News from February 1-5, 2005

FCC Releases Unbundling Order

2/4. The Federal Communications Commission (FCC) released its Order on Remand [185 pages in PDF] in its proceeding titled "In the Matter of Unbundled Access to Network Elements Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers".

With this order, the FCC once again set rules regarding the unbundling requirements of ILECs, pursuant to 47 U.S.C. § 251. The previous three were overturned in part by the federal courts.

The FCC adopted, but did not release, this order at its December 15, 2004 meeting. See, story titled "FCC Adopts Unbundling Order" in TLJ Daily E-Mail Alert No. 1,039, December 16, 2004, and story titled "Reaction to FCC Unbundling Order" in TLJ Daily E-Mail Alert No. 1,041, December 20, 2005.

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

FCC Releases Reports on MVPD Competition and Cable Prices

2/4. The Federal Communications Commission (FCC) released its 11th annual report [151 pages in PDF] on the status of competition in the market for the delivery of multichannel video programming. See also, FCC release and summary [6 pages in PDF].

The FCC also released a document [37 pages in PDF] titled "Report on Cable Industry Prices". See also, FCC release [PDF].

This MVPD competition report concludes that "Today, almost all consumers have the choice between over-the-air broadcast television, a cable service, and at least two DBS providers. In some areas, consumers may also choose between other traditional (e.g., broadcasting, cable, DBS) and emerging (e.g., use of digital broadcast spectrum, fiber to the home, video over the Internet) delivery technologies as well. Increased competition in the market for the delivery of video programming since our first Report has led to improvements in cable television services, including more channels of video programming and more service options, but generally not lower prices. In addition, through the use of advanced set-top boxes and digital video recorders, consumers are now able to maintain more control over what, when, and how they receive information." (Parentheses in original. Footnotes omitted.)

This report also states that "cable subscribership is remaining relatively stable as the MVPD market grows; thus, cable’s share of the MVPD market is declining. In contrast, DBS subscribership continues to increase at nearly double-digit rates of growth, and its share of the marketplace is increasing. The second and fourth largest MVPDs are both DBS operators. In addition, other delivery technologies continue to serve small numbers of subscribers in limited areas. LECs, who have partnered with DBS providers to offer video service over the last year, have recently announced plans to enter the video distribution market with fiber facilities."

Moreover, it finds that "consumers today have viable choices in the delivery of video programming, and they are exercising their ability to switch among MVPDs. We do not believe that the fact that large numbers of consumers continue to subscribe to cable service indicates a lack of choice."

The FCC's cable prices report states that "the average monthly rate for cable service increased by 5.4 percent, from $42.99 to $45.32, over the 12 months ending January 1, 2004. This increase is lower than the 7.8 percent increase for the year ending January 1, 2003, and the 7.5 percent 5-year average annual rate of change over the period beginning July 1, 1998 and ending on January 1, 2004."

It also states that " The average number of channels on basic and expanded basic increased from 67.5 to 70.3 channels, a 4.1 percent increase for the year ending January 1, 2004, which is lower than the 6.3 percent 5-year average."

Also, the average price per channel "increased by 1.2 percent, from 65.2 cents per channel to 66.0 cents per channel, compared with the 5-year average of 0.4 percent."

The report concludes that "The monthly cable rate consists of both programming and equipment charges and the measured annual rate of increase reflects individual changes in these components."

The cable prices report also discusses internet access and telephony. It states that "The nature of cable service has changed significantly in recent years with the emergence of digital cable, Internet access, and telephony as important new services so that these new services now represent significant sources of cable system revenues and costs. A substantial portion of these costs are incurred to support all system services jointly and, therefore, cannot be attributed directly to basic and expanded basic cable service. In the absence of a uniform system of accounts and cost allocation standards, there is no uniform way to allocate these joint costs to specific lines of business or service for purposes of statistical analysis. Moreover, to provide a complete picture, it would be necessary to take into account revenue changes that might offset increases in costs. Thus, from a survey of this nature, there is no way to determine which costs are driving rate increases."

FCC Chairman Michael Powell wrote in a statement [PDF] about the MVPD competition report that "today's video marketplace is the most competitive and diverse in our nation’s history", and that the "continued proliferation of emerging broadband digital platforms and services promise a future of more competition, diversity, localism and personalization in the video marketplace".

Michael PowellPowell (at right) added that "The digital migration in the video distribution market is also bringing new players into the market. The major incumbent local exchange carriers have announced plans to offer video service over new, fiber-based distribution platforms. Broadcasters such as Emmis and USDTV are leveraging their digital assets to offer low-cost pay-television services to several communities across the country. Continuing advances in broadband Internet speeds and compression technologies are allowing thousands of channels to emerge on the Internet".

In contrast, the FCC's two Democratic Commissioners, Michael Copps and Jonathan Adelstein, wrote in a joint statement [PDF] about the MVPD report that the FCC engaged in insufficient data analysis in preparing this report. They conclude that "this year's competition report continues to serve mainly as a recitation of the record rather than providing an in-depth analysis of the status of competition."

One of their complaints is that the report contains no multivariate regression analysis of issues such as factors that influence rate increases.

On January 27, the FCC did release a paper [PDF] titled "Competition between Cable Television and Direct Broadcast Satellite -- It's More Complicated than You Think", which includes regression analysis of DBS penetration, and the effect of cable prices on consumers' decisions to switch to DBS.

Robert Sachs, the outgoing P/CEO of the National Cable & Telecommunications Association (NCTA), commented in a release that "With direct broadcast satellite companies having grown from zero to 25 million customers over the past ten years, and accounting for one in four video subscribers, competition in the video marketplace is an indisputable reality."

