Tech Law Journal Daily E-Mail Alert
December 5, 2001, 9:00 AM ET, Alert No. 321.
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House Committees Hold Hearings on EchoStar DirecTV Merger
12/4. The House Judiciary Committee and the House Commerce Committee's Subcommittee on Telecommunications and the Internet both held hearings on the proposed merger of DBS providers EchoStar and DirecTV, focusing on the status of competition between DBS providers, and between DBS and cable companies.
Representatives of EchoStar and DirecTV, and their supporters, argued that the proposed merger would enable the new satellite company to compete more effectively with cable companies, and thereby benefit consumers. Opponents argued that the merger would decrease competition between satellite service providers, and thereby harm consumers, particularly in rural areas not served by cable companies.
Commerce Committee Hearing. See, prepared testimony of witnesses: Charles Ergen (CEO of EchoStar), Eddy Hartenstein (Ch/CEO of DIRECTV), Robert Sachs (P/CEO of the NCTA), Neal Schnog (President of Uvision, on behalf of the ACA), Bob Phillips (P/CEO of the National Rural Telecommunications Cooperative), Jared Abbruzzese (Acting CEO of WSNET), Marshall Pagon (P/CEO of Pegasus Communication), Michael Fiorile (P/CEO of Dispatch Broadcast Group on behalf of the NAB). See also, opening statement of Rep. Billy Tauzin (R-LA), Chairman of the full Committee, and opening statement of Rep. John Dingell (D-MI), the ranking Democrat.
Judiciary Committee Hearing. See, prepared statements of Charles Ergen (EchoStar), Gene Kimmelman (Consumer's Union), Bob Phillips (National Rural Telecommunications Cooperative), and Robert Pitofsky (former FTC Chairman).
EchoStar DirecTV Merger and Broadband Internet Access
12/4. Hearings held in the House on the proposed merger of EchoStar and DirecTV focused primarily on the consequences for multi channel video programming, such as news and entertainment shows. However, several witnesses and Representatives also focused on the potential consequences for the deployment of Internet services.
Charles Ergen, the Chairman and CEO of EchoStar, addressed deployment of satellite based broadband Internet access services in his written testimony for the House Judiciary Committee. He argued that the merger is necessary to upgrade facilities to provide this high speed service.
Ergen wrote that "only through consolidation of satellites and spectrum will the new EchoStar be able to achieve the economies of scale and spectrum necessary to enable it to compete more effectively against the bundled cable telephony Internet services of cable. While broadband is widely available in much of urban and suburban America, service to rural areas has lagged far behind. The efficiencies created by this merger will help bridge the ``digital divide´´ ..." He elaborated that due to installation costs of about $1,000 and monthly fees or $60 to $100, "the service is simply not competitive on a price quality basis with cable modem service or DSL." He added that there are currently less than 200,000 subscribers to this service. He also said that a competitive service would require investment in "research and development, satellite launches, and related infrastructure".
Rep. Rick Boucher (D-VA), a Co-Chair of the Congressional Internet Caucus, supports the merger of EchoStar and DirecTV, in part, because he argues that it will facilitate the deployment of broadband Internet access service via satellite. He spoke with Tech Law Journal after the House Judiciary Committee hearing on the merger.
He stated that "Neither EchoStar, nor DirecTV, has created a truly viable high speed Internet access satellite based service. And the reason they haven't is because it is very difficult to attract the capital necessary to launch this service. The fixed cost of putting the infrastructure in place to provide that service is about two billion dollars per company. So, EchoStar would have a two billion dollar fixed cost. DirecTV would have a two billion dollar fixed cost, for the infrastructure necessary to deploy a really robust and vigorous high speed Internet access service."
Rep. Boucher continued that "The capital markets have looked at those numbers, and looked at the potential subscriber base, and have decided that at a fixed cost of two billion dollars to put that infrastructure in place, there simply is not a viable business, given the subscriber base of EchoStar separately, and given the subscriber base of DirecTV separately.
