News from December 11-15, 2004

FCC Adopts Unbundling Order

12/15. The Federal Communications Commission (FCC) adopted, but did not release, an Order on Remand regarding incumbent local exchange carriers' (ILECs) obligations under 47 U.S.C. § 251 to make their network elements available on an unbundled basis. The FCC issued only a short release [2 pages in PDF], and four Commissioners wrote brief separate statements. This item is FCC 04-290 in WC Docket No. 04-313 and CC Docket No. 01-338. See, full story.

Reaction to FCC Unbundling Order

12/15. The Federal Communications Commission (FCC) adopted, but did not release, an Order on Remand at its December 15 meeting regarding incumbent local exchange carriers' (ILECs) obligations under 47 U.S.C. § 251 to make their network elements available on an unbundled basis. This article reviews some of the reactions from interested parties.

The FCC issued a short release [2 pages in PDF] that summarizes this Report and Order. Four Commissioners wrote brief separate statements. See also, story titled "FCC Adopts Unbundling Order" in TLJ Daily E-Mail Alert No. 1,039, December 16, 2004.

Walter McCormick, P/CEO of U.S. Telecom Association (USTA), a group that represents ILECs, wrote in a release that "While we will need to review the final order once it is released, it appears that the Commission recognizes the tremendous competition in today's consumer market and is moving in the right direction, although not fast enough, on phasing out the unlawful UNE platform. Unfortunately, instead of resolving all of the issues once and for all, as the courts have ordered, the Commission continues to perform a regulatory two-step, which at the end of the day leaves the industry right back where it started with government-managed competition."

McCormick added that "key aspects of this order appear to defy the direction of the D.C. Circuit, further delaying certainty for the industry and deferring the clear public interest in investment-based competition. It is unfortunate that the Commission failed to seize the opportunity to take decisive steps forward in our telecom policy and catch the laws up with the modern world. By clinging to and even expanding heavy-handed regulations, the FCC fell far short of this important task today."

FCC Chairman Michael Powell predicted in his December 15 statement [PDF] that "one will undoubtedly hear the tortured hand-wringing by incumbents that they are wrongly being forced to subsidize their competitors."

Herschel Abbott, BellSouth's VP for Governmental Affairs, stated in a release that it appears that "there have been significant strides in responding to the vast amount of switching alternatives now in place."

But, he continued that the FCC "has recognized the level of competition in the residential market, but inexplicably seems to ignore the broad competitiveness of the business market where we are still required to substantially unbundle elements of our network so our competitors can get them at a huge discount."

Abbott elaborated that "We are extremely disappointed in the new tests to assess impairment in the areas of transport and high-capacity loops. These rules do not appear to follow the court's order to take into consideration potential competition as well as actual competition. For example, there are BellSouth central offices in Charlotte, Miami, Atlanta and Ft. Lauderdale house a dozen or more competitive fiber networks which apparently could not meet the new high-cap test, thus requiring BellSouth to continue to offer broad unbundling. These rules do not appear to recognize this obvious competition or establish a mechanism to foster the facilities-based competition Congress envisioned. Similarly unbundling of transport is broader than warranted."

Powell also stated that "one can expect to hear dire predictions of competition's demise from those who wanted more from this item. Time will show this will not be so. Business models may change, but competition and choice for consumers in the information age will continue to grow and thrive."

Mark Cooper, of the Consumer Federation of America (CFA), stated in a release that "The FCC today continued its practice of chipping away at telecommunications competition while strengthening the Bell monopoly. And consumers will be the ones paying the price through diminished choices and higher rates. The Bells will soon be able to leverage their new market power over new services, such as broadband and Voice over Internet Protocol, stymieing competition in those new territories as well."

Cooper added that "I find it difficult to understand how the Commission could develop a rule finding there is telecommunications competition throughout this country when we know that most areas of the U.S. only have one major telecommunications provider."

Russell Frisby, CEO of CompTel/ASCENT, wrote in a release that his group's members "remain resolute in their mission to bring cost-effective services to their customers. However, today's FCC actions may potentially place unnecessary obstacles in front of further investment and economic development. CompTel/ASCENT is committed to helping its members retain the unfettered access to monopoly chokepoints that is vital to the further development of IP communications."

Moreover, Frisby stated that "Our hope is that, in the long term, this decision does not ultimately hamper the evolution of alternative IP networks and the deployment of competitive VoIP offerings."

This Report and Order is FCC 04-290 in WC Docket No. 04-313 and CC Docket No. 01-338.

FCC Announces NPRM on Cellphones in Airplanes

12/15. The Federal Communications Commission (FCC) adopted, but did not release, a Notice of Proposed Rulemaking (NPRM) regarding rules prohibiting the use of cellular telephones on airlines.

The FCC issued only a short release [2 pages in PDF], and Chairman Michael Powell and Commissioner Michael Copps wrote brief statements. This item is FCC 04-288 in WT Docket No. 04-435.