Sachs added that "Marketplace competition has spurred the cable industry to invest $95 billion since 1996 to improve customer service, upgrade its technology and launch new services such as digital cable, High-Definition TV, Video-On Demand, Digital Video Recorders, high-speed Internet and local telephone service."

The name of the MVPS competition proceeding is "In the Matter of Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming". The report is FCC 05-13 in MB Docket No. 04-227. The FCC is required, pursuant to 47 U.S.C. § 548(g), to make this annual report to the Congress.

The name of the cable prices proceeding is "In the Matter of Implementation of Section 3 of the Cable Television Consumer Protection and Competition Act of 1992 Statistical Report on Average Rates for Basic Service, Cable Programming Service, and Equipment". The report is FCC 05-12 in MM Docket No. 92-266.

Cato Paper Analyses Telecom Bust

2/4. The Cato Institute released a paper [20 pages in PDF] titled "Who Killed Telecom? Why the Official Story Is Wrong". It is an historical analysis of the nature and causes of the bust in the telecom sector in 2000. The author is Lawrence Gasman, who is a Senior Fellow at Cato, and President of Communications Industry Researchers, Inc.

Gasman argues that the "official story" regarding the cause of the telecom bust is that "a bunch of greedy carpetbaggers, perceiving that there was something to all this Internet and “information age” stuff, jumped into the telecom market, hyped it out of all proportion, and misled investors in order to boost stock values. Then, at the last moment, as the market began to acknowledge the hype and fraud, these crooks got out with their own large personal fortunes mostly intact."

Gasman argues too that this "official story" is wrong. Rather, the cause was the Telecommunications Act of 1996, as implemented by the misguided policies of the Federal Communications Commission (FCC).

He states that the FCC "was determined to crowd as many firms as possible into the telecom sector. That strategy was to be achieved by lowering barriers to entry and, in particular, by giving newcomers low cost access to the networks of the carriers."

Then, "When it became obvious that the market was top heavy with competitors, the telecom bust occurred." It was Reed Hundt's fault, according to Gasman. See, also, brief summary.

DOJ and FTC State the Proposed Kansas Bar Rules Would Impede Information Technology

2/4. The Department of Justice (DOJ) and Federal Trade Commission (FTC) wrote a joint letter to the Kansas Bar Association (KBA) commenting on the anti-competitive aspects of its proposed definition of the practice of law. The letter raises many points, including that the proposed definition might prohibit computer programs and web sites that assist consumers in preparing basic documents, such as simple wills, contracts and non-contested divorce papers.

The DOJ/FTC letter states that "the definition of the practice of law should be limited to those activities where specialized legal knowledge and training is demonstrably necessary to protect the interests of consumers. Otherwise, consumers benefit from preserving competition between lawyers and non-lawyers."

Among other things, the DOJ/FTC letter takes issue with the proposal to include within the definition of practicing law "engaging in an activity which has traditionally been performed exclusively by persons authorized to practice law". The DOJ/FTC letter points out too that the proposed definition "provides no guidance as to what types of services may ``traditionally´´ have been ``exclusively´´ a lawyers' activity." It thus "may diminish or discourage competition anywhere that laypeople see lawyer providers, even if lawyers have not ``traditionally´´ been the exclusive providers of a service and even if there is no demonstrable harm from non-lawyer providers."

The DOJ/FTC state that this provision could impede information technology. It states, "For example, self-help books -- and more recently, computer programs and Web sites -- allow consumers to produce legal documents for themselves such as simple wills, contracts, powers of attorney, and papers for non-contested divorces. The production of such documents before the advent of self-help books or computer programs may have been considered "an activity which has traditionally been performed exclusively by persons authorized to practice law."

This is not an isolated letter. The FTC and DOJ have many times examined legal barriers to competition, including electronic commerce, imposed by bar associations and other barrier creating entities. For example, on March 20, 2003, the FTC and the DOJ wrote a letter to the Georgia State Bar's Standing Committee on the Unlicensed Practice of Law in response to its inquiry regarding preparation of deeds and other real estate conveyance instruments. The FTC and DOJ focused on the impact that an overly broad restriction on the practice of law would have on internet competition and electronic commerce.

The DOJ and FTC argued that "these potential restrictions are likely to impede substantially the growth of e-commerce. The Internet is changing the way many goods and services are delivered, and consumers benefit from the increased choices and convenience and decreased costs that the Internet can deliver." They added that "when restrictions may foreclose potential new Internet competitors, one should proceed cautiously, mindful of the unintended consequences that may unduly limit the choices of consumers." See, story titled "FTC/DOJ Oppose Restraints on E-Commerce Posed by Unlicensed Practice of Law Rules" in TLJ Daily E-Mail Alert No. 629, March 24, 2003.

Similarly, the FTC and DOJ wrote a letter to the American Bar Association (ABA) on December 20, 2002. They argued that "The Internet is changing how many goods and services are delivered, and consumers benefit from the increased choices and convenience and decreased costs that the Internet can deliver. Yet over-broad restrictions on the practice of law can impair the growth of e-commerce by (1) prohibiting or increasing the costs of electronic provision of forms or other legal self-help computer programs, (2) negatively impacting Internet mortgage lenders who rely on lay real estate closers, and (3) restricting the ability of providers to experiment and develop new forms of Internet services touching on legal matters that could benefit consumers directly."

People and Appointments

2/4. Steven Law was named Chairman of the President's Management Council Subcommittee on E-Government. He is also Deputy Secretary of the Department of Labor. See, Office of Management and Budget (OMB) release [PDF].

More News

2/4. The Federal Communications Commission (FCC) announced that "FCC website documents and E-Filing systems will be unavailable from 10:00 PM (EST) on Saturday February 5 until 8:00 AM (EST) on Sunday February 6 due to scheduled maintenance."

