News from April 6-10, 2004

American Airlines Gave Passenger Data to TSA and Others

4/9. American Airlines (AA) stated in a release that "in June 2002, at the request of the Transportation Security Administration (TSA), some passenger travel data was turned over by an American Airlines vendor to four research companies vying for contracts with TSA".

AA added that "American authorized passenger names records (PNRs) held by its vendor, Airline Automation Inc., to be given directly to the TSA. Instead, AAI gave the data to four vendors. American agreed to provide one week’s worth of PNRs -- approximately 1.2 million records -- to the TSA because of the heightened interest in aviation security at the time and American's desire to ensure its passenger and crew safety following the unprecedented attacks on the World Trade Center and Pentagon only nine months earlier." (Parentheses in original.)

JetBlue also provided passenger data to the TSA. On February 20, 2004, the Department of Homeland Security's (DHS) Privacy Office released a report [10 pages in PDF] titled "Report to the Public on Events Surrounding jetBlue Data Transfer". The report concluded that no violation of the Privacy Act by the Transportation Security Administration (TSA) occurred in connection with the transfer of airline passenger data by JetBlue.

See, story titled "DHS Finds No Privacy Act Violation In Connection With JetBlue Transfer of Passenger Data" in TLJ Daily E-Mail Alert No. 841, February 23, 2004, and story titled "EPIC Submits Privacy Complaint To FTC Regarding JetBlue" in TLJ Daily E-Mail Alert No. 744, September 23, 2003.

FCC Receives Few Substantive Comments on DOJ Petition For Rulemaking

4/9. The Federal Communications Commission (FCC) has received few substantive comments to date in response to the Department of Justice's (DOJ) petition for a declaratory ruling and rulemaking regarding electronic surveillance of a wide range of internet based communications.

Comments are due by April 12. Reply comments are due by April 27. Commenters may be waiting until April 12 to file their comments. Also, some commenters may plan to submit what are essentially original comments as reply comments.

The DOJ wants the FCC to issue a declaratory ruling that providers of broadband internet access and voice over internet protocol (VOIP) must comply with the requirements imposed by the Communications Assistance for Law Enforcement Act (CALEA) and thereby design wiretap like capabilities into their networks, equipment, software and other items.

The DOJ also wants the FCC to write rules giving the government broad authority require pre-approval of new information technologies.

The DOJ also seeks a complex and detailed set of procedural and enforcement rules to enable to government to quickly compel telecommunications carriers and information services providers, as well as their equipment manufacturers and others, to comply with government CALEA related mandates.

See also, story in this issue titled "Summary of DOJ Petition for Rulemaking to Expand the CALEA to Cover Information Services". See also, related stories: "FBI Now Seeks a Rulemaking to Expand CALEA to Cover VOIP Services" in TLJ Daily E-Mail Alert No. 834, February 11, 2004; "FBI Publishes CALEA Final Notice of Capacity" in TLJ Daily E-Mail Alert No. 797, December 11, 2004; and "FBI Wants Broadband Internet Access Classified As A Telecommunications Service So That CALEA Will Apply" in TLJ Daily E-Mail Alert No. 707, July 30, 2003.

The FCC's Electronic Comment Filing System (ECFS) now contains over one thousand comments in this proceding. However, almost all of these are substantially identical copies of a one page criticism of the DOJ petition. They are unlikely to be according much weight by the FCC.

This duplicated comment states, in part, that "I do not believe this requirement is necessary. Longstanding laws already require Internet Service Providers and Internet telephone companies to allow the FBI to conduct surveillance. The FBI is going far beyond these existing powers by trying to force the industry to actually build its systems around government eavesdropping. It is the equivalent of the government requiring all new homes be built with a peephole for law enforcement to look through."

The comment adds that "I am very concerned that this requirement represents an end-run around Congress."

On March 22, Vonage submitted a notice [3 pages in PDF] of an ex parte meeting between Vonage President Jeffrey Citron and FCC Commission Kevin Martin and his Senior Legal Advisor, Dan Gonzalez, in which Citron raised several VOIP related issues, including the DOJ's rule making petition.

This notice states that "Concerning CALEA, Mr. Citron noted that, without exception, Vonage has complied with all subpoena requests from law enforcement, including providing call logs, records, and other account information. Vonage has met directly with the FBI and is engaged in coordinating technical discussions. The Company also believes it can generally comply with call intercept requests if they were to be made. Mr. Citron stated that Vonage does not believe it is necessary or appropriate for the FCC to classify its services as a ``telecommunications service´´ under Title II of the Act in order to meet law enforcement needs."

Monroe Pattillo, President of the Hotel Internet Technology, Inc., submitted a brief comment [PDF] on March 31 in which he argued that small businesses, such as a "bed&breakfast, small inn, and small boutique or resort properties" that offer "free to the user High Speed Internet Access or HSIA" would not be able to comply with the regulations requested by the DOJ.

He stated that there is no "revenue stream to cover the equipment and service costs associated with CALEA Packet Mode Intercept compliance. The data networks of such small businesses rarely include equipment for user login authentication and billing. Such gateway and server equipment is typically more expensive than the rest of the networking equipment at the business location."

He added that "If such businesses were to be encompassed by CALEA Packet Mode Intercept coverage then they could no longer economically provide free HSIA without incurring a significant expenditure on capital equipment and incurring a loss on the provided service to cover packet mode intercepts. Without the free HSIA amenity, such small businesses would be at a competitive disadvantage to larger businesses in the same market offering the same free HSIA amenity."

As of Thursday night, April 8, no other original comments in this proceeding had been published in the FCC's website. To view the comments in this proceeding, go to the FCC's comments search page, enter the number of this rulemaking, RM-10865, in dialogue box 1, and click on the enter button. The FCC comment retrieval system is exceedingly slow, and does not always function.

