherwise taxable content."

See also, prepared testimony of Mark Beshears of Sprint.

House Judiciary Committee Approves Internet Tax Bill

7/16. The House Judiciary Committee approved HR 49, the "Internet Tax Nondiscrimination Act", by a voice vote. This bill is sponsored by Rep. Chris Cox (R-CA), and cosponsored by 132 other members of the House. It would permanently extend the moratorium on internet access taxes and multiple and discriminatory internet taxes that was created by the 1998 Internet Tax Freedom Act (ITFA). It would also eliminate the grandfather provision that allows states that had taxes in 1998 to continue those taxes.

The Committee also approved an amendment offered by Rep. Mel Watt (D-NC) that provides that the moratorium applies to telecommunications services, "to the extent such services are used to provide Internet access", thus clarifying that the ban on internet access taxes extends to broadband DSL and wireless services provided by phone companies or others. See, full story.

Conyers and Berman Introduce Bill to Criminalize Placing Copyrighted Works on P2P Networks

7/16. Rep. John Conyers (D-MI) and others introduced HR 2752, the "Author, Consumer, and Computer Owner Protection and Security (ACCOPS) Act of 2003". The bill would amend the Copyright Act and the criminal code to protect digital works from online infringement. It would criminalize the unauthorized placement of copyrighted works on P2P networks, and criminalize offering certain P2P software without first giving notice of the privacy and security risks. It would also criminalize registering a domain name with false information with intent to defraud, and provide that registering a domain name with false information shall be considered evidence of willfulness with respect to infringement committed with that domain name. The bill also calls for increased cooperation between the U.S. and foreign prosecutors, and authorizes appropriations for investigation and prosecution of copyright crimes.

The bill's original cosponsors are Rep. Howard Berman (D-CA), Rep. Marty Meehan (D-MA), Rep. Robert Wexler (D-FL), Rep. Anthony Weiner (D-NY), and Rep. Adam Schiff (D-CA). All are members of the House Judiciary Committee, to which the bill has been referred, and its Subcommittee on Courts, the Internet and Intellectual Property (CIIP).

Rep. John ConyersRep. Conyers (at right) explained in a statement submitted for the Congressional Record that "Those who invest so much into developing software, books, music, and movies and rely upon sales of that content are being deprived of their livelihoods because people are taking advantage of the Internet to obtain and share digital content for free." See, Congressional Record, July 16, 2003, at page E1496.

Rep. Conyers, who is the ranking Democrat on the full Committee, continued that "While there are laws on the books that protect copyrighted content from theft, they do not go quite far enough. Despite court decisions ordering various file swapping sites to shut down, new file-swapping programs and new file-swapping sites appear every day on the Internet, each one better than its predecessor. These sites do not develop their own content; instead, they rely upon the success and popularity of content created by others and allow that content to be distributed to millions with the single click of a mouse. These sites also create security and privacy risks, in that they open up entire the hard drives average consumers for the world to see, financial and personal information included."

Criminalization of Placing Copyrighted Works on Certain Computer Networks. One of the key provisions of the bill would criminalize putting copyrighted works on certain computer networks. Courts have held recently that individuals who put copyrighted songs on peer to peer (P2P) networks commit civil copyright infringement. See, for example, A&M Records v. Napster, 239 F.3d 1004 (9th Cir. 2001). However, the standard for establishing criminal copyright infringement is higher. This bill would make clear that this sort of P2P infringement can constitute criminal conduct.

Basically, the bill amends Section 506 of Title 17. Title 17 codifies copyright law. 17 U.S.C. § 506 pertains to criminal offenses. Subsection 506(a) pertains to criminal infringement. It provides:

"Any person who infringes a copyright willfully either --
  (1) for purposes of commercial advantage or private financial gain, or
  (2) by the reproduction or distribution, including by electronic means, during any 180-day period, of 1 or more copies or phonorecords of 1 or more copyrighted works, which have a total retail value of more than $1,000,

shall be punished as provided under section 2319 of title 18, United States Code. For purposes of this subsection, evidence of reproduction or distribution of a copyrighted work, by itself, shall not be sufficient to establish willful infringement."