FCC Announces Agenda for February 10 Event

2/3. The Federal Communications Commission (FCC) announced the agenda [PDF] for its Thursday, February 10, 2005 event titled "Open Meeting". Two items on the agenda may generate considerable interest: dual must carry and intercarrier compensation. The FCC scheduled these two items as the first and last items on a long nine item agenda.

First, the FCC will consider a Second Report and Order (R&O) and First Order on Reconsideration concerning the carriage obligations of cable operators with respect to digital broadcasters. This item may address the must carry and multicasting requirements of cable operators. This is CS Docket No. 98-120.

The final item on the agenda is a R&O and Further Notice of Proposed Rulemaking (FNPRM) in CC Docket No. 01-92. This is the FCC's four year old proceeding on intercarrier compensation. The agenda is vague. It states that this item "resolves a number of issues regarding application of the Commission’s intercarrier compensation rules and solicits comment on a number of reform proposals submitted by the industry as well as other issues related to intercarrier compensation reform."

The agenda item also references the "Sprint Petition for Declaratory Ruling Regarding Obligation of Incumbent LECs to Load Numbering Resources and Honor Routing and Rating Points", and the "T-Mobile et al. Petition for Declaratory Ruling Regarding Incumbent LEC Wireless Termination Tariffs".

There are also seven other items on the agenda. The FCC will consider a Second Order on Reconsideration regarding petitions for reconsideration filed regarding the national do not call registry and other Telephone Consumer Protection Act (TCPA) rules. This is CG Docket No. 02-278.

The FCC will consider a R&O and FNPRM regarding the mandatory exchange of customer account information among all local and interexchange carriers. This is CG Docket No. 02-386.

The FCC will consider a R&O regarding the FCC's policies governing the federally tariffed charges of ILECs for changing the presubscribed interexchange carrier for end user subscribers (PIC change charges). This is CC Docket No. 02-53.

The FCC will consider a Memorandum Opinion and Order (MO&O) concerning an Application for Review filed by various licensee subsidiaries of Sinclair Broadcast Group, Inc. seeking review of a decision by the FCC's Media Bureau dismissing applications through which Sinclair sought to acquire television stations from the licensee subsidiaries of Cunningham Broadcasting Corporation.

The FCC will consider a MO&O and Second Order on Reconsideration regarding the rules that permit the addition of ancillary terrestrial components (ATC) to the provision of Mobile Satellite Service (MSS) communications. This is IB Docket No. 01-185.

The FCC will consider a NPRM regarding the use of white space in the 900 MHz Business and Industrial Land Transportation Pool.

The FCC's Wireless Broadband Access Task Force will present a report on its findings and recommendations regarding the FCC's wireless broadband policies. This is GN Docket No. 04-163.

This event is scheduled for 9:30 AM on Thursday, February 14, 2005 in the Commission Meeting Room, Room TW-C305, 445 12th Street, SW. The event will be webcast by the FCC. The FCC does not always take up all of the items on its agenda. The FCC does not always start its monthly meetings at the scheduled time.

Sen. Stevens Discusses SBC Acquisition of AT&T

2/3. Sen. Ted Stevens (R-AK), the new Chairman of the Senate Commerce Committee, stated in a news conference for members of the Alaska press corps that his Committee is examining SBC Communications acquisition of AT&T. He said that the Committee will hold a closed briefing on the transaction. See, transcript.

On January 31, 2005, SBC and AT&T announced that the two companies have agreed that SBC will acquire AT&T and that they expect the deal to close by the first half of 2006. See, story titled "SBC to Acquire AT&T" in TLJ Daily E-Mail Alert No. 1,067, February 1, 2005.

Sen. Ted StevensSen. Stevens (at right) said that "We have asked that AT&T and SBC brief us in sort of a briefing session rather than a hearing to determine whether a hearing would be required. We will have such a meeting in the near future. That will be a meeting that Senator Inouye and I will conduct and we'll invite the members of the Full Committee because we've kept communications at the Full Committee level. That is an inquiry, a briefing. We have those."

He continued: "Now the question is whether bigness is bad per se in communications. We don't know that, literally. That was the presumption of the judge in the AT&T situation where he required AT&T to be divested of certain functions and that led to the creation of what we called the Baby Bells at that time."

He also stated that "I don't have a feeling that consolidation is per se bad. The question is, what’s it affect on consumers, what's its affect on future investment for improvement of the system, for research, what does it really affect in terms of the job market. How does it really impact the overall economy of the country? And, beyond that, anti-trust is not our jurisdiction, but the anti-trust concept does come into play, as to whether or not it's eliminating competition. Those are very serious questions. That is why we are going to get briefed to see what really is going to happen. I understand that they will divest themselves of some elements of one company or the other and we need to know more about that."

Sen. Stevens also referenced possible institutional changes at the Federal Communications Commission (FCC). He said that "they can't complete everything they’ve got to do". He then said that "One of the things we have to do is look at the FCC and find a way that it can do functionally and in a reasonable period of time the problems that Congress assigns to it. Because, with the diversification of so many different functions in communications, they just can’t keep up with the world right now."

He also mentioned that the Senate Commerce Committee recently held a closed briefing on voice over internet protocol (VOIP). Moreover, he said that "We're going to have a series of briefings on various other technologies as we go forward, but I do think that that's something that we ought to be better informed on."

Sen. Baucus Discusses Trade with China, Technology, IPR, FTAs, R&D and Education

2/3. Sen. Max Baucus (D-MT) gave a speech [6 pages in PDF] titled "The U.S.-China Relationship in 2005: Priorities and Predictions". He advocated the benefits of a prosperous China, and U.S. trade with China. However, he said that the U.S. must press China on enforcing intellectual property rights and adhering to World Trade Organization (WTO) obligations.