Others written about the DOJ petition, but not yet filed comments. For example, the Center for Democracy and Technology (CDT) wrote a short summary of this issue. The CDT distributed a version of this summary at a luncheon hosted by the Advisory Committee to the Congressional Internet Caucus in the Rayburn Building, on Capitol Hill, on Tuesday, March 16, 2004.

The CDT wrote that "There is nothing untappable about packet or Internet technology. Packet services currently available for voice and data are tappable at one or more points in the networks, and service providers are quite willing to work with law enforcement to satisfy interception orders quickly and fully."

"But the Internet is different from the traditional telephone network, and government agencies should not expect that surveillance will be carried out on the Internet the same way it is carried out in the circuit-switched telephone network. The digital revolution has produced many means of communication and it is not reasonable to require that all of them identify communications and route traffic the same way that the telephone network does."

The CDT argued that the DOJ "and the FBI are trying to force the diversity of services available over the Internet into a single format resembling the telephone network" and "to create a regulatory process under which new communications protocols, applications, or services must be reviewed and approved by the FBI before they can be deployed."

"The CALEA statute applies only to telecommunications common carriers. It does not apply to ``information services.´´ Congress realized that the Internet was fundamentally different from the telephone system and Congress chose not to apply CALEA to the Internet and ``information services´´ carried over it." The CDT argued that the DOJ petition "seeks to alter the balance initially struck in CALEA, and asks the FCC to extend CALEA to cover broadband Internet access generally and VoIP services specifically. Moreover, the Joint Petition asks the FCC to create a system under which any new technology that might replace a range of existing communications technologies must be reviewed and approved by the FBI before deployment."

The CDT concluded that "Such a prior-review requirement would destroy the United States’ ability to innovate on the Internet, and would in effect overturn the critical decisions of the FCC over the years that facilitated the rise of the Internet as a mass communications medium."

Summary of DOJ Petition for Rulemaking to Expand the CALEA to Cover Information Services

4/9. On March 10, 2004, the Department of Justice (DOJ) submitted a petition for rulemaking [83 pages in PDF] to the Federal Communications Commission (FCC) regarding requiring broadband service providers, voice over internet protocol (VOIP) application providers, and others, to design and modify their networks, hardware, software, and equipment in a manner that enables the DOJ to intercept VOIP and other internet based communications. See, full story.

Scalia Asserts That There Is a First Amendment Right Not to Speak on Radio or Television

4/9. Supreme Court Justice Antonin Scalia wrote letters to the Reporters Committee for Freedom of the Press (RCFP) and two reporters whose audio recorders were seized and erased by U.S. Marshals at a public event at which Justice Scalia spoke. See, letter to RCFP and RCFP release.

Scalia wrote that "I was as upset as you were." Nevertheless, he asserted a "First Amendment right not to speak on radio or television".

The Department of Justice's (DOJ) U.S. Marshals Service is a law enforcement agency tasked with protecting federal courts and ensuring the effective operation of the federal judicial system. This includes providing security for the Supreme Court Justices when they travel. The Federal Communications Commission (FCC) is the federal agency that abridges the speech of radio and television broadcasters.

The two reporters whose recordings were erased work for the Associated Press and a local newspaper. Both are entities that publish information primarily through written words for readers.

More News

4/9. The U.S. Court of Appeals (9thCir) stayed its mandate in Brand X v. FCC pending the filing a petitions for writ of certiorari with the Supreme Court. The Federal Communications Commission's (FCC) and others filed motions requesting the stay.

4/9. The Federal Trade Commission (FTC) extended to April 20, 2004 the deadline to submit comments in response to its request for comments regarding a National Do Not E-mail Registry. Section 9 of S 877, the "Controlling the Assault of Non-Solicited Pormography and Marketing Act of 2003" (CAN-SPAM Act), requires the FTC to write a report to the Congress on establishing a nationwide Do Not E-Mail Registry. It is due by June 16, 2004. See, story titled "FTC Announces CAN-SPAM Act Rulemaking" in TLJ Daily E-Mail Alert No. 855, March 15, 2004. The notice (setting the original comment deadline of March 31, 2004) is published in the Federal Register, March 11, 2004, Vol. 69, No. 48, at Pages 11775-11782. See also, FTC release summarizing the notice. The notice (extending the deadline to April 20, 2004) is published in the Federal Register, April 9, 2004, Vol. 69, No. 69, at Pages 18851 - 18852.

4/9. The Department of Homeland Security (DHS) published a notice in the Federal Register that states that it is establishing a Data Integrity, Privacy, and Interoperability Advisory Committee. The notice also requests that applications for membership be submitted by April 30, 2004. See, Federal Register, April 9, 2004, Vol. 69, No. 69, at Page 18923.

4/9. The Office of the U.S. Trade Representative (USTR) released draft text of the Dominican Republic Free Trade Agreement (FTA). See, chapter [PDF] regarding broadcast or cable transmissions or retransmissions. See also, side letter [PDF] from the Dominican Republic (DR) regarding the unauthorized broadcasting of copyrighted materials, and side letter [PDF] from the DR regarding patents, and side letter [PDF] from the DR regarding telecommunications competition. This final letter states that "The Dominican Republic plans to continue to apply a development strategy for its telecommunications sector that fosters universal service, improves teledensity, and promotes competition -- objectives that are fully compatible with those of Chapter Thirteen of the Agreement. The chapter does not prescribe a single approach to regulation, but rather allows each Party a substantial degree of flexibility in determining how to meet the chapter's requirements."

FCC Releases Agenda of April 15 Meeting

4/8. The Federal Communications Commission (FCC) released the agenda [PDF] for its Thursday, April 15, 2004 meeting. It includes consideration of an NPRM to make more spectrum available for unlicensed uses, such as WiFi and Bluetooth.