Chairman Powell wrote in a separate statement [PDF] that "Although operation of wireless devices aboard aircraft remains subject to Federal Aviation Administration (FAA) rules and policies that restrict their use to ensure against interference to onboard communications and navigation equipment, the adoption of this NPRM will help ensure that the Commission’s rules do not unnecessarily restrict the availability of airborne wireless services should the FAA and aircraft operators permit the use of airborne wireless devices."

Michael CoppsCommissioner Copps (at right) wrote in a separate statement [PDF] that "the way the FCC has decided to launch this new service risks creating a monopoly for broadband air-to-ground services. The Order creates an auction where one company can lock up the only license that can support a true broadband air-to-ground service. That means that if a company bids enough, it can exclude all other competitors, leaving airlines with only one possible supplier and passengers with no choice. Experience shows that if a company has the chance to buy a monopoly license, it will pay a premium for it. That is because it allows them, with one fell swoop, to ensure that competitors will not be able to keep prices down or force them to innovate."

The FCC's release states that this NPRM proposes "to permit the airborne operation of ``off the shelf´´ wireless handsets and other devices so long as the device operates at its lowest power setting under control of a ``pico cell´´ located on the aircraft, and the operation does not allow unwanted radio frequency emissions to interfere with terrestrial cellular systems."

The release states that the FCC seeks comments on "whether the proposal should apply only to devices operating in 800 MHz cellular spectrum, or whether devices operating on other spectrum bands, such as the PCS band or Advanced Wireless Services bands, should be included". The FCC also seeks comments on "ways that the 800 MHz cellular spectrum could be used to provide a communications ``pipe´´ between airborne aircraft and the ground", and on "whether to allow cellular carriers to provide service on a secondary basis to airborne devices subject to technical limitations aimed at preventing harmful interference".

FCC Adopts UWB Second Report & Order

12/15. The Federal Communications Commission (FCC) adopted, but did not release, a Second Report and Order and Second Memorandum Opinion and Order pertaining to Part 15 of its rules regarding ultra-wideband (UWB) transmission systems.

The FCC issued only a short release [2 pages in PDF]. None of the Commissioners wrote separate statements. This item is FCC 04-285 in ET Docket No. 98-153.

Michael Gallagher, head of the Department of Commerce's (DOC) National Telecommunications and Information Administration (NTIA), stated in a release that "President Bush has charged us with creating an environment where entrepreneurs and innovators can flourish -- and today's FCC order does just that. The United States continues to lead the world in ultrawideband technology."

Michael GallagherGallagher (at left) added that "Ultrawideband devices have the power to change people's lives whether they are in their living rooms or their automobiles. Today's ruling speeds the arrival of the day when passenger cars come equipped with radars that prevent accidents. The FCC has provided the certainty new technologies need for growth and development, and at the same time maintains protection for restricted bands that serve vital and sensitive purposes, such as earth exploration and radio astronomy."

The FCC release states that the FCC "previously established regulations that permit the marketing and operation of certain types of new products incorporating ultra-wideband (UWB) technology." The FCC adopted its First Report and Order [119 pages in PDF] in 2002.

The FCC then received petitions for reconsideration of the First R&O. The FCC addressed these in its Memorandum Opinion and Order and Further Notice of Proposed Rulemaking [91 pages in PDF] adopted on February 13, 2003. The MO&O portion largely reaffirmed the procedures adopted in 2002 to authorize the unlicensed operation of UWB, but made some changes to further facilitate the operation of imaging devices. The FNPRM portion proposed numerous new rules. See also, story titled "FCC Announces UWB Report and Order and Further NPRM" in TLJ Daily E-Mail Alert No. 604, February 14, 2003, and FCC release [2 pages in PDF], and story titled "NTIA Submits Comment to FCC in UWB Proceeding" in TLJ Daily E-Mail Alert No. 819, January 20, 2004.

The FCC release states that the present item amends "its rules for general Part 15 unlicensed operations that use wide bandwidths but are not classified as UWB devices under its rules. It increased the peak power limits and reduced the unwanted emission levels for 3 frequency bands that were already available for unlicensed operation: 5925-7250 MHz, 16.2-17.2 GHz, and 23.12-29 GHz, and indicated that higher peak power limits in these bands would facilitate wideband operations such as short range communications, collision avoidance, inventory control and tracking systems. The Commission also amended its measurement procedures to permit frequency hopped, swept frequency, and gated systems operating within these bands to be measured in their normal operating mode."

The release adds that the FCC "did not make any major changes to the current UWB technical requirements".

The release also states that the FCC dismissed the Petition for Reconsideration filed by the Satellite Industry Association (SIA).