However, it was a wide ranging speech. He also addressed other topics, including trade agreements, extending TAA to computer programmers and other service workers, research and development spending, education, and immigration policy.

He began by stating that "We can begin by reinforcing and even replicating successful channels of communication like the U.S.-China Joint Commission on Commerce and Trade. As you no doubt recall, last year’s JCCT meeting was critical in resolving a difficult issue involving China’s proposed wireless encryption standard."

"We should also reinforce our efforts to ensure China’s compliance with all of its WTO commitments. On trading and distribution rights, on transparency, and above all on intellectual property – we should not be hesitant to enforce our rights."

Sen. Max BaucusSen. Baucus (at left) said that "real action is necessary on intellectual property rights enforcement. China must follow up its legislative changes increasing penalties for counterfeiters with genuine and aggressive enforcement on its borders, in illegal factories, and in the infamous and abundant markets. Businesses operating in China point out continued – and often egregious -- cases of piracy and counterfeiting. Nothing is safe from this theft, be it software, optical media ..."

He added that "we may have reached a tipping point on this issue", not just because of concerns raised from outside of China, but also because "The drumbeat for stronger IP rights is increasing within China, too, as more and more innovative Chinese companies seek to protect their investments."

And, he said that "timely compliance with China's WTO commitments is critical. Considerable problems remain not only in enforcement of intellectual property rights, but also in the areas of transparency, telecommunications, services, and taxation."

He also discussed trade with other Asian nations. He said that "we should reengage Asia", and this should include negotiating free trade agreements (FTA) with Malaysia, Japan and Korea, as well as negotiating an APEC wide FTA.

Sen. Baucus is the ranking Democrat on the Senate Finance Committee, which has jurisdiction over trade issues.

He then said that with increased competition and trade, the U.S. should focus on the education and retraining of workers. He discussed Trade Adjustment Assistance (TAA). "Service industries like computer programming or calling centers also face competition from China and elsewhere, but service workers are not eligible for TAA. With over 80 percent of the U.S. economy comprised of service sector industries, I believe it is only a matter of time before we re-write TAA to add benefits for service workers."

He also said that the federal government should spend more on research and development. "Multibillion dollar industries have sprung from federal research and development dollars -- fiber optics, radar, wireless communication, nanotechnology, ultrasound and even the internet were all made possible with public sector funding."

Sen. Baucus lamented that "federal investment in the physical sciences and engineering, as a percentage of GDP, has actually declined by nearly one-third over the last two decades. We should reverse this trend." He did not, however, address the research and development tax credit in the prepared text of his speech.

He also addressed education. He said that the U.S. must spend more on "basic education" and "adopt policies to promote the training of more scientists and engineers".

Capitol Hill News

2/3. The Senate Judiciary Committee approved S 5, the "Class Action Fairness Act of 2005" by a vote of 14-5. The full Senate is scheduled to begin consideration on Monday afternoon, February 7. For a summary of this bill, see story titled "Senate Judiciary Committee to Mark Up Class Action Fairness Act" in TLJ Daily E-Mail Alert No. 1,068, February 2, 2005.

People and Appointments

Alberto Gonzales2/3. The Senate confirmed Alberto Gonzales (at right) to be Attorney General by a vote of 60-36. See, Roll Call No. 3. Vice President Dick Cheney administered the oath of office later in the day. Gonzales will begin work at the Department of Justice (DOJ) on Friday, February 4.

More News

2/3. The Federal Trade Commission (FTC) released a paper [90 pages in PDF] titled "Transparency at the Federal Trade Commission: The Horizontal Merger Review Process, 1996-2003". It was written by two FTC economists, Malcolm Coate and Shawn Ulrick. This paper contains data on the FTC's merger enforcement decisions, and analysis of that data, by multivariate regression analysis, and other methods. It makes several findings. "First, increases in the Herfindahl and change in Herfindahl generally make enforcement more likely, as do reductions in the number of significant competitors. Second, the industry may matter as the model predicts that enforcement is more likely in the oil, grocery, and chemical industries. Third, the models show no structural shifts during the eight year period examined here; that is neither political control of the Federal Trade Commission nor the merger wave is statistically related to the enforcement outcome." See also, FTC release. See also, the Department of Justice (DOJ) Antitrust Division's web page titled "The Herfindahl-Hirschman Index".

2/3. Neelie Kroes, the European Competition Commissioner, gave a speech in Brussels, Belgium titled "Effective Competition Policy -- a Key Tool for Delivering the Lisbon Strategy".

2/3. Federal Communications Commission (FCC) Commissioners Michael Copps and Jonathan Adelstein announced that Copps will replace Adelstein on the Federal-State Joint Board on Universal Service. They also said in their joint statement [PDF] that "universal service is critically important to this agency's mission."

2/3. The Department of Homeland Security (DHS) published a notice in the Federal Register in which it stated that it has renewed the charter for the Telecommunications Service Priority (TSP) System Oversight Committee. See, Federal Register, February 3, 2005, Vol. 70, No. 22, at Page 5691.

Bush Delivers State of the Union Address

2/2. President Bush gave the annual State of the Union Address to a joint session of the House and Senate. He had little to say that related to technology.

However, he did speak in broad terms economics. He said that "By making our economy more flexible, more innovative, and more competitive, we will keep America the economic leader of the world."

He elaborated that "To make our economy stronger and more competitive, America must reward, not punish, the efforts and dreams of entrepreneurs. Small business is the path of advancement, especially for women and minorities, so we must free small businesses from needless regulation and protect honest job-creators from junk lawsuits. Justice is distorted, and our economy is held back by irresponsible class-actions and frivolous asbestos claims -- and I urge Congress to pass legal reforms this year."