Title 18 is the criminal code. 18 U.S.C. § 2319 pertains to criminal infringement of copyright. Subsection 2319(a) provides that "Whoever violates section 506(a) (relating to criminal offenses) of title 17 shall be punished as provided in subsections (b) and (c) of this section and such penalties shall be in addition to any other provisions of title 17 or any other law." (Parentheses in original.)

In turn, Subsection 2319(b) provides, in part, that "Any person who commits an offense under section 506(a)(1) of title 17 -- (1) shall be imprisoned not more than 5 years, or fined in the amount set forth in this title, or both, if the offense consists of the reproduction or distribution, including by electronic means, during any 180-day period, of at least 10 copies or phonorecords, of 1 or more copyrighted works, which have a total retail value of more than $2,500;".

HR 2752 would add the following language to 17 U.S.C. § 506(a): "For purposes of section 2319(b) of title 18, the placing of a copyrighted work, without the authorization of the copyright owner, on a computer network accessible to members of the public who are able to copy the work through such access shall be considered to be the distribution, during a 180-day period, of at least 10 copies of that work with a retail value of more than $2,500."

Rep. Howard BermanRep. Berman described this provision of the bill at a hearing on July 16. The hearing was not on HR 2752. Rather, it was on HR 2517, the "Piracy Deterrence and Education Act of 2003", sponsored by Rep. Lamar Smith (R-TX) and Rep. Berman. HR 2517 would enhance the government's resources for prosecuting intellectual property rights (IPR) crimes, and involve the Federal Bureau of Investigation (FBI) and Department of Justice (DOJ) in educating and warning the public regarding internet based copyright infringement. See, TLJ story titled "House CIIP Subcommittee Holds Hearing on Piracy Deterrence and Education Act", July 18, 2003. That is, HR 2517 would expand enforcement of existing IPR related criminal statutes, while HR 2752 would expand the scope of IPR related conduct that constitutes crimes.

Rep. Berman first praised HR 2517, regarding enforcement. But he added, "I think more can be done." He then launched into a long explanation of HR 2752, and why he believes that it is necessary.

For example, he addressed the section that criminalizes putting certain works on P2P networks. He stated that "Section 301 of that bill clarifies that the uploading of a single copyrighted work to a publicly accessible computer network meets the 10 copy, $2,500 threshold for felonious copyright infringement. Section 301 simply brings the law into accord with the reality that uploading a copyrighted work to a place from which millions can download it is equivalent to the distribution of ten or more copies having a value of $2,500. We do this because some prosecutors appear skeptical that they can successfully pursue cases against many uploaders of copyrighted works, otherwise."

Registering Domain Names with False Information. The bill also contains two provisions relating to the use of false contact information when registering domain names.

First, the bill would add a new Section 1037 to Title 18, that would provide, in part, 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."

Second, the bill would further amend Section 506 of Title 17 regarding evidence of willful infringement. It would add the following: "The knowing and intentional provision of 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 considered evidence of willfulness with respect to infringements committed by the domain name registrant through the use of that domain name."

Rep. Berman addressed the second of these two provisions on July 16. He stated that "Section 305 addresses the all too common phenomenon of operators of copyright infringing websites providing false domain name registration information. If the illegal activities on the web site attract the attention of law enforcement or right holders, the operators often disconnect it, and pop up elsewhere, under another domain name, with different contact information. Section 305 directs the courts to consider the knowing and intentional provision of materially false domain name registration as evidence of willfulness with regard to copyright infringements."