FCC Adopts Order and NPRM Regarding Air Ground Service in the 800 MHz Band

12/15. The Federal Communications Commission (FCC) adopted, but did not release, a Report and Order and Further Notice of Proposed Rulemaking regarding the auctioning of 4 MHz of spectrum in the 800 MHz band that is currently dedicated to commercial air-ground service. The FCC will allow auction bidders to determine which of three proposed band plans will be chosen.

The FCC has issued only a short release [PDF] and a chart [1 page in PDF] that depicts the three band plans. Also, three Commissioners prepared brief separate statements. This item is FCC 04-287 in WT Docket 03-103.

FCC Chairman Michael Powell wrote in a separate statement [PDF] that "our rules for the 800 MHz commercial air-ground service has been locked in a narrowly defined technological and regulatory box and have kept passengers from using their wireless devices on planes. Nearly every party in the air-ground proceeding has commented that the existing band plan and our rules have hindered the provision of services that are desired by the public onboard aircraft."

The FCC release and chart disclose that one band plan would provide for two overlapping, cross-polarized 3 MHz licenses. A second plan would provide for an exclusive 3 MHz license and an exclusive 1 MHz license. A third plan would provide for an exclusive 1 MHz license and an exclusive 3 MHz license with the blocks at opposite ends of the band from the second plan.

The FCC release states that "New air-ground service may be any type (e.g., voice, data, broadband internet, etc.) and may be provided to any or all aviation markets (e.g., commercial, military, and general)."

Verizon Airfone is currently operating in this band. The FCC release also states that this item grants Verizon Airfone "a non-renewable 5-year license, subject to existing narrowband technical limits. Noting that the provision of high-speed broadband services to consumers onboard aircraft by one or more new licensees will require at least 3 MHz of the 4 MHz band, the Commission decided that following the grant of the new license, Verizon Airfone must limit operations of the existing narrowband Airfone system under the 5 year non-renewable license to the remaining 1 MHz of spectrum."

Michael CoppsFCC Commissioner Michael Copps (at left) wrote in a separate statement [PDF] that "The current air-to-ground narrowband service surely has not fulfilled expectations. There are few calls made each day and the service is high-priced and limited to voice. A new broadband air-to-ground service could allow a far greater diversity of services, including the ability to check email, access the Web, enhance avionic support, and improve homeland security communications."

However, he also complained that "the way the FCC has decided to launch this new service risks creating a monopoly for broadband air-to-ground services. The Order creates an auction where one company can lock up the only license that can support a true broadband air-to-ground service."

Michael PowellPowell (at right) said that "we will soon be considering pending applications and a rulemaking to authorize more satellite providers". He also pointed out that "we have asked questions in our ongoing 3G proceeding about the possibility of air-ground services in those bands. We will continue to explore opportunities for further competition in other bands and other platforms."

FCC Commissioner Jonathan Adelstein wrote in a separate statement [PDF] that "we already are seeing the deployment of satellite-based high-speed Internet services on international long-distance routes."

However, he added that "But we lost a golden opportunity here to guarantee true broadband competition. While a future auction likely will result in two unique licensees, it is agreed that a licensee with one megahertz of spectrum will be unable to compete against a licensee with three megahertz for a true broadband service. We could have easily made a change to the item to ensure that the broadband air-ground market would have been served by two competitors."

The FCC release states that the FCC "decided not to authorize ancillary services in the band."

The CTIA praised this decision. CTIA P/CEO Steve Largent stated in a release that "There was simply too much uncertainty regarding the Air to Ground spectrum and interference to allow a terrestrial component in the 800 MHz band at this time. There is an obligation to provide for interference-free homeland security communications, which could have been negatively impacted by a new terrestrial offering".

FCC Expands Rural Telemedicine Subsidy Program

12/15. The Federal Communications Commission (FCC) adopted, but did not release, an item titled "Second Report and Order, Order on Reconsideration, and Further Notice of Proposed Rulemaking" that pertains to the the FCC's rules regarding its rural health care subsidy system.

The FCC issued only a short release, and four Commissioners prepared brief separate statements. This item is FCC 04-289 in WC Docket No. 02-60.

The FCC created its rural health care program in its Order of May 8, 1997. It is a cross subsidy program. It provides subsidies to schools, libraries, and rural health clinics for telecommunications services, internet access, and computer networking. It is loosely based upon the Telecommunications Act of 1996. Section 254 of the Act codified the long standing practice of providing "universal service" support for telephone service in high cost and rural areas. The Act also included a subsection that extended universal service support to any school, library and rural health clinic.

The FCC last amended its rules regarding health clinics in November of 2003. See, story titled "FCC Expands Universal Service Support for Rural Clinics and Telemedicine" in TLJ Daily E-Mail Alert No. 779, November 14, 2003.

The present FCC release states that this item adopts rules changes that "Redefine what constitutes a rural area" to enable more towns to qualify. The FCC release cites as an example a small town in southwestern Virginia that will now qualify.