First, the FCC will consider a Third Report and Order regarding rule changes for radio frequency identification systems operating at 433 MHz. This is ET Docket No. 01-278, RM-9375, and RM-10051.

Second, the FCC will consider a Further Notice of Proposed Rulemaking (FNPRM) regarding rule changes for radio stations that broadcast digital audio using In-Band On-Channel (IBOC) technology. This is MM Docket No. 99-325.

Third, the FCC will consider an NPRM regarding unlicensed use of the 3650-3700 MHz band. Unlicensed devices include, among other things, 802.11 (WiFi) and Bluetooth devices. This is ET Docket Nos. 02-380.

On December 11, 2002, the FCC announced a Notice of Inquiry (NOI) regarding "Additional Spectrum for Unlicensed Devices Below 900 MHz and in the 3 GHz Band". See story, "FCC Announces Notice of Inquiry Re More Spectrum for Unlicensed Use" in TLJ Daily E-Mail Alert No. 566, December 12, 2002. On December 20, 2002, the FCC released the text of this Notice of Inquiry [MS Word]. This is ET Docket No. 02-380.

The meeting will be at 9:30 AM on April 15 at the FCC in the Commission Meeting Room (TW-C305), 445 12th Street, SW. The meeting will be webcast by the FCC.

Sen. Clinton Introduces Bill That Mixes Trade Protectionism and Data Privacy

4/8. Sen. Hillary Clinton (D-NY) and Sen. Mark Dayton (D-MN) introduced S 2312, the "SAFE-ID Act". The bill bears some attributes of a data privacy protection proposal, and some attributes of a proposal to impose protectionist barriers to trade in services. See, full story.

Sen. Frist Addresses Outsourcing

4/8. Sen. Bill Frist (R-TN), spoke in the Senate about outsourcing, trade, exports and frivolous lawsuits.

Sen. Bill Frist

Sen Frist (at left) stated that "Critics contend that a company's effort to deliver a product or service more cheaply and efficiently to the American consumer is hurting our economy and hurting America's workers. Indeed, this has become fodder for sound bites that I think are not justified and thus want to take a few moments to talk more broadly about what outsourcing is and what it is not."

But, he said, "I should begin by starting with the flip side of outsourcing and that is insourcing. What is ``insourcing´´? What is this phenomenon of insourcing? Well, it has been a company such as Nissan opens a plant in the United States and thereby creates high-paying jobs for American workers to the benefit of those American workers. In fact, that is the very thing that happened in Tennessee when, in 1980, Nissan opened its first plant in Smyrna."

He continued that "There is a second aspect to this whole discussion of world trade that has gotten overlooked in the debate, and that is the growth of American exports. Again, Tennessee has been a major beneficiary of the opening of foreign markets. ... Even more notably, export-supporting jobs paid 13 to 18 percent more on average than nonexport jobs. Our focus should be to expand economic growth and promote higher wages, not to impose sanctions and restrictions on America's job creators."

He then discussed the role of job training programs. Finally, he discussed at great length an issue that he argued is harming the U.S. economy -- "frivolous lawsuits".

He said that "Every day we encourage America's job creators to grow and expand and to compete in this world market. Yet at the same time we are burdening them with unnecessary, and I would argue unfair, litigation practices that ultimately amount to a hefty tax, which makes them less competitive in the world marketplace."

See, Congressional Record, April 8, 2004, at Pages S4006-7.

FRB Governors Offer Economic Analyses of Offshoring and Free Trade

4/8. Two Governors of the Federal Reserve Board (FRB) gave speeches recently in which they discussed the state of the economy, with reference to outsourcing, trade, the high tech sector, and appropriate policies. Both argued that an appropriate policy response to a weak labor market is education and training.

On April 8, Roger Ferguson gave a speech titled "Macroeconomic Outlook and Uncertainties" at a Federal Reserve Bank of San Francisco luncheon.

Ferguson addressed the state of the U.S. economy, which he said "appears to be engaged in a gradual process of recovery". He added that "production and aggregate income have increased strongly in the past few quarters, but the labor market has been surprisingly weak".

Roger FergusonFerguson (at left) reviewed the statistics that show "weak performance of the labor market". He then reviewed various hypotheses that have been advanced to explain the state of the labor market.

He stated one explanation is that firms have attained higher productivity "because they have realized a delayed efficiency payoff to the substantial investments in high-tech equipment in the late 1990s."

Another explanation is "the recent sizable increases in health insurance costs and in pension costs are cited by some as a reason for businesses to avoid hiring new employees".

Then, he said that "Other observers have pointed to the outsourcing of production abroad as a reason for the weakness in the labor market. Again, however, the magnitude of this phenomenon seems too small to explain more than a small part of the decline in employment over the past two years. Private-sector estimates of outsourcing are on the order of 1 percent of the gross job losses that occur each year. Moreover, because outsourcing abroad represents a shift of both production and labor input to a foreign country, outsourcing is probably not a major explanation for our recent history of elevated productivity growth."

He also reviewed trends in investment in high tech equipment. He stated that "the economic environment now seems more conducive to business investment. For much of the past three years, businesses were reluctant to invest in new capital equipment. At first, the downturn in investment seemed to be a reaction to what in hindsight appears to have been a substantial overinvestment in high-tech equipment in the late 1990s."

He added that "By the middle of last year, however, firms were beginning to boost their capital spending. And, in the second half, real fixed investment rose more than 10 percent at an annual rate, the fastest two-quarter rate of increase since early 2000. To be sure, a sizable portion of the recent strength in investment has been for high-tech equipment, and much of it probably reflects replacement of outdated machines rather than an expansion of existing production capacity."

Ferguson then offered his policy recommendation -- investment in education and skills. He said that "In the longer run, it is important that we as a society recognize the considerable economic benefits associated with sustainable increases in productivity and intensify our efforts to ensure that as many individuals as possible profit from the substantial productivity gains associated with innovation and increased competition. Unless we do so, the support of the population for flexible markets, technological change, and free and open trade--so crucial to the ongoing improvement of our standard of living -- will erode further."