He also asked "Congress to move forward on a comprehensive health care agenda" that includes "improved information technology to prevent medical error and needless costs".

Appeals Court Affirms Judgment Against Mintz Levin

2/2. The U.S. Court of Appeals (4thCir) issued its opinion [21 pages in PDF] in Gallina v. Mintz Levin, a case regarding the firing of an attorney from the Reston, Virginia office of the law firm of Mintz Levin.

The trial jury of the U.S. District Court (EDVa) returned a verdict for the fired worker, Gallina, for wrongful retaliation, for complaining about sexual discrimination, in violation of Title VII of the Civil Rights Act of 1964. The jury awarded her $190,000 in compensatory damages and $330,000 in back pay. Mintz Levin appealed the District Court's denial of its motion for judgment as matter of law. Gallina cross appealed the District Court's dismissal of her claim for punitive damages.

The Court of Appeals, in a split opinion, affirmed the judgment against Mintz Levin, but reversed the District Court's dismissal of Gallina's punitive damages claim. The case is remanded for consideration of punitive damages.

This case is Dawn Gallina v. Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, U.S. Court of Appeals for the 4th Circuit, App. Ct. No. 03-1883, an appeal from the U.S. District Court for the Eastern District of Virginia, D.C. No. CA-02-647-A, Judge T.S. Ellis presiding. Judge Dennis Shedd wrote the opinion of the Court of Appeals, in which Judge Wilkins joined. Judge Niemeyer dissented. This opinion is 21 pages, and includes analysis of the applicable law. Yet, the Court designated this opinion as "unpublished" and "not binding precedent in this circuit".

Capitol Hill News

2/2. Rep. Bob Goodlatte (R-VA), Rep. Rick Boucher (D-VA), and 60 other members of the House, introduced, HR 517, titled the "Class Action Fairness Act of 2005".

People and Appointments

2/2. Mark Stephens was named Special Advisor for Universal Service Fund Oversight in the Federal Communications Commission's (FCC) Wireline Competition Bureau's (WTB) Telecommunications Access Policy Division (TAPD). He will advise the division chief and the division management on issues related to oversight, audits, accounting, and administration of the Universal Service Fund. Stephens is a Certified Public Accountant (CPA) who has worked for the FCC since 1991. See, FCC release [PDF].

2/2. Jeremy Miller was named Deputy Chief of the Federal Communications Commission's (FCC) Wireline Competition Bureau's (WTB) Competition Policy Division (CPD). He is currently Assistant Chief. The FCC also stated in a release [PDF] that he has "consulted on the ongoing proceedings on IP-enabled services". He went to work for the FCC in 2001. Before that, he worked for the law firm of Hogan & Hartson.

2/2. Scott Hammond was appointed Deputy Assistant Attorney General for Criminal Enforcement in the Department of Justice's (DOJ) Antitrust Division (AD). He replaces James Griffin who left in December of 2004.
Hammond was previously the AD's Director of Criminal Enforcement. He will supervise the AD's domestic and international criminal antitrust investigations and prosecutions. He will also review all requests for amnesty under the AD's Corporate and Individual Leniency Policies. Hammond has worked for the AD since 1988, starting as a trial attorney in Litigation II section. Hammond became Director of Criminal Enforcement for the AD in 2000. Marc Siegel was named to replace Hammond as the Director of Criminal Enforcement for the AD. Siegel was previously Assistant Chief in the AD's San Francisco Field Office.

More News

2/2. The U.S. Court of Appeals (9thCir) issued its opinion [36 pages in PDF] in In Re Daou Systems, class action securities litigation against a public traded company that provided computer networking systems for use in the healthcare sector, and several of its officers and directors. The plaintiffs alleged violation of Section 10b Exchange Act of 1934 for alleged accounting fraud. The District Court dismissed the complaint for failure to satisfy the heightened pleading requirements of the Private Securities Litigation Reform Act (PSLRA). The Court of Appeals reversed and remanded. This case In Re Daou Systems, Inc. Securities Litigation, App. Ct. Nos. 02-56989 and 02-57018, appeals from the U.S. District Court for the Southern District of California, Judge James Lorenz presiding, D.C. Nos. CV-98-01537 and CV-98-01537. Judge Melvin Brunetti wrote the opinion of the Court of Appeals, in which Judges Betty Fletcher and Harry Pregerson.

2/2. The Federal Communications Commission (FCC) published a notice in the Federal Register stating that it has suspending Inter-tel Technologies, Inc. from participating in the FCC's e-rate subsidy program for schools and libraries. This notice also sets February 22, 2005 as the deadline for submitting opposition requests. See, Federal Register, February 2, 2005, Vol. 70, No. 21, at Pages 5447-5449.

2/2. The Department of Defense (DOC) and the Department of Homeland Security's (DHS) National Cyber Security Division (NCSD) published a notice in the Federal Register requesting public comments on the National Information Assurance Partnership (NIAP) and security flaws in commercial software products. The deadline for comments is March 4, 2005. Submit comments to at The Institute for Defense Analyses, 4850 Mark Center Drive, Alexandria, VA 22311, Attention: NIAP Review. See, Federal Register, February 2, 2005, Vol. 70, No. 21, at Page 5420.

Senate Approves Copyright Bill

2/1. On January 25, Sen. Orrin Hatch (R-UT), Sen. Patrick Leahy (D-VT), Sen. John Cornyn (R-TX), and Sen. Dianne Feintstein (D-CA) introduced S 167, the "Family Entertainment and Copyright Act of 2005", which is also known as the FECA. On February 1, the Senate approved the bill by unanimous consent.

The Senate Judiciary Committee held no hearing or markup on this bill in this Congress. The Senate, by unanimous consent, discharged the Committee from further consideration. The Senate then approved the bill, with one minor technical amendment, by unanimous consent, with little discussion.