Consumer Privacy and Security. The bill would add a new Section 1822 to Title 18 that provides that "Whoever knowingly offers enabling software for download over the Internet and does not (1) clearly and conspicuously warn any person downloading that software, before it is downloaded, that it is enabling software and could create a security and privacy risk for the user's computer; and (2) obtain that person's prior consent to the download after that warning; shall be fined under this title or imprisoned not more than 6 months, or both."

The bill also defines "enabling software" as "software that, when installed on the user's computer, enables 3rd parties to store data on that computer, or use that computer to search other computers' contents over the Internet."

Rep. Berman stated that "Section 302 addresses the well documented concern that popular peer to peer software programs sometimes allow third parties to hijack personal computers to distribute child pornography and copyright infringing material, come bundled with spyware, and otherwise jeopardize the privacy and security of PC owners. Section 302 requires that PC owners receive clear and conspicuous notice, and provide consent prior to downloading software, that would allow third parties to store material on the personal computer, or use that personal computer to search for material on other computers."

This issues of privacy and security of P2P networks has been addressed at previous Congressional hearings.

The Senate Judiciary Committee held a hearing on June 17, 2003 titled "The Dark Side of a Bright Idea: Could Personal and National Security Risks Compromise the Potential of Peer to Peer File Sharing Networks". See, story titled "Senate Committee Holds Hearing on P2P Networks" in TLJ Daily E-Mail Alert No. 683, June 18, 2003.

At this hearing witnesses praised the benefits of P2P networks, but also cautioned about threats that they pose to the privacy and security of individuals' sensitive records, and to the security of sensitive government records. Witnesses also discussed the problem of pormography on P2P networks that is often disguised a popular music files, thus causing children to unwittingly be exposed.

On March 13, 2003, the House Government Reform Committee held a hearing that focused on the prevalence of pormography on P2P networks. See, record of the hearing [123 pages in PDF].

Other Provisions. The bill would authorize the appropriation of "not less than $15,000,000" for investigation and prosecution by the Department of Justice of violations of Title 17, which codifies copyright law.

The bill provides for increased information sharing by the Department of Justice with foreign law enforcement authorities to assist their enforcement of their copyright laws. Rep. Berman stated on July 16 that "Section 201 addresses the unique law enforcement challenge posed by the increasingly transnational character of online copyright infringement. In order to insure that the road across the border does not become an investigation dead end, Section 201 requires the Attorney General to assist the appropriate foreign authority in making a case against such online infringers."

Finally, the bill would amend 17 U.S.C. § 506 to provide that criminal copyright infringement includes copying "by the unauthorized reproduction or recording of a motion picture as it is being performed or displayed in a motion picture theater".

House Science Committee Holds Hearing on Supercomputing

7/16. The House Science Committee held a hearing titled "Supercomputing: Is the U.S. on the Right Path?"

Rep. Sherwood Boehlert (R-NY), the Chairman of the Committee, said in his opening statement that "Supercomputers help design our cars, predict our weather, and deepen our understanding of the natural forces that govern our lives, such as our climate. Indeed, computation is now widely viewed as a third way of doing science -- building on the traditional areas of theory and experimentation."

He continued that "maintaining U.S. leadership requires a coordinated, concerted effort by the federal government. The federal government has long underwritten the basic research that fuels the computer industry, has purchased the highest-end computers, and has ensured that those computers are available to a wide range of American researchers. This Committee has played an especially crucial role in ensuring access, pushing for the creation of the National Science Foundation (NSF) Supercomputer Centers back in the early '80s."

Rep. Boehlert stated that "Government action is just as needed now. But what action? The Department of Energy is proposing to move away from our reliance on more mass-market supercomputers to pursue research on massive machines designed to solve especially complex problems. NSF appears to be moving away from supporting supercomputer centers to a more distributed computing approach. These policies need to be examined."