Rep. Rick Boucher (D-VA), who represents the area, and is a member of the House Commerce Committee's Subcommittee on Telecommunications and the Internet, has pressed the FCC on this subject. See, for example, comment [8 pages in PDF] submitted by Rep. Boucher on July 31, 2002.

The FCC release also states that this item adopts changes in FCC rules to "Increase discounts available to mobile rural health care providers for the purchase of mobile satellite telecommunications services". In addition, FCC Chairman Michael Powell wrote in a separate statement [PDF] that this item "seeks comment on whether to modify its rule specifically to allow mobile rural health care providers to receive discounts for facilities other than satellite."

The FCC release also states that the further NPRM portion of this item examines "whether a flat 25 percent discount for Internet services is sufficient and whether network infrastructure should be funded under the rural health care mechanism".

See also, statement [PDF] of Commissioner Kathleen Abernathy, separate statement [PDF] of Commissioner Michael Copps, and statement [PDF] of Commissioner Jonathan Adelstein.

More Court Opinions

12/15. The U.S. Court of Appeals (9thCir) issued its opinion [35 pages in PDF] in Grupo Gigante v. Dallo, a trademark dispute between supermarket chains, involving the territoriality principle and the exception for famous or well known marks. This case is Grupo Gigante SA DE CV, et al. v. Dallo & Co., Inc., et al., App. Ct. No. 00-57118, an appeal from the U.S. District Court for the Central District of California, D.C. No. CV-99-07806-DDP-MAN, Judge Dean Pregerson presiding.

More News

12/15. Sprint and Nextel Communications announced that their Boards of Directors "have unanimously approved a definitive agreement for a merger of equals. The combination will create ... a leading wireless carrier augmented by a global IP network that will offer consumer, business and government customers compelling new broadband wireless and integrated communications services. The new company, which will be called Sprint Nextel, also intends to spin off to its shareholders Sprint's local telecommunications business following the merger." See, Nextel release. See also, Sprint release. The merger is subject to approval by shareholders and government regulators.

Federal Circuit Rules in Blackberry Patent Infringement Case

12/14. The U.S. Court of Appeals (FedCir) issued its opinion [60 pages in PDF] in NTP v. Research in Motion, a patent infringement case involving RIM's Blackberrys. NTP prevailed below, obtaining a $53 Million judgment. The Court of Appeals affirmed in part, vacated in part, and remanded.

Research In Motion (RIM) makes Blackberrys. NTP holds U.S. Patents Nos. 5,436,960, 5,625,670, 5,819,172, 6,067,451, and 6,317,592, which pertain to technology for integrating existing e-mail systems with radio frequency (RF) wireless communication networks, to enable mobile users to receive e-mail over a wireless network.

NTP filed a complaint in U.S. District Court (EDVa) against RIM alleging infringement of its patents in suit. The District Court entered judgment of infringement for NTP, awarded damages to NTP of $53,704,322.69, and enjoined RIM from further infringement. RIM brought this appeal.

The Court of Appeals held that the District Court erred in construing the claim term "originating processor", but did not err in construing any of the other claim terms on appeal. The Court of Appeals also affirmed the District Court's finding of infringement.

This case is NTP, Inc. v. Research in Motion, Ltd., App. Ct. No. 03-1615 , an appeal from the U.S. District Court for the Eastern District of Virginia, Judge James Spencer presiding, D.C. No. 3:01CV767. Judge Linn wrote the opinion of the Court of Appeals, in which Judges Schall and Michel joined.

AEI Panel Addresses Telecom Regulation

12/14. The American Enterprise Institute (AEI) hosted a panel discussion titled "The Proper Direction for Telecommunications Reform Legislation". Robert Crandall of the Brookings Institution presented a paper titled "A Critical Analysis of the Economic Benefits of the 1996 Telecom Act's Local Competition Provisions". He argued that while the goal of the 1996 Act was to produce local competition, it did not produce "meaningful local competition".

He said that while there have been some benefits for local competition, they have been swamped by resource costs. He added that competition is coming instead from wireless and voice over internet protocol (VOIP) services. He also said that the 1996 Act delayed entry into long distance by the regional Bell operating companies (RBOCs), and this delay resulted in the loss of reduced rates for consumers.

Crandall summarized the theory behind the 1996 Act's local competition provisions. The local telecommunications market was a monopoly. So, the Congress mandated unbundling of network elements at regulated rates, mandated interconnection, mandated reciprocal compensation for local interconnection, and barred the RBOCs from providing in region interLATA services until they met a 14 point checklist. The theory was that this would enable new entry, increase competition, and thereby cause company revenues, and prices, to drop for local telecommunications services. And, in theory, it would not affect long distance revenues or rates.

