| FCC Meeting |
| 4/19. The FCC held a
public meeting Thursday morning to address three items. First,
it adopted a Notice of Proposed Rulemaking to explore ways of
reforming existing intercarrier compensation rules.
Second, it approved amendments to its rules, known as the Dual
Network Rule, to allow the major networks to acquire UPN
an WB. Third, it heard a report on, and discussed the status
of, the transition from analog to digital TV. |
|
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| Dual Network Rule |
| 4/19. The FCC voted at its public meeting to adopt a Report
and Order that will amend its rules (at § 73.658(g)) to
permit one of the four major TV networks (ABC, CBS, Fox and
NBC) to own, operate, maintain or control the UPN and/or the
WB TV network. Commissioner Furchtgott- Roth said he would
have gone further and eliminated all FCC ownership
restrictions; he reasoned that if there were a competition
problem, the FTC or Antitrust Division could handle it.
Commissioner Tristani dissented, lamenting that the rule will
limit "broadcast diversity". See, FCC
release and written statements of Tristani,
Powell,
and Ness.
(MM Docket No. 00-108.) |
|
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| COPPA |
4/19. The Children's Online Privacy Protection Act (COPPA),
which was passed at the end of the 105th Congress in 1998,
prohibits the collection of personally identifying information
of children under 13 by web site operators without parental
consent. The COPPA, and the implementing
rules, went into affect on April 21, 2000. Several
parties noted its first anniversary.
4/19. The Center for Media
Education released a report
[PDF] titled "COPPA: The First Year: A Survey of
Sites." It found that "COPPA has brought about
significant changes in Web sites' business practices in data
collection. A number of promising creative approaches
illustrated how companies can adapt to the rules without
undermining the interactive personalized features of the
Internet. Commercial Web sites can still provide customized
experiences for children and learn more about their audience,
without compromising children's privacy." However, it
also found that "the industry is clearly not doing all it
can to comply with the new privacy provisions, and in some
cases, may be violating both the spirit and letter of the
law."
4/19. The FTC approved the Entertainment Software Rating
Board (ESRB) as a "safe harbor" program under
the terms of the Children's Online Privacy Protection Act (COPPA).
See, FTC
release and ESRB
release.
4/19. The FTC also filed three
complaints in U.S. District Courts alleging violations of the
COPPA. The FTC also simultaneously settled all three actions.
Under the terms of the settlements, the offending web site
operators will pay fines, delete illegally obtained
information, and comply with the COPPA in the future. See,
• Complaint
[PDF] and Consent
Decree [PDF] in US v. Looksmart (EDVa).
• Complaint
[PDF] and Consent
Decree [PDF] in US v. Monach Services (DMd).
• Complaint
[PDF] and Consent
Decree [PDF] in US v. BigMailBox.com (EDVa). |
|
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| FEC and E-SIGN |
| 4/19. The Federal Election
Commission approved a draft advisory opinion regarding Morgan Stanley Dean Witter's
plans to use a web site to authorize payroll deductions for
political actions committees. MSDW submitted a Request for
Advisory Opinion [PDF] requesting an opinion that it is
permissible, pursuant to the E-SIGN Act, to use electronic
signatures to authorize payroll deductions for the MSDW
political action committee. The draft advisory opinion permits
the activity, but does not rely upon the E-SIGN Act. The
Commission approved the draft with little discussion by a vote
of 6 to 0. |
|
|
| Insider Trading |
| 4/16. The SEC filed a
civil complaint
in U.S. District Court (NDCal)
against Malcolm Wittenberg alleging violation of federal
securities laws in connection with allegations that he traded
in stock on the basis of material non public information. He
simultaneously consented, without admitting or denying the
allegations in the complaint, to the entry of a permanent
injunction against future violations of § 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and
to pay a total of $29,224.67, including $14,000 in
disgorgement of trading profits, $1,224.67 in prejudgment
interest and a civil penalty of $14,000. See, SEC
release. On April 16 a grand jury of the U.S. District
Court (NDCal) returned a two count indictment
[PDF] against Wittenberg. |
|
|
| New Documents |
RIAA:
opposition
to Napster's petition for a rehearing en banc, 4/19 (PDF, RIAA).
CME:
report
on COPPA, 4/19 (PDF, CME).
Unger:
speech
re analyst independence, 4/19 (HTML, SEC). |
|
|
|
| Reciprocal Compensation |
4/19. The FCC took action on the reciprocal compensation
issue in two related matters. First, it announced that it has
adopted rules setting prices for intercarrier compensation for
ISP bound traffic. Second, it announced the commencement of a
broader NPRM relating to intercarrier compensation. However,
the FCC released neither its price fixing rule nor its NPRM,
and hence, left uncertain what it is doing.