"In my view, the best long-run response to the inevitable turbulence of a dynamic market economy is to increase our investment in the education and skills of the workforce", said Ferguson. And, he said that that community colleges provide workers an opportunity "to retool their skills to meet the changing requirements of the economy".

On March 30, FRB Governor Ben Bernanke gave a speech titled "Trade and Jobs" at Duke University in Durham, North Carolina. He said that "free trade among nations promotes economic prosperity".

While Ferguson spoke generally about the economy, and touched on outsourcing as one issue, Bernanke focused solely on trade issues.

Ben Bernanke

Bernanke (at right) argued that "although trade in general, and outsourcing abroad in particular, may bring with them structural change in the economy, they are not the principal reason for the current underperformance of the labor market. Rather, the sources of slow job creation are primarily domestic."

He added that "although trade does lead to the loss of jobs in some industries and locations, trade also creates jobs, both directly and indirectly. Directly, trade creates jobs in the United States by expanding the potential market for U.S. goods and services." And, he pointed out that one of the sectors that benefits from trade is technology.

Bernanke argued that "Attempts to restrict trade through the imposition of tariffs, quotas, or other trade barriers are not a good solution. Such actions may temporarily slow job loss in affected industries. But they do so by imposing on the overall economy costs that typically are many times greater than the benefits. In the short run, the costs of trade barriers include higher prices for consumers and higher costs (and thus reduced competitiveness) for U.S. firms. Trade barriers typically provoke retaliation from trading partners as well, with potentially large costs for exporters. And history shows that in the longer run, economic isolationism and retreat from international competition lead to bloated, inefficient industries, lower productivity, and lower living standards." (Parentheses in original.)

He said that "policy should be directed at helping to ensure that jobs become available for those who have been displaced. In particular, over time, appropriate monetary policies can help the economy achieve maximum employment with low inflation, irrespective of the trade situation. The nation's trade policies, rather than attempting to restrict trade, should be used to push for even more trade. By opening markets abroad, trade policy provides greater opportunities for U.S. firms and workers."

Then he argued that "The second piece of a constructive policy toward trade is to help displaced workers train for and find new work."

He said that training is good for several reasons, including that it provides new job opportunities for workers. He also concluded that one of the reasons for retraining displaced workers is that "if workers are less fearful of change, less pressure will be exerted on politicians to erect trade barriers or to take other actions that would reduce the flexibility and dynamism of the U.S. economy. In the long run, avoiding economic isolationism and maintaining economic dynamism will pay big dividends for everybody."

FCC Fines Clear Channel $495,000

4/8. The Federal Communications Commission (FCC) fined Clear Channel $495,000 for broadcasting an indecent Howard Stern program. Specifically, the FCC issued a Notice of Apparent Liability for Forfeiture (NAL) [20 pages in PDF] against Clear Channel Communications, Inc., for apparently willfully broadcasting over six radio stations indecent material on the Howard Stern Show. See, FCC release.

The FCC's method of calculating the $495,000 is notable. First, it assessed the maximum $27,500 penalty for each apparent indecency violation, which it has done in the past. Second, it multiplied this by the number of radio stations. Third, it multiplied this by three -- the number of indecent utterances on the program in question.

This per utterance method of calculating fines is new for the FCC. The FCC wrote in the NAL that "We believe that, under the specific circumstances at issue here, it is appropriate to treat the statements by each of the individuals as two separate utterances and therefore two separate violations, contrary to our more traditional approach of treating a specific program or program segment as indecent. Consequently, we conclude that there are three (3) apparent violations of the Commission’s indecency rules for each of the captioned stations that aired this material."

USTR Releases US-Morocco FTA and Report of Advisory Committees

4/8. On April 2, the Office of the U.S. Trade Representative (USTR) released the draft U.S. Morocco Free Trade Agreement (FTA). See especially, intellectual property rights chapter [PDF], electronic commerce chapter [PDF], and telecommunications chapter [PDF].

On April 8, the USTR released copies of the reports that it has received from its thirty-two trade advisory committees regarding the recently completed FTA. See especially, report [PDF] of the Industry Functional Advisory Committee (IFAC) on Intellectual Property Rights, report [PDF] of the IFAC on Electronic Commerce, and report [PDF] of the Industry Sector Advisory Committee (ISAC) on services. The FTA was praised by these and other committees, but criticized by the labor advisory committee. See also, USTR release [PDF].

The IFAC on Intellectual Property Rights wrote that this FTA contains "the most advanced IP chapter in any FTA negotiated so far ... making this truly a precedential agreement for future FTAs".

The IFAC on Electronic Commerce wrote that "the e-commerce chapter introduces the concept of ``digital products´´, which reflects digital product development in the last two decades and the need for predictability in how digital products are treated in terms of trade."

It added that "The chapter assures the non-discriminatory treatment of digital products, addresses the valuation of physically delivered digital products, and provides commitments to cooperate on electronic commerce policy. In the Morocco Agreement, the parties agreed not to impose customs duties on digital products transmitted electronically."

The ISAC on Services wrote in its report that the FTA "ensures full market access and national treatment for computer and related services by taking no reservations in this important sector for the U.S. information technology industry."

It also stated that the FTA "includes important language on electronic commerce. The chapter maintains and slightly expands the standards for trade in electronic commerce established under previous agreements. As with previous Agreements, the Morocco FTA includes the concept of ``digital products´´; prevents the application of customs duties on electronically delivered digital products; assures the non-discriminatory treatment of digital products delivered physically or electronically; addresses the valuation of physically delivered digital products; and provides commitments to cooperate on electronic commerce policy."