Vincent Scarafino, Manager of Numerically Intensive Computing at Ford Motor Company, wrote in his prepared testimony that "Up until the mid 1990's, the Federal government had helped with the development of high-end machines with faster, more powerful processing capability and matching memory bandwidth and latency characteristics by helping to fund development and create a market for them. These machines were built mainly to meet the needs of government security and scientific research. Once they were built, there was a limited, but significant application of these machines in the private sector. The availability of higher capability machines advanced the application of science in the private sector."

Then, "In the mid 1990's the Federal government decided to rely on utilizing off-the-shelf components and depend on the ability to combine thousands of these components to work in harmony to meet its advanced high-performance computing needs. The result was an advance in the areas of computer science that dealt with parallel processing. Over the last eight years, some kinds of applications have adapted well to the more constrained environment supported by these commodity based machines."

However, Scarafino added that the "hardest problems do not adapt well to parallel architectures. Either we don't know enough about the problem to develop a parallel solution, or they are not parallel by nature."

He stated that the "Federal government cannot rely on fundamental economic forces to advance high-performance computing capability", and that the "Federal government should help with the advancement of high-end processor design and other fundamental components necessary to develop well-balanced, highly capable machines. U. S. leadership is currently at risk."

Daniel Reed, Director of the National Center for Supercomputing Applications (NCSA) at the University of Illinois at Urbana-Champaign, wrote in his prepared testimony [PDF] that "We must change the model for development, acquisition and deployment of high-end computing systems if the U.S. is to sustain the leadership needed for scientific discovery and national security in the long term."

He recommended that "In the short to medium term, we must acquire and continue to deploy additional high-end systems at larger scale if we are to satisfy the unmet demand of the science and engineering research community." Also, "we must fund the design and construction of large-scale prototypes of next-generation high-end systems that includes balanced exploration of new hardware and software models, driven by scientific application requirements."

Peter Freeman of the National Science Foundation wrote in his prepared testimony that the "NSF remains absolutely committed to providing researchers the most advanced computing equipment available and to sponsoring research that will help create future generations of computational infrastructure, including supercomputers."

"At the same time, we are committed to realizing the compelling vision described in the report of the NSF Advisory Panel on Cyberinfrastructure, commonly known as the Atkins Committee -- that ``a new age has dawned in scientific and engineering research, pushed by continuing progress in computing, information and communications technology.´´ This cyberinfrastructure includes, and I quote, "not only high-performance computational services, but also integrated services for knowledge management, observation and measurement, visualization and collaboration", said Freeman. See, Atkins Report Executive Summary [6 pages in PDF] and full Report [3.2 MB in PDF].

See also, Hearing Charter [12 pages in PDF], and prepared testimony of Raymond Orbach of the Department of Energy.|

House Committee Holds Hearing on IP Piracy and Terrorism

7/16. The House International Relations Committee held a hearing titled "Intellectual Property Crimes: Are Proceeds From Counterfeited Goods Funding Terrorism?"

Rep. Henry Hyde (R-IL), the Chairman of the Committee, wrote in his opening statement that "the counterfeit item you purchase from a street vendor or on the Internet may be helping to finance terrorism".

He added that "Traditionally, intellectual property crimes and terrorism have been considered separately -- much as drug trafficking and terrorism were considered until recently. Law enforcement and the intelligence community have been telling us that a growing concern is the convergence of different types of illicit activities in order to further the gains of clandestine activities and operations."

Rep. Tom Lantos (D-CA), the ranking Democrat on the Committee, wrote in his opening statement that "millions of Americans, through buying counterfeiting goods, have inadvertently made contributions to terrorist organizations connected to these activities." He continued that "We are, however, in a new world, where terrorists act globally and use creative ways to finance and conduct their evil operations. Terrorist groups are behaving much like international crime syndicates, developing increasingly sophisticated financial infrastructures to generate dependable revenue sources. There are disturbing reports, many fully confirmed, that terrorist groups as HAMAS and Hezbollah and their sympathizers are using Intellectual Property crimes -- selling pirated software, DVDs, and other products -- to generate funds."