He concluded that "If you combine the two companies, bearing in mind that you only have to deploy this infrastructure once, and then the marginal cost of adding subscribers is virtually zero, you can deploy the infrastructure once, at an estimated cost of about 2.5 billion dollars for the one merged company, and then you would enjoy the potential subscriber base of both companies. And so, the cost of deployment per subscriber is brought down dramatically. And that in turn, would make this service far more attractive to the financial markets that would finance the deployment of it. So, it becomes a viable service, whereas today it is not."
In contrast, Robert Pitofsky, who was Chairman of the FTC during the Clinton administration, argued that "the proposed merger raises troubling issues in the emerging broadband market." He wrote in his prepared testimony that "In a series of proceedings -- including those occasioned by the AOL/Time Warner merger and the AT&T/Media One merger, the Antitrust Division, the FTC and the FCC have all sought to preserve competition in this extremely important new market. Congress has also been concerned that megamergers not lead to a situation in which high speed access to the Internet will come under the control of one or a small handful of companies. This merger would threaten a potential monopoly in satellite broadband services."
Pitofsky conceded that cable and phone companies have been slow to deploy broadband service in rural areas, and that satellite "provides the most viable technology that can bridge the digital divide in rural America." However, he continued that "the merging parties argue that the merger, by increasing capacity and eliminating ``duplication,´´ will enable them to devote more capacity to rolling out broadband services. But the ``duplication´´ they seek to eliminate is competition itself. Moreover, they would have to bear the burden of showing why the increase in capacity this merger would produce is necessary to bring out the services that both DirecTV and EchoStar have promised consumers for some time that each separately would provide."
Supporters of Tauzin Dingell Bill Seek Vote in House
12/4. Supporters of HR 1542, the Tauzin Dingell bill, are lobbying for a House vote on the bill before the House recesses for the year. See, for example, release of the USTA. See also, release of CompTel criticizing HR 1542.
Rep. Fred Upton (R-MI), Rep. Rick Boucher (D-VA), and other House members will hold a news conference on December 5 to release a letter signed by close to 100 members of the House. The letter urges House Speaker Dennis Hastert (R-IL) and House Majority Leader Dick Armey (R-TX) to schedule a vote on HR 1542.
More News
12/4. The GAO released a report [PDF] titled "Loan Monitoring System: SBA Needs to Evaluate Use of Software".
12/4. President Bush named former Montana Gov. Marc Racicot to chair the Republican National Committee. He will replace Virginia Gov. James Gilmore.
Representatives Introduce Cyber Security Bills
12/4. Rep. Sherwood Boehlert (R-NY), Rep. Ralph Hall (D-TX), Rep. Nick Smith (R-MI), and other members of the House Science Committee, introduced a pair of bills pertaining to cyber security. Rep. Boehlert, the Chairman of the Committee, introduced the "Cyber Security Research and Development Act". He stated at a press conference that "Under the bill, the National Science Foundation (NSF) will create new cyber security research centers, undergraduate program grants, community college grants and fellowships. The National Institute of Standards and Technology (NIST) will create new program grants for partnerships between academia and industry, new post-docs, and a new program to encourage senior researchers in other fields to work on computer security." He added that government research is necessary because there are not market incentives to develop cyber security.
Rep. Smith, the Chairman of the Research Subcommittee, introduced the "Networking and Information Technology Research Advancement Act". It authorizes an increase in basic research in information technology at six federal agencies.
Democrats and Republicans at the press conference stated that the bills enjoy bipartisan support on the House Science Committee. The bills will be marked up on Thursday, December 6.
Commerce Department Adopts Encryption Standard
12/4. The Department of Commerce announced its approval of a new encryption standard for the federal government -- the Advanced Encryption Standard, or AES. See, release.
NIPC Issues Worm Warning
12/4. The FBI's National Infrastructure Protection Center (NIPC) issued a warning regarding the Goner worm. NIPC stated that it "is tracking a new mass mailing worm ... . This is a very fast spreading mass-mailing worm that appears to take advantage of Visual Basic Scripting built into Microsoft Outlook and Outlook Express. Developing information indicates that this worm mails itself to all the addresses within the infected computer's Outlook or Outlook Express address book, sets itself as a server process so it does not show up in the task manager, and deletes the anti virus definitions from many common anti virus products." See, NIPC Alert 01-029.