This bill is a made up of four unrelated titles, all of which pertain mostly to copyright law. It is a carryover from the 108th Congress. It is essentially a subset of S 3021 (108th), which was titled the "Family Entertainment and Copyright Act of 2004". The Senate approved S 3021 very late in the last Congress, on Saturday, November 20, 2004. The House did not approve it. However, three of the provisions of S 3021 were enacted into law through other bills, and hence, are not in S 167.

See, story titled "Senate Approves Copyright Bill" in TLJ Daily E-Mail Alert No. 1,024, November 23, 2004.

S 167, contains four titles. The key parts of the bill are the ART Act, which includes a provision criminalizing certain uses of camcorders in movie theaters, and the Family Movie Act, which pertains to ClearPlay type technology. It also contains the Film Preservation Act and the Orphan Works Act.

See, full story.

Senate Judiciary Committee to Mark Up Class Action Fairness Act

2/1. Sen. Charles Grassley (R-IA), and 25 other Senators from both parties, introduced S 5, the "Class Action Fairness Act" on January 4. The bill was referred to the Senate Judiciary Committee, which is now scheduled to mark up the bill on February 4, 2005.

This bill would amend Title 28 of the U.S. Code by adding a new Chapter 114 pertaining to class actions, by adding a new Section 1332 that creates federal jurisdiction over certain class action litigation, and by adding a new Section 1453 regarding the removal of certain class actions to federal court.

A key provision of the bill creates jurisdiction in U.S. District Courts over class actions in which the aggregate amount in controversy exceeds $5 Million and any member of a plaintiff class is a citizen of a different state from any defendant.

The bill recites in its findings that "Abuses in class actions undermine the national judicial system, the free flow of interstate commerce, and the concept of diversity jurisdiction as intended by the framers of the United States Constitution, in that State and local courts are -- (A) keeping cases of national importance out of Federal court; (B) sometimes acting in ways that demonstrate bias against out-of-State defendants; and (C) making judgments that impose their view of the law on other States and bind the rights of the residents of those States."

The bill also addresses abuse of coupon settlements. For example, it provides that "If a proposed settlement in a class action provides for a recovery of coupons to a class member, the portion of any attorney's fee award to class counsel that is attributable to the award of the coupons shall be based on the value to class members of the coupons that are redeemed."

Sen. Charles GrassleySen. Grassley (at right) stated in a release on January 24 that "In the 109th Congress we once again have the opportunity to stop class action lawyers from being able to snag millions of dollars while class action members receive a worthless coupon or even nothing".

He added that "Many class actions are just frivolous lawsuits filed by crafty lawyers who want to make a quick buck, and do little or nothing for the consumers these cases are allegedly supposed to help. We need to put an end to the frivolous litigation tax that everyone ends up paying."

The bill also protects against discrimination based on geographic location. It provides that "The court may not approve a proposed settlement that provides for the payment of greater sums to some class members than to others solely on the basis that the class members to whom the greater sums are to be paid are located in closer geographic proximity to the court."

The bill also provides for notice of proposed settlements to certain state and federal officials, such as attorneys general.

The bill is a reintroduction of similar legislation from the 108th Congress. S 5 (109th Congress) is almost identical to S 2062 (108th Congress).

In the last Congress, the Senate version of the bill came close to approval, but was blocked by Democratic filibusters. On July 8, 2004, the Senate failed to approve a motion to invoke cloture on S 2062, the "Class Action Fairness Act of 2004", on a vote of 44-43. See, Roll Call No. 154. Cloture motions require a three fifths majority. See, Senate Rule No. 22.

Also, on October 22, 2003, the Senate rejected a motion to invoke cloture on an earlier version, S 1751, the "Class Action Fairness Act of 2003", by a vote of 59-39. See, Roll Call No. 403. See also, story titled "Senate Rejects Class Action Fairness Act" in TLJ Daily E-Mail Alert No. 764, October 23, 2003.

In the last Congress, the House approved its version of the bill on June 12, 2003. The House approved HR 1115, also titled the "Class Action Fairness Act", by a vote of 253-170. See, Roll Call No. 272. See also, stories titled "House Passes Class Action Fairness Act" in TLJ Daily E-Mail Alert No. 680, June 13, 2003, and "Reps. Goodlatte and Boucher Re-Introduce Class Action Fairness Act" in TLJ Daily E-Mail Alert No. 619, March 10, 2003.

In addition to Sen. Grassley, the other Republican original cosponsors are Sen. Orrin Hatch (R-UT), Sen. Bill Frist (R-TN), Sen. Lincoln Chafee (R-RI), Sen. Jon Kyl (R-AZ), Sen. Richard Lugar (R-IN), Sen. Mitch McConnell (R-KY), Sen. John Thune (R-SD), Sen. David Vitter (R-LA), Sen. George Voinovich (R-OH), Sen. Trent Lott (R-MS), Sen. Lamar Alexander (R-TN), Sen. Olympia Snowe (R-ME), Sen. Jeff Sessions (R-AL), Sen. Jim DeMint (R-SC), Sen. Mel Martinez (R-FL), Sen. Chuck Hagel (R-NE), and Sen. John Ensign (R-NV).

And then, Sen. Mike DeWine (R-OH) and Sen. John Sununu (R-NH) joined in cosponsoring the bill on January 31.

The Democratic original cosponsors are Sen. Herb Kohl (D-WI), Sen. Tom Carper (D-DE), Sen. Charles Dodd (D-CT), Sen. Dianne Feinstein (D-CA), Sen. Blanche Lincoln (D-AR), Sen. Chuck Schumer (D-NY), and Sen. Joe Lieberman (D-CT).