Ronald Noble, Secretary General of Interpol stated in his prepared testimony that "Interpol is sounding the alarm that Intellectual Property Crime is becoming the preferred method of funding for a number of terrorist groups. There are enough examples now of the funding of terrorist groups in this way for us to worry about the threat to public safety. We must take preventative measures now." He addressed examples involving Northern Ireland, Kosovo, Chechen separatists, Al Qaeda and Hizbullah.

Asa Hutchinson, Under Secretary for the Border and Transportation Security Directorate at the Department of Homeland Security (DHS), testified regarding the intellectual property crimes related activities of the DHS's Bureau of Immigration and Customs Enforcement (BICE) and the Bureau of Customs and Border Protection (BCBP).

He wrote in his prepared testimony that "IPR violations have grown in both magnitude and complexity. BICE investigations have shown that organized criminal groups are involved in trademark counterfeiting and copyright piracy. Criminals use the proceeds from the sale of counterfeit and pirated goods to finance a variety of legitimate and/or criminal enterprises." However, he also testified that "Neither BICE nor BCBP have established a direct link between profits from the sale of counterfeit merchandise and specific terrorist acts."

See also, prepared testimony of Timothy Trainer (International AntiCounterfeiting Coaltion), Iain Grant (International Federation of the Phonographic Industry) [9 pages in PDF], and Larry Johnson (Berg Associates) [8 pages in PDF].

Delegates Discuss World Radiocommunications Conference

7/16. Members of the U.S. delegation to the International Telecommunications Union's (ITU) World Radiocommunications Conference 2003 (WRC-03) spoke about the conference at an event on July 16. Several items addressed by the conference pertain to wireless broadband internet access, including allocating spectrum in the 5 GHz band for use by unlicensed devices (including WiFi), and allocating spectrum for broadband access by passengers and crew on commercial aircraft.

The delegates spoke at a luncheon in Washington DC hosted by the Federal Communications Bar Association's (FCBA) International Practice Committee and the Computer & Telecommunications Law Section of the D.C. Bar Association. The WRC-03 took place in Geneva, Switzerland from June 9 through July 4, 2003.

Unlicensed Devices. WRC-03 resolution pertaining to spectrum for unlicensed devices provides "that this Conference has allocated the bands 5 150-5 350 MHz and 5 470-5 725 MHz on a primary basis to the mobile service for the implementation of wireless access systems (WAS), including radio local area networks (RLANs);".

It resolves "that the use of these bands by the mobile service will be for the implementation of WAS, including RLANs, as described in Recommendation ITU‑R M.1450" and "that in the band 5 150-5 250 MHz, stations in the mobile service shall be restricted to indoor use with a maximum mean e.i.r.p. of 200 mW and a maximum mean e.i.r.p. density of 10 mW/MHz in any 1 MHz band or equivalently 0.25 mW/25 kHz in any 25 kHz band;". (Footnote omitted.)

The WRC-03 resolution also recognizes "that WAS, including RLANs, provide effective broadband solutions".

Jennifer Manner, an assistant to FCC Commissioner Kathleen Abernathy, and a member of the U.S. delegation, stated that "we see this as a potential third broadband pipe to the home".

Microsoft, which had representatives at the conference, released a statement regarding the unlicensed devices resolution. It wrote that "This decision should significantly broaden the opportunities for people to access information using unlicensed devices, such as Wi-Fi wireless LANs. It is also likely to enable faster deployment of wireless data services in locations where dial-up access is not practical."

Microsoft added that "Representatives from companies such as Microsoft, Intel, HP and Cisco worked very closely with U.S. officials in the months leading up to the WRC", and that "In the case of the radio spectrum and the U.S., Microsoft and its technology industry partners will support the Federal Communications Commission as it codifies the WRC decisions and allocates the radio spectrum in the United States."

The U.S. delegates also discussed implementation at the July 16 luncheon.