Crandall said "the theory did not work out very well". Instead, long distance revenues and prices have dropped, while local revenues grew until quite recently. He added that local revenues only dropped because of a drop in the total number of access lines. Moreover, contrary to the theory underlying the 1996 Act, local prices have not dropped as anticipated by the theory underlying the 1996 Act.

He also argued that the new entrants enabled by the 1996 Act have not innovated.

He said that "consumers have gained from lower local rates". However, he said that there have been costs as well. He said that the competitive local exchange carriers (CLECs) spent more per customer than the incumbent local exchange carriers (ILECs), even though the CLECs did not maintain the networks of the ILECs. He argued that CLEC entry reduced productivity.

Moreover, he argued that the total capital expenditures of the CLECs far exceeds their total current market capitalization. He added that the prospects for survivors is bleak.

John Mayo of Georgetown University's McDonough School of Business was the first panelist to comment on Crandall's paper. He said that the "current process has shortcomings" and is "arguably broken". However, he emphasized the reaction of the ILECs to the local competition provisions of the 1996 Act. He said that "monopolists do not readily cede their monopoly power", and that the ILECs worked hard to maintain control over their networks after passage of the 1996 Act.

He also made the point that rent seeking behavior has occurred at the FCC, in the courts, and in the Congress.

Mayo offered three recommendations. First, he said that the practical implementation of universal service has been atrocious. He said that funds should be collected broadly and distributed narrowly, but that just the opposite is taking place now. He said that policymakers should consider including broadband services when collecting funds.

Second, he argued that access pricing is laden with subsidies and competitive distortions, and that it is essential that access "be priced at the same competition enabling levels" that exclude subsidies.

Third, he argued that the Congress should sharpen the prospects for antitrust liability as a means to promote competition.

To this final point Crandall responded that "there is no empirical economic evidence that antitrust has been successful at improving consumer welfare". He said that "we need some evidence" before more authority is given to the Federal Trade Commission (FTC) and the Department of Justice's (DOJ) Antitrust Division.

He added that the independent regulatory agencies that have been given antitrust authority have been "politically compromised". He added that "you have to change the structure to reduce the political lobbying".

Crandall also addressed the FCC's universal service programs during the question and answer session. He said that universal service "has nothing to do with universality of service". Rather, it is "a huge slush fund moving around between competing political groups".

Harold Furchtgott-Roth, who is a former FCC Commissioner, next commented on Crandall's paper. He made three main points.

First, he said that is far easier to analyze the consequences to consumer welfare of a statute in hindsight than it is to predict the likely consequences before its enactment. He was involved in drafting the 1996 Act as a member of the staff of the House Commerce Committee.

Second, he stated that while Crandall's assessment is on point as to local competition for consumers, there has been more innovation and price reduction on the business side.

Third, he said part of the problem is not the statute, but rather how the FCC implements statutes. And hence, he argued changes in the law will not necessarily bring about improvement. He was later asked a question about what legislation the Congress should enact to direct the FCC on VOIP regulation. He responded that "my point is that they do not follow directions".

Finally, Walter McCormick, P/CEO of U.S. Telecom Association (USTA), spoke. He said that "UNE-P was dumb", and that "it was an entirely failed experiment". He argued for "market competition" as opposed to "government managed competition".

Robert Hahn of the AEI Brookings Joint Center opened the discussion, and Greg Sidak of AEI moderated.

BellSouth CEO Ackerman Offers Recommendations for Next Telecom Act

12/14. Duane Ackerman, Ch/CEO of BellSouth, gave a speech, answered questions, and held a press conference, at the American Enterprise Institute on Tuesday, December 14, 2004. He said "It's time to update our communications laws" with Congressional legislation. He argued for less regulation in some areas (such as mandatory unbundling of network elements, and price regulation), but expanded regulation in others. He wants the Congress to expand telecommunications regulation under the rubric of 911, universal service, CALEA, disabled access, and consumer protection from telecommunications carriers to other industry sectors.

He gave a luncheon address that followed a panel discussion. See, related story in this issue titled "AEI Panel Addresses Telecom Regulation"

Ackerman said that there is a "disconnect between policy and reality". He asserted that "There's no credible evidence of ``market power´´ anywhere in U.S. communications markets today." (Internal quotations are from the prepared text of the speech.)

"There's no need for Government regulation to control the market", said Ackerman. "Perhaps it's time to substitute competition for regulation instead of substituting regulations for competition which was yesterday's policy objective."

He stated that "The next telecom act should focus on two communications policy goals: First, we should foster a far more consumer-controlled, investment-friendly, and less regulated marketplace than we have today… and … Second, we should correct flaws in the current universal service mechanism, preferably before that mechanism totally unravels "

He still wants some price regulation. Under his proposal, "very basic service rates would remain regulated. But if a customer opted to add another service or feature, the resulting bundle would not be regulated."