Eight out of eighteen members of the Senate Judiciary Committee were sponsors of the bill as of January 31.

President Bush has also frequently spoken in support of these bills.

These bills are also backed by groups such as the U.S. Chamber of Commerce. See, January 4, 2005 release and January 6 release.

Sen. Baucus Advocates Open Trade with China and Other Countries

2/1. Sen. Max Baucus (D-MT) spoke in the Senate about trade. He praised the recently negotiated free trade agreement with Australia, proposed negotiating a free trade agreement with New Zealand, and advocated a policy of free trade towards transitioning countries, such as the People's Republic of China.

Sen. Max BaucusSen. Baucus (at right) stated that "Faced with this uncertainty, some Americans look at the Pacific Rim and see danger. They see the rise of China's and Asia's economic prowess as a threat to American prosperity. But we have never been a nation that succeeds only by the economic failure of others."

"We used the Marshall Plan to help pull Europe out of economic distress -- and have benefited enormously. We believed that capitalism would win the Cold War -- and it did", said Sen. Baucus. "Now China, Vietnam, Russia, and others are beginning the transition to a free market economy. This is a positive development -- not one to fear."

He added that "America has never shied away from engagement with the rest of the world. We have been successful because we are confident, innovative, positive, and open. We can only lose our place in the world if we forget who we are and forget how we got here in the first place. That is why I will continue to work for an open trade policy." See, Congressional Record, February 1, 2005, at Pages S735-7.

Sen. Baucus is the ranking Democrat on the Senate Finance Committee, which has trade related jurisdiction.

On Wednesday, February 2, the House approved HRes 57, a resolution urging the European Union to maintain its arms embargo on the People's Republic of China, by a vote of 411-3. See, Roll Call No. 18.

Senate Commerce Committee Announces Subcommittees

2/1. The Senate Commerce Committee announced that it will have nine committees, and one study, in the 109th Congress. There is no longer a subcommittee titled "Communications". Communications issues will be handled at the full committee level.

There is a new subcommittee titled "Technology, Innovation, and Competitiveness", that will replace the old Science, Technology and Space Subcommittee. There will be a National Ocean Policy Study. The new subcommittees are as follows:
 • Technology, Innovation & Competitiveness
 • Surface Transportation & Merchant Marine
 • Science and Space
 • Fisheries and the Coast Guard
 • Trade, Tourism & Economic Development
 • Aviation
 • Consumer Affairs, Product Safety & Insurance
 • Global Climate Change
 • Disaster Prevention & Prediction

Committee spokespersons stated that the Committee has not yet announced the subcommittees' members, Chairs, or ranking Democrats. However, Sen. John Ensign (R-NV) has announced that he will chair the Technology, Innovation & Competitiveness Subcommittee. Sen. Ensign also announced that he will remain as Chairman of the Senate Republican High Tech Task Force. See, full committee release and Sen. Ensign's release.

FCC Order Allows SBC to Obtain Numbers from NANPA for IP Enabled Services

2/1. The Federal Communications Commission (FCC) released an order [pages in PDF] that grants to SBC Internet Services (SBCIS) "permission to obtain numbering resources directly from the North American Numbering Plan Administrator (NANPA) and/or the Pooling Administrator (PA) for use in deploying IP-enabled services, including Voice over Internet Protocol (VoIP) services, on a commercial basis to residential and business customers".

This order waives Section 52.15(g)(2)(i) of the FCC's rules. This proceeding is titled "In the Matter of Administration of the North American Numbering Plan". This order is FCC 05-20 in CC Docket 99-200

FCC Commissioner Kathleen Abernathy wrote in a separate statement [PDF] that she supports this order, but "would have preferred, however, to grant such access by adopting a rule of general applicability, rather than by waiver. All of the arguments that justify allowing SBCIP to obtain numbers directly appear to apply with equal force to many other IP providers, suggesting that this decision will trigger a series of ``me too´´ waiver petitions."

Kathleen AbernathyAbernathy (at right) added that "proceeding by rulemaking would have better enabled the Commission to address potential concerns associated with the direct allocation of numbers to IP providers. Particularly where, as here, the Commission already has sought public comment in a Notice of Proposed Rulemaking, I support adhering to the notice-and-comment rulemaking process established by the APA, rather than developing important policies through an ad hoc waiver process."

FCC Commissioner Michael Copps wrote in a concurring statement [PDF] that "numbers are a scarce public good", and that "numbering conservation is not an issue that the federal government can undertake by itself. States have an integral role to play."

He also wrote that "our approach today neglects the need for broader reform that could accommodate other IP service providers. It puts this off for another day, preferring instead to address what may soon be a stream of wavier petitions on this subject."

FCC Commissioner Jonathan Adelstein wrote in a separate statement [PDF] that "these issues would be more appropriately addressed in the context of the Commission’s IP-Enabled Services rulemaking."

The FCC has an open proceeding regarding IP enabled services generally. It is intended to address issues such as compensation, the Universal Service Fund, 911/E911, consumer protection, and disability access requirements. The FCC adopted its IP enabled services Notice of Proposed Rulemaking (NPRM) [97 pages in PDF] on February 12, 2004, and released it on March 10, 2004. It is FCC 04-28 in WC Docket 04-36.

The FCC briefly raised this issue in its 97 page NPRM. It wrote, in sentence four, of paragraph 76, that "we seek comment whether any action relating to numbering resources is desirable to facilitate or at least not impede the growth of IP-enabled services, while at the same time continuing to maximize the use and life of numbering resources in the North American Numbering Plan." See also, footnote number 226.

8th Circuit Affirms Approval of Settlement in Nextel Billing Dispute

2/1. The U.S. Court of Appeals (8thCir) issued its opinion [21 pages in PDF] in In Re: Wireless Telephone Federal Cost Recovery Fees Litigation, appeals from the District Court's approval of a settlement of class action multidistrict litigation involving billing disputes with Nextel Communications.