Prior to the conference, on May 15, 2003, the Federal Communications Commission (FCC) adopted a Notice of Proposed Rulemaking (NPRM) [28 pages in PDF] proposing to make available an additional 255 MHz of spectrum for unlicensed use. This NPRM proposed allocating the 5.470-5.725 GHz band. See also, FCC press release [PDF], and stories titled "FCC Adopts NPRM to Increase Unlicensed Spectrum" and "FCC Unlicensed Spectrum NPRM and the Jumpstart Broadband Act" in TLJ Daily E-Mail Alert No. 663, May 16, 2003.

Manner stated that "We actually did issue an NPRM on the unlicensed bands on 5 GHz WiFi, in order to send a signal that we want to move forward, and we are planning to move forward as quickly as possible. Unfortunately, our rule making process is fairly slow. Even in the best of situations you are looking at a six month period, just because by the time you get comments, and things published in the Federal Register, and then you draft an order, and review the comments in the record. It just takes a while. So, I do think that there is a commitment."

She added that "The big complicating factor here was a change, I think, in our attitude on how we see WiFi in the U.S. It is an unlicensed device. Most countries don't have unlicensed services. They required a mobile allocation to be made. And then you had to have operation limits put on the operation. So that was something we had to sell. We also had an issue of our manufacturers, our commercial industry, wanted this to be used for both outdoors and indoors. And the rest of the world is still concerned about interference. And we had a lot of selling."

She elaborated on indoor versus outdoor use. "We were able to overcome the indoor outdoor use prohibition, by putting in language that gave comfort to countries that they did not have to allow outdoor use if they did not want to. It is very similar to what we did at ITU 2000 a couple of years ago. Was, we came up with an approach which basically says every country can decide for themselves. So, if you are here in the United States, if the records reflects, we may make that decision to allow outdoor use."

Broadband Services in Commercial Aircraft. The WRC-03 also approved a secondary allocation for aeronautical mobile satellite services in the 14-14.5 GHz band for the provision of internet and other data services on aircraft.

Audrey Allison of Boeing was a member of the U.S. delegation. She stated that Boeing is "going into commercial service early next year to provide real time two way broadband services to aircraft passengers and crew. Like I said, we are starting next year. We have got Lufthansa and SAS signed up. We are also on government aircraft and business jets."

She continued that "there is one little flaw in our plan. And that was the spectrum we planned to use for this service, which is an international service by definition. In the international table of frequency allocations, it says you cannot use it for aeronautical mobile satellite service. So, this is the detail that I was hired to help resolve. And that is what I am doing in my three year career so far with the Boeing company. It was my job to get the U.S. and other western hemisphere countries to approve a change of the regulatory status of the existing mobile satellite service allocation in the Ku band."

She added that "All you had to do was cross out the words in the table ``excluding aeronautical mobile satellite´´".

The other speakers at the July 16 luncheon were John Giusti (FCC's International Bureau), Cecily Holiday (State Department), Karl Nebbia (NTIA's Office of Spectrum Management), James Voorhies (NTIA International Spectrum Plans Program Manager), Jennifer Warren (Lockheed Martin), Lisa Choi (FCC's International Bureau), and Troy Tanner (Swidler Berlin).

See also, the FCC IB's WRC-03 web site.

Court Rules Retaliation by State for Work Related E-Mail is Not Actionable Under § 1983

7/16. The U.S. Court of Appeals (8thCir) issued its unpublished opinion [2 pages in PDF] in Bracey v. Lawson, holding that in a Section 1983 claim that asserts violation of free speech rights, an alleged retaliation by a state employer against an employee for sending a e-mail message about the job performance of a co-worker is not actionable, because the subject of the speech is not a matter of public concern.

Mary Bracey filed a complaint in U.S. District Court (EDArk) against Jim Lawson and the City of Little Rock, Arkansas, alleging violation of 42 U.S.C. § 1983. She alleged that she was denied promotion by her employer for sending an anonymous e-mail message criticizing a fellow employee's job performance, in violation of her First Amendment free speech rights. The District Court granted summary judgment to the City.