He also wants a reduction in, but not yet the elimination of, unbundling requirements. He said that "Wholesale regulation should be limited to requiring non-rural phone companies to unbundle local copper loops at negotiated rates. This obligation also should sunset after a few short years in order to facilitate commercially negotiated network access arrangements."

"During that period, incumbent carriers would be required to give competitors access to copper plant where other competitive alternatives are not available. There'd be a uniform Federal intercarrier compensation rate to reduce arbitrage." He added that "But at the end of a date certain, the FCC and state regulators would be out of the business of fixing interconnection terms and rates."

He also advocated regulation in a range of other areas, in order to enforce "social responsibilities" of companies. This includes 911, universal service, law enforcement monitoring of communications, disabled access, and consumer protection.

Moreover, he argued for an expansion of current regulation from telecommunications to other types of service providers. He said that "Congress must ensure that all the base-line social obligations placed on the communications business are equitably apportioned and supported by all competitors … regardless of the technology they choose to serve the public."

Also, he advocated expanding the pool of companies that subsidize the universal service programs. He said that "the contribution base should be broadened to include all service providers". Also, he said that general revenues of the federal government should support universal service programs. He said that "General tax revenues could also be used to fund at least part of the USF."

Ackerman also addressed intercarrier compensation. He said that the Congress should "direct the FCC to adopt a uniform federally administered intercarrier compensation mechanism within 6 months of enactment. The new mechanism should fairly compensate providers for use of their networks, while minimizing arbitrage opportunities. It also should require facilities-based carriers to interconnect directly and to provide transiting service to other facilities-based carriers at rates terms and conditions set through commercial contracts or, failing that, FCC-developed principles."

And then, "After a few years, the FCC's authority over interconnection and transiting should sunset. An industry group should then be responsible for updating default interconnection guidelines as necessary. Dispute resolution would be accomplished through mediation and/or some type of arbitration utilizing these guidelines."

Ackerman also discussed the logistics of passing legislation, during the question and answer session, and at a press conference. He said that it took about five years to pass the 1996 Act. He hopes that the next bill will take less time. When asked if the 109th Congress will pass a bill, he said "I won't go that far."

He said that any bill "has got to be pragmatic enough to get through the Senate". He also said that "I don't think that you are going to get through the Senate without an acceptable universal service approach".

He also suggested that the legislative process in likely to entail comprises. This means compromise language will be included in the statute. And then, this results in more litigation.

People and Appointments

12/14. Wendy Wysong was named Deputy Assistant Secretary of Commerce for Export Enforcement in the Department of Commerce's (DOC) Bureau of Industry and Security (BIS). See, release.

12/14. David Sanders was named Chairman of the Board of Directors of the Information Technology Association of America (ITAA), and Henry Steininger was named Vice Chairman. Sanders is a VP of Perot Systems. He replaces Roy Haggerty, P/CEO, of Ajilon. Steininger is Managing Partner of Grant Thornton.

12/14. Intel announced the appointments of 18 Vice Presidents. Suzan Miller was named VP Legal and Government Affairs, and Assistant General Counsel. Intel wrote in a release that Miller, who has worked for Intel since 1991, "is responsible for legal support for Intel's product and technology business units."

More News

12/14. The Federal Communications Commission (FCC) issued a Public Notice [PDF] that states that the FCC has rechartered its Consumer Advisory Committee (CAC), and that the deadline to submit applications and nominations for membership on the CAC is January 31, 2005. This item is DA 04-3892.

12/14. The Federal Communications Commission's (FCC) Advisory Committee on Diversity for Communications in the Digital Age adopted some recommendations. See, FCC release [PDF].

USTR Releases 3rd Annual Report on WTO Compliance by PR China

12/13. The Office of the U.S. Trade Representative (USTR) released a report [90 pages in PDF] titled "2004 Report to Congress on China's WTO Compliance".

The People's Republic of China acceded to the World Trade Organization (WTO) three years ago, on December 11, 2001. The Congress has, by statute, required the USTR to provide it with annual reports on China's WTO compliance. The present report is the third.

See, second report [73 pages in PDF] and story titled "USTR Releases 2nd Annual Report on WTO Compliance by PR China" in TLJ Daily E-Mail Alert No. 803, December 19, 2003; and first report [55 pages in PDF] and story titled "USTR Reports to Congress on PR China's WTO Compliance" in TLJ Daily E-Mail Alert No. 567, December 13, 2002.

The report begins by stating that "China committed to implement a set of sweeping reforms that required it to lower trade barriers in virtually every sector of the economy, provide national treatment and improved market access to goods and services imported from the United States and other WTO members, and protect intellectual property rights (IPR). China also agreed to special rules regarding subsidies and the operation of state-owned enterprises, in light of the state’s large role in China’s economy."