Finally, it states that the FTA chapter on telecommunications "is very similar to previous strong chapters in Singapore and Australia. It covers access to and use of the public telecommunications network for the provision of services. It includes all providers of public telecommunications services, with a focus on the major suppliers of those services. The chapter includes several important ``WTO-plus´´ obligations for major suppliers, including resale, provisioning of leased circuits and co-location. The chapter also fosters independence of regulatory bodies by disallowing a financial interest in any supplier of public telecommunications services by the regulator."

Sen. Burns Introduces Bill to Allow Delay in INTELSAT IPO

4/8. Sen. Conrad Burns (R-MT) introduced S 2315, an untitled bill to amend the Open-Market Reorganization for the Betterment of International Telecommunications (ORBIT) Act to extend the deadline for INTELSAT's initial public offering from June 30, 2004 to December 31, 2005. Burns argued that "the market is simply not conducive for a successful IPO".

Sen. Conrad BurnsSen. Burns (at left) introduced S 376, the ORBIT Act, in February of 1999. The Congress passed the bill, and President Clinton signed it, in 2000. It then became Public Law No. 106-180. It is codified at 47 U.S.C. § 763.

The present bill, HR 2315, was referred to the Senate Commerce Committee. Sen. Burns is a member of the Committee, and the Chairman of it Subcommittee on Communications.

The ORBIT Act mandates the privatization of INTELSAT, which has already occurred. The Act also set a deadline of December 31, 2002 for an initial public offering of stock in INTELSAT. That deadline has already been extended. Sen. Burns now seeks legislation allowing for a further extension.

The bill is very short. It provides that "Section 621(5)(A)(i) of the Communications Satellite Act of 1962 (47 U.S.C. 763(5)(A)(i)) is amended--
  (1) by striking ``December 31, 2003,´´ and inserting ``June 30, 2005,´´; and
  (2) by striking ``June 30, 2004;´´ and inserting ``December 31, 2005;´´."

Sen. Burns stated in the Senate that "Congress passed the ORBIT Act to enhance competition in the global satellite communications market. I am proud to say that ORBIT has achieved all of its objectives. Since its enactment, the FCC has found that positive change has occurred in the satellite services market as a result of the ORBIT Act. The FCC has declared that the pro-competitive objectives of the ORBIT Act have been achieved--including the complete transformation of Intelsat from what used to be a highly bureaucratic, intergovernmental organization into a fully privatized, U.S. licensed company that is headquartered and operates in the U.S., and is now subject to U.S. laws and U.S. regulations." See, the most recent Federal Communications Commission (FCC) annual report [18 pages in PDF] on the ORBIT Act, released on June 16, 2003.

"The only piece of unfinished business from the ORBIT Act that remains is the requirement that an IPO occur by a date certain", said Sen. Burns. "I have always had serious reservations with the very idea that Congress would impose a date certain for an IPO, rather than letting market forces determine the appropriate time for such an event. If I had my preference, we would get rid of the mandatory IPO requirement altogether. But since the Intelsat IPO deadline is June 30, 2004, we don't have a lot of time to get back into the substance of that issue."

Sen. Burns added that "the market is simply not conducive for a successful IPO" and that "major investors in Intelsat stand to lose hundreds of millions of dollars because the telecom market for IPOs is far from ideal". See, Congressional Record, April 8, 2004, at pages S4053-4.

People and Appointments

4/8. President nominated Jon Leibowitz to be a Commissioner of the Federal Trade Commission (FTC) for the remainder of a seven year term expiring on September 25, 2010. He will replace Mozelle Thompson. Leibowitz is Vice President of Congressional Affairs for the Motion Picture Association of America (MPAA). Before that he was Democratic Chief Counsel and Staff Director for the Senate Judiciary Committee's Subcommittee on Antitrust, Business Rights and Competition. That is, he previously worked for Sen. Herb Kohl (D-WI). See, White House release announcing intent to nominate, and release announcing nomination.

Ben Wu4/8. President nominated Benjamin Wu (at right) to be Assistant Secretary of Commerce for Technology Policy. He is currently Deputy Under Secretary of Commerce for Technology. He will replace Bruce Mehlman, who resigned late last year. Wu previously worked for the House Science Committee's Subcommittees on Technology, and Investigations and Oversight. See, White House release announcing intent to nominate, and release announcing nomination.

4/8. President nominated David Stone to be Assistant Secretary of Homeland Security for the Transportation Security Administration (TSA). He is currently Acting Administrator of the TSA. Before that, he was Federal Security Director at the Los Angeles International Airport. See, White House release announcing intent to nominate, and release announcing nomination.

More News

4/8. The U.S. Court of Appeals (7thCir) issued an Order [PDF] in which it denied petitions for rehearing and rehearing en banc in Indiana Bell v. McCarty, a interconnection dispute between Indiana Bell (SBC) and AT&T arising in the state of Indiana. A three judge panel of the Court of Appeals issued its opinion [29 pages in PDF] on March 5, 2004. The Order also makes one change in the opinion. See, story titled "7th Circuit Rules in Indiana Bell v. McCarty" in TLJ Daily E-Mail Alert No. 852, March 9, 2004. This case in Indiana Bell Telephone Company, Inc. v. William McCarty, et al., U.S. Court of Appeals for the 7th Circuit, Nos. 03-1123, 03-1122 & 03-1124, appeals from the U.S. District Court for the Southern District of Indiana, Indianapolis Division, D.C. No. 01 C 1690, Judge Larry McKinney presiding.

4/8. The Federal Communications Commission (FCC) released a Memorandum Opinion and Order that affirms its $14,000 forfeiture penalty against Emmis Radio License Corporation for willfully broadcasting indecent material. See also, FCC release. In this proceeding the FCC record did not include an audio tape, transcript, or significant excerpt of the complained of radio broadcast. Commissioner Copps dissented, arguing that the fine was too small. See, Copps statement [PDF].