Background: §
251(b)(5) of the 1996 Telecom Act provides that local
phone companies must compensate each other for handling each
other's local calls. A telephone company pays a second
telephone company for each local call the second company
completes to one of its customers. For example, if a person
whose local phone company is the incumbent local exchange
carrier (ILEC) makes a local phone call to another person
whose local phone company is a competitive local exchange
carrier (CLEC), the CLEC is entitled to compensation from the
ILEC for completing the call. The same is the case if the call
originates with the CLEC and completes with the ILEC. Hence,
it is called "reciprocal compensation" in the
statute. However, ILECs, such as BellSouth, Verizon, and SBC,
now complain that some CLECs are abusing the system by
concentrating on serving ISPs, but not residential customers,
and making the money off of reciprocal compensation payments
that are not in fact reciprocal, and involve little cost to
provide. They want to end reciprocal compensation for ISP
bound traffic. Others argue that doing so would harm
competition, and could result in Internet access charges.
FCC Commences NPRM: The FCC adopted, but did not
release, a Notice of Proposed Rule Making (NPRM) regarding
intercarrier compensation generally. The Commission adopted
the NPRM Wednesday night, and again at the Commission's public
meeting Thursday morning. The Commission did not release the
NPRM, explain its content, or quote from it. However,
Commissioner Furchtgott-Roth quoted from the works of Milton
Friedman and Adam Smith. Dorothy Attwood, Chief of the Common
Carrier Bureau, and other FCC staff, held a press conference
immediately after the Commission meeting to discuss the NPRM.
However, they too refused to elaborate on the contents of the
NPRM. The FCC merely issued a short release.
FCC Commissioners and staff did say that they were interested
in receiving comment on "bill and keep" proposals.
(Re: Notice of Proposed Rulemaking, Developing a Unified
Intercarrier Compensation Regime, CC Docket No. 01-92.)
Chairman Powell praised the NPRM at the meeting. He called it
"extraordinarily ambitious undertaking" that is
"long overdue". He added that "in a competitive
environment, and an environment in which new technical
innovative services are being provided, that the regulatory
regime itself risks distorting the efficient development of
that market because there are such different compensation and
regulatory regimes, depending on the nature of your
service." See, also written statements by Powell,
Ness
and Furchtgott-Roth.
FCC Sets Prices: The FCC also adopted, but did not
release, new rules setting intercarrier compensation rates for
telecommunications traffic delivered to ISPs. The FCC issued a
release
that states that "The Commission concluded that
telecommunications traffic delivered to an ISP is interstate
access traffic, specifically "information access,"
thus not subject to reciprocal compensation. Additionally,
rather than immediately eliminate the current system, which
has created opportunities for regulatory arbitrage and
distorted market incentives, the Commission established a
transitional cost recovery mechanism for the exchange of this
traffic." The release also states the prices fixed by the
FCC: "For the first six months following the effective
date of this Order, intercarrier compensation of ISP-bound
traffic will be capped at a rate of $.0015/ minute-of-use (mou).
For the 18 months thereafter, the rate will be capped at
$.0010/mou. Thereafter, the rate will be capped at $.0007/mou."
(CC Docket Nos. 96-98 and 99-68, Order on Remand and Report
and Order, FCC 01-131.)
Harold Furchtgott-Roth criticized price setting by government
agencies. He said that "deregulation is not about
government setting prices. It is not about government setting
up mechanisms or specific types of intercarrier arrangements
-- intercarrier compensation arrangements. It is not about
mandating bill and keep. It is not about mandating any type of
price ..." He wants to "get the government out of
the price setting business." He also noted that the North
Korean and Cuban governments set prices. He also released a written
dissent afterwards which argued that the price rule is
without legal basis. He predicted that "The result of the
Commission's order will be another round of litigation, and,
in all likelihood, this issue will be back at the agency in
another couple of years."
Industry Reaction: Bob Blau of BellSouth praised the FCC
for limiting reciprocal compensation payments. "We
congratulate the commission on this important first step out
of the thicket that has allowed one group of companies to milk
cash from BellSouth and others, for doing almost nothing but
watching the internet one-way traffic flow. ... But, the fact
of the matter is today's ruling still leaves incumbents
subsidizing their competitors. The order is only a partial
solution. BellSouth will participate vigorously in the next
round of this debate, hoping to move to a bill and keep regime
as quickly as possible." Similarly, Gary Lytle, President
of the USTA, a group which
represents ILECs, stated that "We are encouraged by
today's announcement and look forward to reviewing the entire
order upon its release. It's time for the FCC to close the
reciprocal compensation loophole for good." See, release.
Russell Frisby, President of CompTel,
praised the FCC for not eliminating reciprocal compensation
payments. "Remember, the Bells were the ones who pushed
so hard to get reciprocal compensation into the Act. And
now they want to penalize competitors for benefiting from it.