Section 1983 provides, in part, that "Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress, except that in any action brought against a judicial officer for an act or omission taken in such officer's judicial capacity, injunctive relief shall not be granted unless a declaratory decree was violated or declaratory relief was unavailable."

The Appeals Court affirmed. It wrote that "The First Amendment protects a public employee's speech so long as it addresses a matter of public concern."

The Court continued that "Speech qualifies as a matter of public concern if it is ``fairly considered as relating to any matter of political, social, or other concern to the community.´´ ... Having reviewed the record in the light most favorable to Bracey, as we must on summary judgment, we conclude that the district court determined correctly that because Bracey’s e-mail message was purely job-related and thus did not qualify as a matter of public concern, it did not constitute protected speech under the First Amendment." (Citations omitted.)

The Court added that "Bracey failed to show any causal connection between the e-mail message and any adverse employment action, as is required of a successful claim of First Amendment retaliation under § 1983."

DOJ Does Not Support SBC's Michigan Long Distance Application

7/16. The Department of Justice's (DOJ) Antitrust Division issued its Evaluation [23 pages in PDF] for the Federal Communications Commission (FCC) of SBC's Section 271 application to provide in region interLATA services in the state of Michigan.

The Evaluation states that "in-region, interLATA entry by a regional Bell Operating Company (``BOC´´) should be permitted only when the local markets in a state have been ``fully and irreversibly´´ opened to competition. Although SBC has made significant progress in addressing many of the issues raised in the DOJ Michigan II Evaluation and substantial entry has occurred in Michigan, serious questions continue to be raised concerning the accuracy of SBC’s wholesale billing. The record does not permit the Department to conclude that these concerns are insignificant or that they have been adequately addressed. Thus, the Department is not in a position to support this application based on the current record." (Footnotes removed from quotes from the Evaluation.)

The Evaluation also addresses line splitting and DSL service. It states that "line-splitting service to CLECs could provide an important platform for future broadband competition. Such a platform will be more important if in the future incumbent local exchange providers are no longer required to share their voice customer loops with independent providers of DSL service. In such an environment, and absent line-splitting service, a given area might be served only by two broadband providers, the incumbent local exchange provider itself and any cable television system serving the same area."

The Evaluation recommends that the FCC should "determine based on the record before it whether SBC's processes provide non-discriminatory access to line-splitting and UNE-platform services. SBC's current processes appear to place the CLECs at a competitive disadvantage as against SBC when they seek to sell DSL service. Their customers could experience a significant interruption of voice service if they later choose to disconnect the DSL service. SBC customers apparently do not suffer the same potential disability."

SBC filed its application with the FCC on June 19, 2003. The FCC must approve or deny the application within 90 days. This is SBC's fourth application to provide long distance service in Michigan. It withdrew the previous three. This is FCC WC Docket No. 03-138. See also, DOJ release.

House Appropriations Committee Approves FCC Appropriation, with TV Ownership Cap Rider

7/16. The House Appropriations Committee (HAC) approved the Commerce, Justice, State, the Judiciary and Related Agencies Appropriation Bill for FY 2004. This bill includes appropriations for the Federal Communications Commission (FCC).

The bill provides an appropriation for the FCC of $279 Million. This is $2 Million below the President's request, and $8 Million above the FY 2003 appropriation.

The HAC also added a rider offered by Rep. David Obey (D-WI), by a vote of 40-25, that prohibits the use of funds to grant licenses for a commercial TV broadcast station if the granting of that license would result in such party having an aggregate national audience reach exceeding 35%. See, HAC release.

The amendment would have the effect of preventing the FCC from fully implementing, during FY 2004, the national TV ownership provisions of its Report and Order and Notice of Proposed Rulemaking [257 pages in PDF] amending its media ownership rules.