Ballmer Addresses Cybersecurity

4/7. Microsoft CEO Steve Ballmer gave a speech in Washington DC at a discussion of cybersecurity hosted by the Center Strategic and International Studies (CSIS). See, transcript.

Steve BallmerBallmer (at right) stated that "Ensuring a more secure information technology infrastructure is absolutely essential to our societal and economic future, to public safety, and to our national security."

He discussed the nature of cyberthreats. He then spoke at length about Microsoft's recent efforts to makes its products more secure.

He also said that "Government also has a vital role to play. First, we look to government as a collaborator with industry and academia on basic cyber-security research. Second, governments need to implement the criminal-justice system that will deter hackers, and we look to government to help us drive cyber-security awareness amongst consumers and consumer education."

He added that "Last November, Microsoft established the Antivirus Rewards Program. In cooperation with the FBI, Secret Service and Interpol, we're offering significant cash rewards for information that leads law enforcement and results in the arrest and conviction of cyber-criminals. We're collaborating with governments to protect critical infrastructure here in the United States and in many, many other countries. We recently began work with National Security's National Cyber-Security Division on raising awareness of cyber-threats through the release of very prompt and well-formed security bulletins. Along with our industry partners, we're proud to be involved in the effort to connect much of the federal Homeland Security community into a national network for information sharing and intelligence analysis. We're also eager to work with government on policy matters, including more resources for law enforcement, ratification of the Council of Europe Cyber-Crime Treaty, investment in basic research, and broad consumer education campaigns, as I noted before."

The other speakers at the event were John Hamre (P/CEO of the CSIS) and Robert Holleyman (P/CEO of the Business Software Alliance).

USTR Releases Report on Telecom Market Access Barriers

4/7. The Office of the U.S. Trade Representative (USTR) released a report [13 pages in PDF] titled "Results of 2004 Section 1377 Review of Telecommunications Trade Agreements".

Section 1377 of the Omnibus Trade and Competitiveness Act of 1988, which is codified at 19 U.S.C. § 3106, tasks the USTR with preparing an annual report on the operation and effectiveness of telecommunications related trade agreements. See also, USTR release [PDF].

The report identifies four main problems: mandatory and discriminatory technology standards (and especially the PR China's WAPI standard, to the exclusion of CDMA, for wireless LAN products), excessive fixed to mobile termination rates, excessive pricing and provisioning delays for access to leased lines and submarine cable capacity, and the lack of an independent telecommunications and technology regulator.

The report states that the "USTR is seriously concerned about mandatory single-technology standards being considered or proposed for wireless telecommunications services and equipment in China (Wireless LAN Authentication and Privacy Infrastructure or ``WAPI´´, 3G services, and 450 MHz services); Korea (Wireless Internet Protocol for Interoperability or ``WIPI´´ and 2.3GHz services); and Japan (new 3G services)." (Parentheses in original.)

However, the report focuses on the People's Republic of China's abuse of technology standards. It states that "China announced that it would require all WLAN products (including computers to be connected to WLANs) sold in China to be developed in cooperation with 24 designated Chinese firms, which hold exclusive access to the encryption algorithms needed to comply with WAPI. This appears to be an example of mandating a locally developed standard for protectionist purposes." (Parentheses in original.)

The report adds that "China's telecommunications ministry, MII, has restricted the use of CDMA technology at 450 MHz and recently issued Document No. 15, which proposes that only SCDMA (a Chinese-developed standard) and other technology incorporating China-controlled IPR be permitted as rural communications solutions. MII’s apparent rejection of CDMA at 450 MHz on technical grounds does not appear justified, given the success this technology has had at this frequency in numerous markets."

The Telecommunications Industry Association (TIA) raised the matter of the PR China's discriminatory technology standards in its comment [13 pages in PDF] to the USTR.

With respect to standards setting in Korea, the report states that "there are two areas where proposals to mandate standards will potentially exclude U.S. equipment and service suppliers: a proposal to mandate a software interface standard for mobile wireless Internet services (WIPI, or wireless internet platform for interoperability); and a mandate to develop a single standard (as yet undefined) for ``portable´´ (i.e. limited mobility) wireless Internet services, licenses for which are expected to be issued this year, in the 2.3 GHz range." (Parentheses in original.)

The USTR report further states that "it appears that the standards process, under the influence of the government-funded research institute ETRI, is being manipulated to exclude foreign technologies and promote a technology developed by a particular Korean company."

ArrayComm raised the matter of Korea's WIPI in its comment [3 pages in PDF] to the USTR. See also, USTR web page with hyperlinks to all comments received by the USTR.

Next, the report identifies the high cost of completing calls onto mobile networks in many foreign countries. It specifically identifies France, Germany, the Netherlands, Greece, Australia, Japan, New Zealand, Peru, Switzerland, and Venezuela as the problem nations.

The report also states that "Commenters identified the following countries as not adequately addressing the problems of excessive pricing and lengthy provisioning times for the supply of leased lines to competitive suppliers of telecom services: Australia, Germany, France, PR China, New Zealand (late filing), Singapore, and Switzerland. In addition, India was cited for inadequately ensuring access to submarine cable capacity."

Finally, the report identifies the lack of an independent regulator in PR China, Colombia, Germany, France, Japan, Mexico, and South Africa.

The report identifies several things that can limit regulatory independence. First, it states that "In many countries, incumbent operators are perceived as enjoying favorable treatment, either through explicit regulatory decisions, or implicitly through regulatory/Ministry inaction in the face of anticompetitive conduct. This problem is most acute in countries that maintain some level of government ownership in the dominant telecommunications operator (e.g. Germany, France, China, Japan), but cases of fully private incumbents enjoying similar privileges (e.g. Mexico) are not uncommon." (Parentheses in original.)