Microsoft Seeks Tougher Cyber Crime Laws
12/4. Microsoft published an essay titled "Thwarting Cyber Terrorism". It argues that "Additional resources are needed by the Department of Justice and the FBI to hire, train and equip agents and prosecutors specializing in cyber crime. International cyber crime laws and penalties must be strengthened. The author of the ``Lovebug´´ virus remains free because his nation did not have cyber crime laws. The ``AnnaKournikova´´ virus caused billions of dollars in damage, but the individual who distributed it received only 150 hours of community service as a penalty."
House Passes Bill Banning Circumvention of Caller ID
12/4. The House passed HR 90, the Know Your Caller Act, by a voice vote. This bill amends the Communications Act of 1934 to provide that "It shall be unlawful for any person within the United States, in making any telephone solicitation (A) to interfere with or circumvent the capability of a caller identification service to access or provide to the recipient of the telephone call involved in the solicitation any information regarding the call that such service is capable of providing; and (B) to fail to provide caller identification information in a manner that is accessible by a caller identification service, if such person has capability to provide such information in such a manner." This bill is sponsored by Rep. Rodney Frelinghuysen (R-PA).
FEC and Political Speech on the Internet
12/4. The Center for Democracy and Technology (CDT) submitted a comment to the Federal Election Commission (FEC) in response to its Notice of Proposed Rulemaking (NPRM) regarding political activity on the Internet. The CDT wrote that "in cases of Internet activity by individuals, the Commission should presume that federal election law is not applicable." It also recommended several changes to the proposed rule.
December 3 was the deadline to submit comments to the FEC regarding its proposed rule changes affecting political activity on the Internet. This NPRM proposes to permit certain personal political web sites, and to allow corporations and unions to put certain hyperlinks and press releases in their web sites. See, TLJ story of September 27, 2001, and TLJ Daily E-Mail Alert No. 320, December 3, 2001. See also, FEC release, and notice in the Federal Register.
Specifically, the NPRM states that the FEC "is proposing to add a new section 117.1, which would describe certain types of individual Internet activities that would not be treated as contributions or expenditures. Section 117.19(a) would contain an exception from the definition of "contribution" in section 100.7(a) of the current regulations. Section 117.1(b) would contain a parallel exception from the expenditure definitions in sections 100.8(a) and 109.1. Proposed sections 117.1(a) and (b) would state that no contribution or expenditure results where an individual, without receiving compensation, uses computer equipment, software, Internet services or Internet domain name(s) that he or she personally owns to engage in Internet activity for the purpose of influencing any election to Federal office."
The CDT recommended that "The regulations need to be clarified in that the exemption for use of Internet services and equipment owned by an individual does not account for use of computer and Internet services at public access facilities and in other contexts where the same presumptions should apply. Many people use computers at libraries, universities, community centers, or public schools as their primary source of Internet connectivity."
The CDT also wrote that "people use Internet accounts or computers supplied by their place of employment as their primary means of Internet access. Businesses may provide their employees with computer equipment for use at home or with laptops. Individuals then use these computers for both business and personal use. Similarly, a business may provide its employees with home connectivity that may them be used for both personal and business purposes. Use of these services and this equipment for Web site production or uploading, but not hosting, should be exempted from reporting absent evidence of employer encouragement or coercion."
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Wednesday, Dec 5
Day two of a two day conference hosted by the Business Software Alliance (BSA) titled "Global Tech Summit." See, agenda. Location: Omni Shoreham Hotel, 2500 Calvert Street, NW.
The Supreme Court of the United States will hear oral argument in Verizon Maryland v. Public Service Commission of Maryland, Nos. 00-1531 and 00-1711.
9:00 AM. The Senate Commerce Committee's Subcommittee on Science, Technology, and Space will hold a hearing "to examine the technology sector in times of crises". Location: Room 253, Russell Building.
9:00 AM - 5:00 PM. Day two of a three day meeting of NIST's Computer System Security and Privacy Advisory Board (CSSPAB). See, notice in Federal Register. Preregistration is required to attend; to register, contact Elaine Frye by November 30, at elaine.frye @nist.gov or 301 975-2819. Location: NIST, Administration Building, Lecture Room B, in Gaithersburg, MD.