The report states that "China deserves due recognition for the tremendous efforts made to reform its economy to comply with the requirements of the WTO. It is beyond the scope of this Report, however, to detail all the ways in which China is in compliance with its commitments. This Report sets out to reflect the significant concerns raised by U.S. stakeholders regarding China’s efforts to implement its WTO commitments and China’s adherence to WTO rules. As the Report shows, while China’s efforts to fulfill its WTO commitments are impressive, they are far from complete and have not always been satisfactory, and China at times has demonstrated difficulty in adhering to WTO rules."

Intellectual Property Rights. The report states that "Upon joining the WTO, China agreed to overhaul its legal regime to ensure the protection of intellectual property rights in accordance with the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). China has undertaken substantial efforts in this regard, as it has revised or adopted a wide range of laws, regulations and other measures. While some problems remain, China did a relatively good job of overhauling its legal regime."

"However, China has been much less successful in ensuring effective IPR protection, as IPR enforcement remains problematic. Indeed, counterfeiting and piracy in China are at epidemic levels and cause serious economic harm to U.S. businesses in virtually every sector of the economy. One U.S. trade association reports that counterfeiting and piracy rates in China remain among the highest in the world, exceeding 90 percent for virtually every form of intellectual property."

The report goes on to discuss at length, at pages 62-71, problems with China's IPR regime. It finds that China's laws and regulations are "generally in line with international norms in most key areas", but with exceptions.

The report finds IPR enforcement by the Chinese government is lacking. It states that "effective IPR enforcement has not been achieved, and IPR infringement remains a serious problem throughout China. IPR enforcement is hampered by lack of coordination among Chinese government ministries and agencies, local protectionism and corruption, high thresholds for criminal prosecution, lack of training and weak punishments." The report goes on to detail weaknesses and deficiencies in the administrative, criminal and civil enforcement regimes.

Telecommunications. The just released third annual report discussions telecommunications on pages 75-76.

It concludes that "China has not yet established a truly independent regulator in the telecommunications sector. The current regulator, MII, while nominally separate from the current telecommunications operators, maintains extensive influence and control over their operations and continues to use its regulatory authority to disadvantage foreign firms."

Much of the discussion here is a repeat from the second annual report released last December.

Although, the latest report adds updates. For example, it states that "In April 2003, new problems developed with MII’s issuance of the Catalogue of Telecommunications Services. MII reclassified several telecommunications services from the value-added category to the basic category, contrary to widely accepted international practice. MII also placed restrictions on what new services could be classified under the value-added category. These moves have limited the ability of U.S. firms to access China's telecommunications market. Under China's Services Schedule, basic services are on a slower liberalization schedule, and MII subjects them to higher capitalization requirements. Indeed, MII requires suppliers of basic services to satisfy an excessive registered capital requirement of RMB 2 billion ($241.2 million). A review of capital requirements around the world shows essentially no capital requirements in many WTO member markets, including, for example, Argentina, Australia, Brazil, Chile, the member States of the European Union, Japan and the United States."

The 2004 also states that "MII continues to process applications very slowly for the few foreign-invested telecommunications enterprises that have attempted to satisfy MII’s licensing requirements. For example, as China nears the end of its third year of WTO membership, the United States is not aware of a single application for a license to provide value-added services that has completed the MII licensing process."

The report adds that "In 2004, a draft of the long-awaited Telecommunications Law began to circulate among Chinese ministries and agencies. The United States and U.S. industry have urged China also to circulate the draft law for public comment. If China takes the initiative, this law could be a vehicle for addressing existing market access barriers and other problematic aspects of China’s current telecommunications regime."

Supreme Court Denies Cert in Copyright and Reverse Passing Off Case

12/13. The Supreme Court denied certiorari, without opinion, in Silverstein v. Penguin Putnam, a compilation copyright and reverse passing off case. See, Order List [6 pages in PDF] at page 5. This lets stand the opinion [PDF] of the Second Circuit, which reversed a summary judgment for the author of a compilation of old poems. The case now goes back to the District Court for trial.

See also, Petition for Writ of Certiorari [40 pages in PDF] of Silverstein, which attaches copies of the opinions of the District Court and Court of Appeals.

See, full story.

5th Circuit Rules on Jurisdiction, Removal and Remand in Dispute Over Laying of Fiber Optic Cable

12/13. The U.S. Court of Appeals (5thCir) issued its opinion [8 pages in PDF] in Schexnayder v. Entergy, a case involving the laying of fiber optic cable. However, this appeal involves procedural questions regarding jurisdiction, removal, and remand. The Court of Appeals held that it lacked jurisdiction to review the District Court's order remanding the case to state court, and dismissed the appeal.

State courts have general jurisdiction, while federal District Courts have limited jurisdiction. They have jurisdiction only over cases in which there is diversity of citizenship or there is a claim based upon federal law. A case in which there is diversity of citizenship or a federal question may be brought in a state court. However, it can then be removed by a defendant to federal court. And, in some situations, the federal court may remand the case back to the state court. 28 U.S.C. § 1447 covers removal jurisdiction.