The report also cites the combination of industry promotion and regulation in one entity. For example, "In both China and Japan, a single ministry oversees both regulatory and industry promotion functions, in the context of markets dominated by government-owned firms. This confluence of interests calls into question how the MII (China) and MPHPT (Japan) can oversee the market in an impartial manner." (Parentheses in original.)

Finally, the report discusses the PR China's capital requirements. It states that "China's capital requirements ($240 million) for Foreign Invested Telecom Enterprises (FITEs) engaged in basic telecommunications services appear unjustifiably high and pose a significant barrier to market entry. USTR will continue to advocate lowering these barriers as in China’s interest to attract foreign investment." (Parentheses in original.)

Privacy Groups Request That Google Suspend Its New Free Gmail Service

4/7. A collection of groups and individuals wrote a letter to Google urging it "to suspend the Gmail service until the privacy issues are adequately addressed".

The letter argues that three aspects of the Gmail service raise privacy questions: "Google has proposed scanning the text of all incoming emails for ad placement"; "Google's overall data retention and correlation policies are problematic in their lack of clarity and broad scope"; and "the Gmail system sets potentially dangerous precedents and establishes reduced expectations of privacy in email communications".

The letter states that "First, Google must suspend its implementation of scanning the full text of emails for determining ad placement." And, "Second, Google must clarify its information retention and data correlation policy amongst its business units, partners, and affiliates. This means that Google must set clear data retention and deletion dates and establish detailed written policies about data sharing and correlation amongst its business units and partners."

The letter was signed by representatives of the World Privacy Forum, Privacy Rights Clearinghouse, Electronic Privacy Information Center (EPIC), Consumer Federation of America (CFA), and others.

See also, Google' release announcing the new service, Google's summary of the service, and Google's Gmail privacy policy.

FTC and USPTO Officials Will Participate in Patent Conference

4/7. The Federal Trade Commission (FTC), the National Academy of Sciences (NAS), and the Berkeley Center for Law and Technology will co-host a two day conference titled "Ideas Into Action: Implementing Reform of the Patent System" on Thursday, April 15, and Friday, April 16, at the Bancroft Hotel in Berkeley, California.

The speakers will include Mozell Thompson (FTC Commissioner), Susan DeSanti ( FTC), and Steve Kunin (U.S. Patent and Trademark Office).

DeSanti was the primary author the FTC report tiled "To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy". See, Executive Summary [18 pages in PDF] and Report [2.28 MB in PDF]. It was released on October 28, 2003. See also, story titled "FTC Releases Report on Competition and Patent Law" in TLJ Daily E-Mail Alert No. 768, October 29, 2003.

See, agenda, conference web site, and FTC release. The event will not be webcast.

People and Appointments

4/7. William Mercer was named Chair of the Attorney General's Advisory Committee of United States Attorneys, for a one year term beginning on May 1, 2004. He is the U.S. Attorney for the District of Montana. See, DOJ release.

4/7. The Federal Communications Commission's (FCC) International Bureau (IB) made staff announcements. Breck Blalock will be the Chief of Staff and Associate Bureau Chief of the IB. Steven Spaeth and David Strickland are Legal Advisors to the Bureau Chief, Donald Abelson. Alexandra Field was named Assistant Division Chief for the IB's Policy Division. Andrea Kelly was named Chief of the Policy Branch of the IB's Satellite Division. See, FCC release [PDF].

More News

4/7. The Federal Communications Commission's (FCC) filed a motion with the U.S. Court of Appeals (9thCir) in Brand X v. FCC requesting that it stay its mandate pending the filing a petition for writ of certiorari with the Supreme Court. The FCC wrote in is motion that "The answers to the substantial legal questions in this case have profound implications for the development of the Internet, for the communications and information services industries in the United States, and for millions of cable modem subscribers receiving service today." It added that "Absent a stay, the FCC's nationwide policy of classifying cable modem service as an information service will cease to be in effect after April 7, 2004. At that point, difficult and possibly urgent questions would arise whether cable operators that provide cable modem services are subject to the myriad federal and state regulatory obligations that apply to providers of telecommunications services – obligations that do not now apply to providers of ``information services.´´"

4/7. The European Commission released its new block exemption regulations and guidelines on the application of Article 81 to technology transfer agreements. See, regulation [13 pages in PDF] titled "Commission Regulation ... on the application of Article 81(3) of the Treaty to categories of technology transfer agreements", and accompanying guidelines [67 pages in PDF] titled "Guidelines on the application of Article 81 of the EC Treaty to technology transfer agreements". These regulations takes effect on May 1, 2004.

4/7. Sen. John Breaux (D-LA) introduced S 2298, the "Employee Stock Ownership Plan Promotion and Improvement Act of 2004". It was referred to the Senate Finance Committee, of which Sen. Breaux is a member.

4/7. The Internet Corporation for Assigned Names and Numbers (ICANN) released its report [PDF] titled "Report by ICANN to United States Department of Commerce Re: Progress Toward Objectives of Memorandum of Understanding".

Bush Addresses Math and Science Education

4/6. President Bush gave a speech at the South Arkansas Community College in Eldorado, Arkansas, in which he addressed math and science, education, and jobs.

"Jobs in computer and math-related fields are expected to rise by nearly 60 percent by the year 2010 in the state of Arkansas", said Bush. "In other words, there's going to be jobs. The question is, are people going to be prepared to fill those jobs. That's really what we're here to talk about today."

He then discussed some of his proposals related to math and science education. He stated that "We've got a mathematics and science partnership program. One of the problems we've got, you heard me describe the kinds of jobs that will be available in Arkansas by 2010 -- you better make sure your math programs and science programs work."

The White House Press Office also issued a release that states that the President's proposals include "Increased funding for the Mathematics and Science Partnership Program to provide extra help to middle and high school students who fall behind in math. The President's FY 2005 budget provides an additional $120 million for the Program."