10:00 AM. The FCC's Technological Advisory Council will hold a meeting. See, notice in Federal Register. Location: 445 12th St., SW, Room TW-C305.
10:00 AM. The Senate Judiciary Committee will hold a hearing on pending judicial nominations, including Callie Granade (to be U.S. District Judge for the Southern District of Alabama), Marcia Krieger (Colorado), James Mahan (Nevada), Philip Martinez (Western District of Texas), and Ashley Royal (Middle District of Georgia). Sen. Dick Durbin (D-IL) will preside. Location: Room 226, Dirksen Building.
12:15 PM. The FCBA's Cable Practice Committee will host a luncheon. The speaker will be Barbara Esbin, Associate Bureau Chief, FCC Cable Services Bureau. The price to attend its $15. RSVP to Wendy Parish. Location: NCTA, 1724 Massachusetts Avenue, NW.
12:15 PM. The FCBA's Mass Media Practice Committee will host a brown bag lunch. The topic will be "Meet the Mass Media Trade Press". RSVP to: Barry Umansky. Location: NAB, ground floor conference room, 1771 N Street, NW.
1:00 - 3:00 PM. The FCC's International Bureau will hold a roundtable discussion on the Bureau's Electric Filing System (IBFS). Location: FCC, Room 6B516, 445 12th Street, SW.
2:00 PM. The Frontiers of Freedom will hold a press conference on the Microsoft settlement and the continuing action by nine states. The scheduled speakers are John Berthoud (National Taxpayers Union), Jim Cox (Association of Concerned Taxpayers), James Gattuso (Competitive Enterprise Institute), Erick Gustafson (Citizens for a Sound Economy), David Keene (American Conservative Union), George Landrith (Frontiers of Freedom), Jim Martin (60 Plus), Grover Norquist (Americans for Tax Reform), Tom Schatz (Citizens Against Government Waste), and Jason Wright (Frontiers of Freedom). See, release. Location: Holeman Lounge, National Press Club, 529 14th St. NW, 13th Floor.
2:00 - 5:00 PM. Day one of a two day open business meeting of the U.S. National Commission on Libraries and Information Science. See, notice in Federal Register. Location: Conference Room, NCLIS Office, 1110 Vermont Avenue, NW., Suite 820.
2:15 PM. The House Rules Committee will meet to adopt a rule for HR 3005, the Bipartisan Trade Promotion Authority Act of 2001.
Thursday, Dec 6
The House is scheduled to vote on HR 3005, the Bipartisan Trade Promotion Authority Act of 2001.
9:00 AM - 5:00 PM. Day one of a two day conference hosted by the NTIA regarding its grant program named "Technology Opportunities Program", or TOP. See, agenda. NTIA officials and grant recipients will speak on the first day. The second day will focus on how to write TOP grant applications. The price to attend is $65. Location: Renaissance Hotel, 999 Ninth Street NW.
9:00 AM - 9:45 AM. Bernadette Rivera (Associate Administrator of the NTIA), Nancy Victory (head of the NTIA), and Stephen Downs (Director of the TOP Grant program) will speak at the NTIA's conference on TOP grants.
9:00 AM - 5:00 PM. Day three of a three day meeting of NIST's Computer System Security and Privacy Advisory Board (CSSPAB). See, notice in Federal Register. Preregistration is required to attend; to register, contact Elaine Frye by November 30, at elaine.frye @nist.gov or 301 975-2819. Location: NIST, Administration Building, Lecture Room B, in Gaithersburg, MD.
9:00 AM - 12:00 NOON. Day two of a two day open business meeting of the U.S. National Commission on Libraries and Information Science. See, notice in Federal Register. Location: Conference Room, NCLIS Office, 1110 Vermont Avenue, NW, Suite 820.
9:30 AM. The The U.S. Court of Appeals for the District of Columbia Circuit will hear oral argument in Channel 32 Hispanic v. FCC, No. 00-1527. Judges Edwards, Henderson and Garland will preside. Location: 333 Constitution Ave., NW.