This is important because the outcome of a case may be affected by which court tries the case. The present case is a class action trespass and fraud case against a set of telecom companies. The plaintiffs want it to proceed in state court. The defendants want it to proceed in federal court.

Entergy Services and affiliated companies provide telecommunications services in the states of Texas, Louisiana and Arkansas. They upgraded their infrastructure by laying fiber optic cable.

Arthur Schexnayder and other land owners filed a complaint in state court in Louisiana against Entergy Services and related companies alleging trespass and fraud for laying cable across their properties without their permission. They plead no federal claims.

Six months later another party intervened, and also alleged a RICO violation, which is a federal claim. Entergy removed the action to the U.S. District Court based upon federal subject matter jurisdiction.

Schexnayder moved to remand the case back to the state court, arguing that removal jurisdiction cannot be based upon an intervenor's claim. The District Court granted this motion. This appeal followed.

The Court of Appeals held that it lacks jurisdiction to review the District Court order, and dismissed the appeal.

It wrote that "Congress has severely circumscribed the power of federal appellate courts to review remand orders. Section 1447(d) states that ``[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise.´´"

The Appeals Court noted that the Supreme Court created a limited class of cases that may be reviewed. The Supreme Court held that for a remand to be unreviewable, the District Court must act within the authority granted to it by § 1447(c). See, Quackenbush v. Allstate Ins. Co., 517 U.S. 706 (1996).

28 U.S.C. § 1447(c) provides, in part, that "A motion to remand the case on the basis of any defect other than lack of subject matter jurisdiction must be made within 30 days after the filing of the notice of removal ..."

The Appeals Court concluded that "this Court lacks jurisdiction under § 1447 if the district court based its remand order on either a lack of subject matter jurisdiction or a defect in removal procedure." It wrote that "Here, the district court based its remand decision on two factors. Principally, it ruled that Entergy’s removal petition was untimely based on § 1446(b). It also rejected Entergy’s argument that it could base the removal petition on Fear Farm’s intervening federal claim, which is to say that the district court did not have subject matter jurisdiction. These two grounds constitute allowable § 1447(c) reasons for remand. As a consequence, this Court lacks jurisdiction to review the district court’s order."

This case is Arthur Schexnayder, et al. v. Entergy Louisiana, Inc., et al., App. Ct. No. 03–31138.

Oracle Finally to Acquire PeopleSoft

12/13. Oracle Corporation announced that "it has signed a definitive merger agreement to acquire PeopleSoft, Inc., for $26.50 per share (approximately $10.3 billion). The transaction has been approved by the boards of directors of both companies and should close by early January." (Parentheses in original.) See, Oracle release.

PeopleSoft, Inc. announced in a release that "Under terms of the agreement, Oracle will revise its tender offer by this Wednesday, December 15th, and it will remain open through December 28th, unless extended in accordance with the merger agreement. The Board recommends that PeopleSoft stockholders tender their shares into Oracle's offer. Following the completion of the tender offer, Oracle intends to complete a merger in which all remaining PeopleSoft shares will be acquired for $26.50 per share."

"Oracle and PeopleSoft will each stay all pending litigation and will dismiss such litigation permanently following the consummation of the offer." PeopleSoft added that "The offer is subject to at least a majority of the fully diluted outstanding shares being validly tendered into the offer and to a limited number of other customary conditions."

Oracle has long sought to acquire PeopleSoft. Initially, PeopleSoft and its former P/CEO, Craig Conway, opposed the acquisition.

The Department of Justice's (DOJ) Antitrust Division also opposed the acquisition. On February 26, 2004, the U.S. and several states filed a complaint in U.S. District Court (NDCal) against Oracle alleging that its proposed acquisition of PeopleSoft would lessen competition substantially in interstate trade and commerce in violation of Section 7 of the Clayton Act, which is codified at 15 U.S.C. § 18. The plaintiffs sought an injunction of the proposed acquisition. See, story titled "Antitrust Division Sues Oracle to Enjoin Its Proposed Acquisition of PeopleSoft" in TLJ Daily E-Mail Alert No. 846, March 1, 2004.

The government lost in the District Court, and did not appeal. See, story titled "DOJ Loses Oracle Case" in TLJ Daily E-Mail Alert No. 974, September 10, 2004.

People and Appointments

12/13. Sean O'Keefe, Administrator National Aeronautics and Space Administration (NASA), announced his resignation. See, NASA release.

12/13. President Bush announced his intent to nominate Mike Leavitt to be Secretary of Health and Human Services. He is currently Administrator of the Environmental Protection Agency (EPA). See, White House release and transcript of White House event.

More News

12/13. 3Com Corporation announced that it has signed an agreement to acquire TippingPoint Technologies, Inc., a provider of network based intrusion prevention systems. See, 3Com release.

Go to News from December 6-10, 2004.