On June 2, the FCC announced rules changes that raise the national TV ownership cap from 35% to 45%. That is, one company can own TV stations reaching no more than a 45% share of U.S. TV households. See, stories titled "FCC Announces Revisions to Media Ownership Rules" and "Reaction to the FCC's Media Ownership Announcement" in TLJ Daily E-Mail Alert No. 672, June 3, 2003, and story titled "FCC Releases Media Ownership Order and NPRM" in TLJ Daily E-Mail Alert No. 692, July 7, 2003. See also, FCC press release [10 pages in PDF] of June 2, 2003.

On June 19, 2003, the Senate Commerce Committee amended and passed S 1046, the "Preservation of Localism, Program Diversity, and Competition in Television Broadcast Service Act of 2003". The bill would roll back some of the changes FCC's media ownership. In particular, it would establish by statute a national broadcast television multiple ownership cap of 35%. See, TLJ story titled "Senate Commerce Committee Passes Media Ownership Bill", June 19, 2003.

On July 15, FCC Commissioners Michael Copps and Jonathan Adelstein wrote a letter [PDF] to FCC Chairman Michael Powell requesting that the FCC "stay its media ownership decision of June 2nd."

They wrote that "We seek a vote by the Commission on the question of a temporary stay of our rules to allow the Commission time to obtain concrete public input on the effect of the rule changes and to allow the people’s elected representatives in Congress to debate media consolidation. In addition, we seek expeditious consideration of any reconsideration petitions that are filed with the Commission once the public has the opportunity to analyze the implications of the rule changes." See also, Copps and Adelstein release [PDF].

More Capitol Hill News

7/16. Federal Reserve Board Chairman Alan Greenspan testified before the Senate Banking Committee. See, prepared testimony, which is the same as his prepared testimony of July 15 for the House Financial Services Committee. See also, opening statement of Sen. Richard Shelby (R-AL) and opening statement of Sen. Paul Sarbanes (D-MD).

7/16. The House Financial Services Committee's Subcommittee on Financial Institutions passed HR 2622, the "Fair and Accurate Credit Transactions Act of 2003" (FACT Act), by a vote of 41-0. Title II of the bill pertains to identity theft prevention. The bill is sponsored by Rep. Spencer Bachus (R-AL). See, HFSC release.

7/16. The House Judiciary Committee voted to report HR 2738, the "U.S. - Chile Free Trade Agreement Implementation Act", and HR 2739, the "U.S. - Singapore Free Trade Agreement Implementation Act". This Committee has jurisdiction over its visa provisions. The House Ways and Means Committee, which has jurisdiction over trade issues, is scheduled to consider these two bills on Thursday, July 17 at 2:00 PM. The Senate Finance Committee, which has trade jurisdiction, is scheduled to consider the Senate version of these two bills on July 17 at 10:00 AM. And finally, the Senate Judiciary Committee is scheduled to consider this legislation on July 17 at 9:30 AM. See also, the U.S Chile Free Trade Agreement (FTA), which was signed on June 6, 2003, and the U.S. Singapore FTA, which was signed on May 6, 2003. Both contains provisions relating to e-commerce, protection of intellectual property rights, and telecommunications.

7/16. The House Judiciary Committee approved HR 1303 by voice vote. The Committee adopted an amendment in the nature of a substitute, and then the bill as amended. This bill amends the E-Government Act of 2002 with respect to rule-making authority of the Judicial Conference.

People and Appointments

7/16. Makan Delrahim will become a Deputy Assistant Attorney General in the Department of Justice's (DOJ) Antitrust Division. He is currently Chief Counsel and Staff Director for the Senate Judiciary Committee (SJC). Before going to work for the SJC he worked for the law firm of Patton Boggs. See, release issued by Sen. Orrin Hatch (R-UT), Chairman of the SJC.

Go to News from July 11-15, 2003.