10:00 AM. The House Judiciary Committee's Subcommittee on Commercial and Administrative Law and Subcommittee on Courts, the Internet, and Intellectual Property will hold a joint hearing on the proposed settlement agreement between NextWave, the FCC, the DOJ, and the Auction 35 winning bidders. Location: Room 2141, Rayburn Building.

10:00 AM. The Senate Judiciary Committee will hold another hearing in its ongoing series of hearings titled "DOJ Oversight: Preserving Our Freedoms While Defending Against Terrorism." These hearings began on December 28. Attorney General John Ashcroft is scheduled to testify. Sen. Patrick Leahy (D-VT) will preside. Location: Room 106, Dirksen Building.
11:00 AM. The House Science Committee will meet to mark up the Networking and Information Technology Research Advancement Act, sponsored by Rep. Sherwood Boehlert (R-NY),and the Cyber Security Research and Development Act, sponsored by Rep. Nick Smith (R-MI). Location: Room 2318, Rayburn Building.
11:00 AM. George Washington University's Democracy Online Project will host press conference. Location: National Press Club, 529 14th St., NW, 13th Floor.
12:00 NOON - 4:00 PM. George Washington University's Democracy Online Project will host a debate titled "Privacy & Online Politics: Is online profiling doing more harm than good for citizens in our political system?" The scheduled participants include Scott Harshbarger (Common Cause), Jeffrey Eisenach (Progress & Freedom Foundation), and Marvin Kalb (Joan Shorenstein Center on the Press, Politics, and Public Policy). RSVP to dop@gwu.edu or 202 994-3219. Location: Holeman Lounge, National Press Club, 529 14th St., NW, 13th Floor.
12:15 PM. The FCBA's Online Communications Practice Committee will host a brown bag lunch. Tod Cohen, Washington Counsel and Director of Governmental Affairs for Ebay, will give an address titled "Broadband, When?" RSVP to Diane Raley. Location: Covington & Burling, 1201 Pennsylvania Avenue, NW, 11th Floor.
12:30 PM. The FCBA's FCC Enforcement Committee will host a brown bag lunch. The speaker will be David Solomon of the FCC's Enforcement Bureau. Location: Wiley Rein & Fielding, 1750 K Street, NW, 10th Floor.
The Bureau of Export Administration will host a course titled "Essentials of Export Controls". The price to attend is $100. For more information, contact Douglas Bell at 202 482-2642. Location: Ronald Reagan International Trade Center.
6:30 ­ 7:30 PM. There will be a panel discussion on Cyber Security. The speakers will be Richard Forno (CTO of Shadowlogic), Mark Rasch (CEO of Predictive Systems), Amit Yoran (CEO of Riptech), and Declan McCullagh (Wired News). In addition, Richard Clarke (Office of Homeland Security) has been invited. A reception will follow. The event is free for National Press Club members, and $10 for others. For reservations, contact 202 662-7501 or pnelson @press.org. Location: National Press Club, 529 14th St. NW, 13th Floor, Washington DC.
Friday, Dec 7
The House will meet at 9:00 AM for legislative business.
8:30 AM - 12:30 PM. Day two of a two day conference hosted by the NTIA regarding its grant program named "Technology Opportunities Program", or TOP. See, agenda. The second day will focus on how to write TOP grant applications. The price to attend is $65. Location: Renaissance Hotel, 999 Ninth Street NW.
The Bureau of Export Administration will host a course titled "How To Classify My Item".  The price to attend is $50. For more information, contact Douglas Bell at 202 482-2642. Location: Ronald Reagan International Trade Center.
12:15 PM. The Federal Communications Bar Association's (FCBA) Wireless Telecommunications Practice Committee will host a luncheon. Julius Knapp, Deputy Chief of the FCC's Office of Engineering and Technology will be give an overview of current and future technologies using unlicensed spectrum, including Bluetooth, Wi-Fi and other products that could be used in the unlicensed bands. The price to attend its $15.00. RSVP to Wendy Parish. Location: Sidley & Austin, 1501 K Street, NW Conference Room 6-E.
5:00 PM. Deadline to submit nominations to the FCC to fill three vacancies on the FCC's Local and State Government Advisory Committee (LSGAC). See, FCC notice.