| CJS Subcommittee Discusses
FCC Budget and Policy |
| 6/28. The Senate
Appropriations Committee's Commerce, Justice, State, and
the Judiciary (CJS) Subcommittee held a hearings on the
proposed budgets for FY 2002 for the Federal Communications Commission
and Securities and Exchange Commission. See, prepared
testimony of FCC Chairman Michael Powell. The hearing
served as a forum for discussing several difficult issues
facing the FCC, including how to extend the universal service
goals of ubiquity and affordability to new communications
media (such as broadband Internet access and instant
messaging), how to allocate more spectrum for third generation
wireless services, and the Bell companies' efforts to rewrite
key provisions of the Telecom Act of 1996. |
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| Universal Service and New
Technologies |
6/28. Sen. Ted Stevens
(R-AK), the ranking Republican on the Appropriations
Committee, raised the subject of universal service at the CJS
hearing. He represents a state with voters widely dispersed
over vast rural and remote areas where the cost of
communications services is high.
The longstanding policy of promoting universal service for
voice telecommunications was codified in Section
254 of the Telecom Act of 1996. Only telecommunications
services are subject to universal service support
contributions. Also, this section, as interpreted by the FCC,
has extended universal service support to schools and
libraries for telecommunications, as well as for Internet
access and internal wiring costs. Stevens pointed out while
new methods of communications, such as broadband Internet
access and instant messaging are becoming increasingly
important, rural areas are likely to fall behind urban areas
without universal service support for these services. He also
stated that with only telecommunications services currently
contributing, new technologies are also going to have to pay
their way. "I continue to be worried about the future of
the universal service fund," said Sen. Stevens. "The
revenue base of universal service is declining, and the
demands are increasing." He suggested that "one
solution might be taxing the Internet ... to support the
universal service fund." However, he added that he does
not support this yet.
Chairman Powell stated that he is committed to the universal
service goals of ubiquity and affordability, whatever the
architecture of the communications. However, he added that he
"reserves judgment" on who should contribute. He
pointed out also that the FCC is constrained by a court
decision preventing the FCC from tapping intrastate revenues
for universal service, and by the language of Section 254. He
suggested that a legislative solution may be required. |
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| Tauzin Dingell Bill |
6/28. Sen. Hollings, the Chairman of the
Appropriations Committee's CJS Subcommittee (as well as
Chairman of the Commerce Committee) ridiculed the Bell
companies for lobbying the Congress to pass HR
1542 (the Tauzin Dingell bill). He stated that the Bells
are carrying on a "big charade". The Bells seek
legislation that would exempt interlata data service (as
distinguished from voice service) from the requirements of Section
251 of the Telecom Act of 1996. They assert that when the
1996 Act was being drafted, data communications were not
considered, and were not intended to be covered by Section
251. Sen. Hollings, who was intimately involved in
negotiations over the drafting of the bill, refuted this
claim. He stated that Bell companies were involved in
negotiations -- "they wrote the words". He continued
that data was referenced over 470 times. He concluded that the
Bells are engaged in "a big charade, a big straw man to
extend their monopoly."
Sen. Dan Inouye (D-HI)
and Sen. Hollings both asked Chairman Powell for his views on
HR 1542. Powell stated that he would not take a position on
the bill. Instead, he said there are two competing views of
competition in the market for broadband services. One view is
that competition exists between different
"pipelines". These are currently cable and phone
networks, but may in the future may also include wireless and
satellite. He said that under this view, it does not matter
whether there is competition between providers of the same
service; competition is between the different pipelines. This,
he said is the view of the proponents of HR 1542. He then said
that the other view of broadband competition holds that there
must be competition within each technology. Sen. Hollings was
unimpressed. He said, "Let me correct that." He
proceeded to explain that the intent of Congress in passing
the 1996 Act was to require competition in local phone loop. |
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| Spectrum Issues |
6/28. Both Sen. Hollings and Sen. Stevens discussed spectrum
policy with Chairman Powell at the CJS hearing. The FCC has
recently taken very tentative steps towards developing
secondary markets for spectrum, and moving towards property
rights in spectrum. Sen. Hollings asked, "Who owns the
spectrum? Are you and I the trustee" for spectrum? Powell
answered that "it is clear that spectrum is the public
property of the American taxpayers." Powell added that it
is the function of the FCC to put spectrum to its highest and
best use. He also stated that the FCC can reclaim licensed
spectrum.