The underlying dispute involves Nextel's line item in its bills for "Tax, Fees, and Assessments", which plaintiffs assert were actually for "Federal Programs Cost Recovery", such as fees used to pay for E911, wireless local number portability, and telephone number pooling capabilities. Class action lawyers then filed numerous lawsuits on behalf of phone customers.

Several plaintiff classes object to the settlement reached by the name plaintiffs and Nextel, and filed the present appeals. The Court of Appeals affirmed the District Court's approval of the settlement.

This case is In Re: Wireless Telephone Federal Cost Recovery Fees Litigation, Blando, et al. v. Nextel, et al., U.S. Court of Appeals for the 8th Circuit, App. Ct. Nos. 04-2276, 2285, 2295, 2298, 2303, and 2313, appeals from the U.S. District Court for the Western District of Missouri.

FTC Releases Data on Consumer Complaints Regarding Fraud and Identity Theft in 2004

2/1. The Federal Trade Commission (FTC) released its fifth annual report [71 pages in PDF] on consumer complaints to the FTC. It states that "Internet-related complaints accounted for 53% of all reported fraud complaints". See also, FTC release.

The report is titled "National and State Trends in Fraud & Identity Theft January - December 2004". The report states that in 2004 the FTC received over 635,000 consumer fraud and identity theft complaints from consumers in the U.S. Of these, 61% were for fraud, and 39% were identity theft complaints.

The report provides that of the complaints about fraud, "Internet Auctions was the leading complaint category with 16% of the overall complaints, followed by Shop-at-Home/Catalog Sales (8%), Internet Services and Computer Complaints (6%), Foreign Money Offers (6%), Prizes/Sweepstakes and Lotteries (5%), Advance-Fee Loans and Credit Protection (3%), Business Opportunities and Work-at-Home Plans (2%), and Telephone Services (2%)."

The report also provides that of the identity theft complaints, "Credit card fraud (28%) was the most common form of reported identity theft followed by phone or utilities fraud (19%), bank fraud (18%), and employment fraud (13%). Other significant categories of identity theft reported by victims were government documents/benefits fraud and loan fraud."

PFF Announces Digital Age Communications Act Project

2/1. The Progress and Freedom Foundation (PFF) hosted an event in Washington DC to announce the formation of a project titled the "Digital Age Communications Act", or DACA. Its purpose is to review, issue reports on, and make legislative recommendations regarding, the legislative and regulatory framework affecting the communications and information technology sectors. It plans to issue a series of reports, starting in April, and then release a draft bill in the fall of 2005.

The DACA project has not yet released any reports or legislative proposals. However, when it does produce reports and recommendations, they are likely to entail less regulation, wider property rights regimes, more reliance upon markets, and changes to the policy making process. This project is just one of many diverse efforts to advise or influence the legislative and regulatory process on telecommunications reform.

The PFF announced the membership of the DACA project's advisory committee, and the subject matter and membership of each of five working groups. These groups are named "Regulatory Framework", "Spectrum Policy", "Institutional Reform", "Universal Service/Social Policy", and "Federal/State Framework".

The PFF also released a collection of essays that outline the topics that the DACA project will address. The essays were written by the PFF's Kyle Dixon, Raymond Gifford, Thomas Lenard, Randolph May, and Adam Peters.

Several persons involved in the DACA project spoke at the February 1 event. Ray Gifford, the President of the PFF, stated that "the communications laws need reform for the 21st Century digital age".

See, full story.

People and Appointments

2/1. The House Science Committee announced subcommittee Chairmen. Rep. Vernon Ehlers (R-MI) is again the Chairman of the Subcommittee on Environment, Technology, and Standards. Rep. Bob Inglis (R-SC) is the new Chairman of the Subcommittee on Research. He replaces former Rep. Nick Smith (R-MI), who retired. Rep. Ken Calvert (R-CA) is the Chairman of the Subcommittee on Space and Aeronautics. Rep. Judy Biggert (R-IL) is again the Chairman of the Subcommittee on Energy. Rep. Sherwood Boehlert (R-NY) is again the Chairman of the full Committee, and Rep. Bart Gordon (D-TN) is the ranking Democrat.

2/1. Karen Cottle was elected Chairman of the Board of Directors of the Business Software Alliance (BSA) for 2005. She is SVP, General Counsel and Corporate Secretary for Adobe Systems. See, BSA release.

2/1. Louis Addeo was named to the Office of Management and Budget's (OMB) acquisition advisory panel. Addeo is also President of AT&T Government Solutions. See, OMB release [PDF].

More News

2/1. The U.S. Patent and Trademark Office (USPTO) published a notice in the Federal Register that describes, recites, and sets the effective date (February 1, 2005) of its final rule that reduces the search fee and examination fee
for certain Patent Cooperation Treaty (PCT) applications entering the national stage. See, February 1, 2005, Vol. 70, No. 20, at Pages 5053 - 5055.

More New Bills

2/1. A bill numbered HR 107 has been introduced in the House. It pertains to life insurance. 107 is also the section number of the Copyright Act that addresses fair use. See, 17 U.S.C. § 107. In the 108th Congress, Rep. Rick Boucher (D-VA) and Rep. John Doolittle (R-CA) introduced another HR 107, titled the "Digital Media Consumer Rights Act". See also, story titled "Reps. Boucher and Doolittle Introduce Digital Fair Use Bill" in TLJ Daily E-Mail Alert No. 582, January 14, 2003. Rep. Boucher has not yet reintroduced his fair use bill in the 109th Congress.

Go to News from January 26-31, 2005.