All the competitors did was bring better prices and services
to consumers when the Bells had no interest in it." He
added that "The Bell monopolies have been trying every
which way they can to wriggle out of the Telecommunications
Act and its pro-competitive intent since the beginning.
Reciprocal compensation is just one of those avenues. And the
FCC's decision makes it clear that road is closed." See, release.
Commissioners encouraged people to read two working papers
published by the FCC's Office
of Plans and Policy. One is Bill
and Keep at the Central Office as the Efficient
Interconnection Regime [PDF], by Patrick
DeGraba. It proposes "a unified approach to
interconnection pricing called Central Office Bill and Keep
("COBAK"), which provides that a called party's
carrier cannot charge an interconnecting carrier to terminate
a call. Rather, each carrier recovers the cost of the loop and
local switch from its own end-user customers). The second
paper is A
Competitively Neutral Approach to Network Interconnection
[PDF], by Jay Atkinson and Christopher Barnekov. It proposes
"a default bill and keep solution under which carriers
split equally those costs that are solely incremental to
interconnection, and recover all remaining costs from their
own customers." For further background, see testimony
of former FCC Common Carrier Bureau Chief Larry Strickling to
the House Commerce Committee on June 22, 2000, and Bell
Atlantic v. FCC, 206 F.3d 1 (D.C. Cir 2000). |
|
|
|
| Encryption |
4/19. The Cato Institute
hosted a book forum titled "Are the Crypto Wars Over? Privacy,
Digital Security and the Future of Encryption Policy."
Steven Levy discussed his book, Crypto:
How the Code Rebels Beat the Government -- Saving Privacy in
the Digital Age. Bruce Schneier discussed his book, Secrets
and Lies: Digital Security in a Networked World. Levy
stated that encryption export regulations were significantly
relaxed over a year ago, but that it has not resulted in
widespread use of encryption products.
Schneier said that "I believe we won the crypto war, but
it was the wrong war." He said that most of the problems
faced today, such as distributed denial of service attacks,
web site defacements, unauthorized access, theft of data, and
viruses, cannot be solved by cryptography. He elaborated that
encryption protects data in motion, but today's problem's are
primarily the security of data when it is sitting still on
hard drives. There is no cryptological or other technological
fix to these problems. He concluded that the answer lies in
obtaining a lawful society, and this entails adoption of
criminal statutes, and government prosecutions. "The way
we will get security on the Internet is through
convictions."
Schneier also stated that encryption can not provide a
solution to the copyright infringement problems of record and
movie companies. He said that audio and video can be
encrypted, but ultimately, "the device that plays it must
be able to decrypt it. If you are going to attack these
systems, you don't attack the cryptography. You just grab the
data after it has been decrypted." |
|
|
| Napster News |
| 4/19. The record companies plaintiff and appellees filed
their opposition
to Napster's petition for a rehearing en banc with the U.S.
Court of Appeals for the 9th Circuit. See also, letter
brief on procedural issues, and response
to Napster's motions for judicial notice, and to file
supplemental brief. |
|
|
| Today |
9:30 AM. The U.S.
Court of Appeals (DC Cir) will hear oral argument in
National Public Radio v. FCC, Appeal No. 00-1246. Judges
Ginsburg, Randolph and Tatel will preside.
10:00 AM. The FCC's WRC-03
Advisory Committee will hold a meeting to continue
preparations for the 2003 World Radiocommunication Conference.
The Advisory Committee will consider any preliminary views
and/or proposals introduced by the Advisory Committee's
Informal Working Groups. Location: FCC, 445 12th Street, SW,
Room TW-C305, Washington DC.
12:00 NOON. Tom Sugrue, Chief of the FCC's Wireless
Telecommunications Bureau, will address the Land Mobile
Communications Council Annual Meeting. Location: Loews
L’Enfant Plaza Hotel, Washington DC.
Deadline to submit written testimony for hearing to be held by
the USTR on
further actions against Ukraine for its denial of adequate
protection of intellectual property rights. On March 12, the
USTR designated Ukraine as a "Priority Foreign
Country" under the "Special 301" program. A
public hearing will be held on April 27, 2001. See, notice
in the Federal Register, April 6, 2001, Vol. 66, No. 67, at
Pages 18346 - 18348. See also, USTR
release of March 13. |
|
|
| More News |
4/19. President Bush announced his intent to nominate Allen
Johnson to be Chief Agriculture Negotiator for the Office
of the USTR. He is
currently President of the National Oilseed Processors
Association. See, release.
4/19. SEC Acting
Chairman Laura Unger gave a speech
at the Northwestern University School of Law in
Evanston, Illinois, titled "How Can Analysts Maintain
Their Independence?"
4/19. Convergent Communications and its subsidiary Convergent
Communications Services filed a Chapter 11 bankruptcy petition
in U.S. Bankruptcy Court. See, release. |
|
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