3G Wireless. Sen. Stevens focused specifically on third
generation (3G) wireless services, which are intended to bring
broadband Internet access to portable devices. Currently, the
Defense Department is vigorously opposing the reallocation or
sharing of any of the spectrum in the 1755 to 1850 MHz band
which it now uses, but which has been identified for possible
use by 3G services. Sen. Stevens suggested that one solution
may be to ask the DOD to be "hard headed about what the
really need," and allow the rest to be re-auctioned, with
most of the proceeds from the sale of spectrum licenses going
back to the DoD to fund new defense technologies. Chairman
Powell responded, "I think it is a creative idea."
NextWave. Chairman Powell spoke with reporters after
the hearing about the June 22 opinion
of the U.S. Court of Appeals (DCCir) in NextWave v. FCC. He
stated that "This is a major blow to the legal and
regulatory foundation of our auction policy." He declined
to state whether the FCC would appeal. |
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| Appeals Court Rules in USA
v. Microsoft |
The U.S. Court of
Appeals (DCCir) issued its en
banc opinion in USA v. Microsoft. This is an antitrust
action brought by the Department of Justice's Antitrust Division and by
individual states. The Court of Appeals affirmed in part,
reversed in part, and remanded in part the District Court's
judgment assessing liability. It vacated in full the Final
Judgment containing the break up order. Finally, it remanded
the case to a different trial judge.
District Court Proceedings. The District Court, Judge
Thomas Jackson presiding, determined that Microsoft had
maintained a monopoly in the market for Intel compatible PC
operating systems in violation of § 2 of the Sherman
Antitrust Act; attempted to gain a monopoly in the market for
Internet browsers in violation of § 2; and illegally tied two
purportedly separate products, Windows and Internet Explorer,
in violation of § 1. See, Judge Jackson's Conclusions
of Law (April 3, 2000). The District Court then issued a
Final Judgment requiring Microsoft to submit a proposed plan
of divestiture, with the company to be split into an operating
systems business and an applications business. See, Judge
Jackson's and Final
Judgment (June 7, 2000). Microsoft appealed.
Holding Re Violation of the Sherman Act. The Appeals
Court affirmed in part and reverse in part the District
Court's judgment that Microsoft violated § 2 of the Sherman
Act by employing anticompetitive means to maintain a monopoly
in the operating system market. The Appeals Court reversed the
District Court's determination that Microsoft violated § 2 of
the Sherman Act by illegally attempting to monopolize the
internet browser market. The Appeals Court remanded the
District Court's finding that Microsoft violated § 1 of the
Sherman Act by unlawfully tying its browser to its operating
system. The Appeals Court also stated this its holding extends
to the District Court's findings with respect to the state law
counterparts of the plaintiffs' Sherman Act claims.
Holding Re Breakup Order. The Appeals Court also
vacated the District Court's Final Judgment ordering the break
up of Microsoft, on several grounds. First, the Final Judgment
was based on a number of liability determinations that the
Appeals Court reversed. Second, the District Court erred in
failing to hold an evidentiary hearing to address remedies
specific factual disputes.
Holding Re Jackson's Appearance of Partiality. Third,
the "trial judge engaged in impermissible ex parte
contacts by holding secret interviews with members of the
media and made numerous offensive comments about Microsoft
officials in public statements outside of the courtroom,
giving rise to an appearance of partiality. The Appeals Court
added that "the actions of the trial judge seriously
tainted the proceedings before the District Court and called
into question the integrity of the judicial process." The
Appeals Court ordered reassignment to another trial judge.
Gates' Reaction. Microsoft Chief Software Engineer Bill
Gates said that "The ruling lifts the cloud of breakup
over the company, reverses the tying claim, and says clearly
that we did not attempt to monopolize the browser
market." See, Microsoft release
and statement
by Bill Gates. |
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| Congressional Reaction |
6/28. Sen. Herb Kohl
(D-WI) and Sen. Mike
DeWine (R-OH), the Chairman and Ranking Member of the
Senate Subcommittee on Antitrust, Business Rights and
Competition, issued a joint statement: "The recent DC
Circuit court ruling is a split decision that reflects the
important balance that must be struck between ensuring
competitive markets and allowing businesses room to innovate
-- both of which are important for consumers. The court
overturned the breakup order, but at the same time confirmed
that Microsoft had engaged in illegal monopoly maintenance.
Today's decision does not end the Microsoft litigation, and
further proceedings will likely continue in the coming months.