Bush continued. "See, a new skill-set is necessary to fill the new jobs. And therefore, we put out a program, a math and science partnership program, which will help teachers with curriculum, but also provide extra help for kids just to make sure they don't get shuffled through. I mean, literacy is more than just being able to read. There's math literacy, as well, that we want to effect."

Bush also stated that "We've got an adjunct teacher program. That's an important way to help recruit professionals into the classroom to teach math. If you've got yourself a retired NASA employee in your neighborhood, it seems like to me you want to be able to have that person go into the classrooms and teach science or math. One of the things the superintendent may tell you here, I know I've heard it from other superintendents, is that we've got a shortage of math teachers and science teachers."

The White House Press Office release also states that the President's proposals include "Incentives to invite math and science professionals from the private sector to teach part-time in our high schools. The President's FY 2005 budget also includes $227 million in loan forgiveness for math, science and special education teachers in low-income schools."

The White House Press Office release also states that "President Bush wants to expand opportunities for math and science education in colleges and universities. The President proposes establishing a new public-private partnership to provide $100 million in grants to low-income students who study math or science. Under this plan, approximately 20,000 low-income students would receive up to $5000 each to study math or science. Students would have to be eligible for Pell Grants to receive this additional $5,000, although this new fund would be run separately from the Pell Grant program."

BIS Annual Report Addresses Encryption, IT Hardware, and Deemed Exports

4/6. Bureau of Industry and Security (BIS) released a report titled "Annual Report: Fiscal Year 2003". The BIS, which is also still known as the Bureau of Export Administration (BXA), controls exports for national security purposes, including exports of dual use items, such as computers, microprocessors, software and encryption products.

The report states that in 2004 "BIS also will work to achieve needed export policy changes. In particular, BIS expects to undertake a comprehensive examination of deemed exports and technology controls. While controls on information technology hardware - such as computers and microprocessors - have been updated regularly to keep pace with rapid technological and market changes, the corresponding technology and software controls have not always kept pace. In addition to updating information technology control parameters, BIS will work with its interagency partners in the U.S. Government to seek to revise the restrictions on transfers of technology within U.S. companies."

The report also reviews encryption export controls. It states that "U.S. encryption export control policy continues to be anchored on the technical review of encryption products prior to export, streamlined post-export reporting, and license review for certain exports of strong encryption to foreign government end-users. BIS published a rule on June 17, 2003 (68 Fed. Reg. 35783), updating U.S. export controls on dual-use encryption items. The rule implemented changes made to the Wassenaar Arrangement List of Dual-Use Goods & Technologies in December 2002, and further clarifies U.S. encryption export policy in light of the widespread use of encryption products by individuals, businesses, and governments."

The report continues that "The encryption policy published by BIS in June 2003 clarifies when encryption commodities and software may be given ``de minimis´´ treatment; provides that short-range wireless devices incorporating encryption may be given ``mass market´´ or ``retail´´ treatment; and confirms that specially designed medical equipment and software are not controlled as encryption or ``information security´´ items under the EAR. The rule also expands the authorizations according to which travelers departing the United States may take encryption items for their personal use, and provides additional guidance on when exporters are required to submit encryption review requests for new products that will be sold or otherwise exported for other than ``personal use´´ overseas. Finally, this rule implements changes to the Wassenaar Arrangement List of Dual-Use Goods & Technologies (finalized in December 2002) by eliminating national security-based controls on certain types of ``personalized smart cards´´ and equipment controlling access to copyright protected data." (Parentheses in original.)

The report also covers technical reviews of encryption exports. It states that "BIS processed a substantial number of pre-export encryption review requests for a variety of products with encryption features, including commodities and software for desktop and laptop computers, wireless handheld devices, e-business applications, network security, and telecommunications platforms. Commercial encryption products, except high-end networking products, source code, and products for which the cryptography has been customized or tailored to customer specification, may be exported and reexported to any destination other than a designated terrorism-supporting country after a one-time technical review."

The report adds that "In Fiscal Year 2003, BIS received over 1,400 technical review requests for 2,400 controlled encryption products, components, toolkits, and source code items. Encryption reviews comprised 34 percent of BIS's total output of commodity classifications in Fiscal Year 2003. Of the 1,759 encryption products actually reviewed during the fiscal year, 82 percent (1,444) were classified as ``retail´´ (964) or "mass market" (480) encryption items, making them eligible for export and reexport without a license to government and non-government end-users in most countries."

It also states that "During Fiscal Year 2003, BIS also approved 373 license applications for ``non-retail´´ encryption items (such as high-end routers and other network infrastructure equipment) and technology valued at $71.1 million." (Parentheses in original. Footnote omitted.)

Finally, the BIS annual report addresses deemed exports. It states that "Most deemed export cases involved the transfer to foreign nationals of technologies controlled for national security reasons. In addition, most deemed export cases involved foreign nationals employed in the semiconductor manufacturing, telecommunications, and computer industries. More than 69 percent of the deemed export license applications reviewed related to Chinese and Russian nationals. Additionally, over 30 percent of the deemed export license applications received in Fiscal Year 2003 were for renewals and technology upgrades of existing deemed export licenses."

People and Appointments

4/6. President Bush nominated Michael Watson to be a Judge of the U.S. District Court for the Southern District of Ohio. See, White House release.

More News

4/6. The National Institute of Standards and Technology's (NIST) Computer Security Division (CSD) released its "Pre-Publication Final" draft [67 pages in PDF] of NIST Special Publication 800-37, titled "Guide for the Security Certification and Accreditation of Federal Information Systems". The deadline for public comments is April 21, 2004. Comments should be addressed to The CSD has previously released, and received comments upon, two earlier drafts of SP 800-37. The CSD stated that its final publication is expected in May.

Go to News from April 1-5, 2004.