The full implications of this decision will be known only over
time as antitrust law is applied to the entire high technology
industry, but it is clear that the antitrust laws must play a
key role in ensuring competitive markets in this sector. We
will continue to monitor future developments in the case
closely but feel strongly that the case must remain above
politics. Whatever the outcome of this particular case, we
will continue to work to assure that no one company can abuse
a dominant market position to the detriment of competition and
consumers."
6/28. Rep. Dick Armey
(R-TX) stated that "I applaud today's ruling because it’s
good for American competitiveness. It sends the message that
innovation in America will be rewarded, not punished. Our
antitrust laws should not be used to hold our most successful
companies back to give the competition a chance to catch up.
That kind of tired economic thinking is exactly what our new
economy does not need. Government needs to get off the back of
our innovators so that high tech America can prosper."
See, statement. |
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| FCC's Lack of Engineering
Expertise |
6/28. Chairman Powell and Sen. Hollings discussed the FCC's
lack of technical expertise at the CJS hearing. The FCC is and
agency of lawyers. It lacks staff who can understand the new
technologies that the FCC seeks to regulate. The FCC has no
trouble attracting the brightest lawyers, because a short
stint at the FCC greatly increases the earning capacity of
these lawyers. Most go to work for the law firms that
represent companies regulated by the FCC, or the companies
themselves. There is no comparable payoff for engineers.
Moreover, they are asked to work at the lowly levels of GS-5
and GS-7.
Powell stated that "we cannot depend on those we regulate
for on-the-job tutorials while we make decisions. Over the
last six years, our engineering staff has decreased by more
than 20 percent. Within the next four years, 40 percent of our
engineering staff will be eligible to retire."
Sen. Hollings asked of the FCC's FY 2002 budget request,
"does this take care of the engineers and the lawyers
too?" Chairman Powell responded "no, it does not
over time take care of it." He added that this budget
request, which barely covers cost of living adjustments,
"is the first step." He will seek more funding
later. |
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| Microsoft Opinion |
| The Appeals Court's slip opinion
is 125 on paper, and is available on the USCA web site in a
single file. Tech Law Journal converted this file into HTML,
and split it into 9 separate files, which are hyperlinked
below.
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| Friday, June 29 |
| 10:00 AM. Walt Strack, Chief Economist of the FCC's Wireless Telecommunications
Bureau, will give a keynote address titled "Wireless
Telecommunications in the U.S." at the 2001 International
Communications Forecasting Conference. Location: Arlington,
VA. |
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| Monday, July 2 |
| July 2- July 6. The House and Senate will be in recess for
the Independence Day District Work Period. |
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| Abernathy Speech on FCC |
| 6/25. Recently appointed FCC
Commissioner Kathleen
Abernathy gave a speech
in which she summarized her approach to regulation. She stated
that "I will always prefer a private market based
solution to a government mandate. I have learned through
experience that functioning markets will always make better
decisions than government. It will reward winners and punish
losers more effectively and efficiently than regulators and
provides consumers with greater benefits. In areas where it is
necessary for government to intervene and to enact rules, they
must be clear, obtainable, and enforced vigorously. Government
must be humble, especially in regulating technology." |
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| Privacy |
| 6/27. House Majority Leader Dick Armey (R-TX) gave a speech
to the Federalist Society on privacy. He stated that "We
shouldn't allow ourselves to be distracted by false notions of
privacy that encourage more government control over our lives.
Instead, conservatives must embrace privacy -- but on our
terms, not theirs. For privacy, properly understood, is about
reining in the most intrusive force in the lives of Americans.
Today, that force is the federal government." |
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| More News |
6/28. The Copyright
Office published a notice
in the Federal Register that it has completed its annual
review of Copyright Office regulations and adopted several
non- substantive amendments to clarify, update and correct the
text of the regulations. See, Federal Register, June 28, 2001,
Vol. 66, No. 125, at Pages 34372 - 34374.
6/28. The U.S. Court of
Appeals (7thCir) issued its opinion
in USA v. Walton. This is a criminal case in which an employee
of Perdue University used a networked workstation to download
pictures from the Internet, and store them on a network
server. He was charged, convicted, and sentenced for
possession of child pormography in violation of 18 U.S.C. §
2252(A)(a)(5)(B), and receiving child pormography in violation
of 18 U.S.C. § 2252A(a)(2). He appealed on several issues,
all of which the Appeals Court rejected.
6/27. The U.S.
Court of Appeals (FedCir) issued its opinion in Durel
v. Osram Sylvania, a patent infringement case involving
electro- luminescent phosphor particles used to illuminate
watches and instrument panels in cars. Reversed. |
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