8/23. The Federal Communications Commission (FCC) released a Report and Order [107 pages in PDF] that suspends the FCC's rules, which have been in effect for 13 years, that allow for automatic grants of pricing flexibility for special access services.

Introduction. This pertains to FCC price regulation for connections that provide voice and data for government entities and businesses. For example, mobile communications companies use these connections to link cell towers to wireline backbone networks.

This R&O states that its sets "a path to update our rules". It adds that "we currently lack the necessary data to identify a permanent reliable replacement approach". Nevertheless, this item contains no NPRM, NOI, or any request for "the necessary data". This R&O does state that the FCC will issue a "comprehensive data collection order within 60 days".

This action is controversial. The five member Commission divided along party lines, with Democrats voting for it, and Republicans against. Congressional Republicans condemned it. Congressional Democrats praised it. Price cap carriers who will lose pricing flexibility hate it.

How one concludes this will affect consumers, investment, competition, and innovation depends on one's economic analysis of communications and internet protocol networks. Such conclusions vary widely.

The FCC adopted this R&O on August 15, but did not release it until August 22, 2012. It is FCC 12-92 in WC Docket No. 05-25.

Historical Background. The FCC has long engaged price regulation, including special access line price regulation. The FCC employed traditional rate of return regulation of local exchange carriers' (LEC) special access lines until 1990, when the FCC introduced what it called an "incentive based system" of price regulation.

Then, in 1999, the FCC adopted the order [171 pages PDF] that contains the rules that the just released order suspends. That 1999 order, titled "Fifth Report and Order and Further Notice of Proposed Rulemaking", is also known as the "Pricing Flexibility Order" or "PFO". The FCC adopted the PFO on August 5, 2001. See, FCC release. The FCC released it on August 27, 1999. It is FCC 99-206 in CC Docket No. 96-262.

The 1999 order, among other things, provided for additional pricing flexibility once a LEC shows that certain competitive thresholds, or triggers, have been met in a given metropolitan statistical area (MSA). The concept was to provide relief from pricing regulations as competition for special access services increased.

While the 1999 order and its implementation have remained contentious, it has been in effect for 13 years.

The 1999 vote was nonpartisan. The Democratic Chairman, William Kennard, and two other Democrats (Susan Ness and Gloria Tristani) voted for it, as did Republican Michael Powell. Republican Harold Furchgott Roth dissented in part. However, he supported pricing flexibility, and dissented in part because he wanted more flexibility, and more deregulation.

The U.S. Court of Appeals (DCCir) upheld the PFO in its February 2, 2001 opinion in WorldCom v. FCC, 238 F.3d 449. That unanimous opinion, written by Judge David Sentelle, provides an explanation of the technology, issues, and PFO, See also, "Telecom Rulings" in TLJ Daily E-Mail Alert No. 116, February 5, 2001.

In 2000 the FCC adopted its CALLS plan to move towards a more market based approach to rate setting.

On January 31, 2005, the FCC released a document [49 pages in PDF] titled "Order and Notice of Proposed Rulemaking" in its proceeding titled "In the Matter of: Special Access Rates for Price Cap Local Exchange Carriers: AT&T Corp. Petition for Rulemaking to Reform Regulation of Incumbent Local Exchange Carrier Rates for Interstate Special Access Services".

That 2005 NPRM started an examination of the regulatory framework to apply to price cap LEC's interstate special access services after June 30, 2005, when the CALLS plan expired. See, also, story titled "FCC Releases NPRM on Regulatory Framework to Apply to Price Cap LECs for Interstate Special Access Services" in TLJ Daily E-Mail Alert No. 1,067, February 1, 2005.

The FCC received comments, and more comments, and eventually held a workshop, but adopted no new rules, until the just released R&O.

The FCC wrote in a pleading filed with the U.S. Court of Appeals (DCCir) on October 6, 2011, that the FCC has not yet compiled "an evidentiary record that is sufficient to evaluate current conditions in the special access market". See, In Re Comptel, App. Ct. No. 11-1262.

Report & Order. The FCC vote broke down along party lines, with the three Democrats (Genachowski, Clyburn and Rosenworcel) voting yes, and Republicans (McDowell and Pai) voting no.

The R&O states that "we suspend, on an interim basis, our rules allowing for automatic grants of pricing flexibility for special access services in light of significant evidence that these rules, adopted in 1999, are not working as predicted, and widespread agreement across industry sectors that these rules fail to accurately reflect competition in today’s special access markets."

It continues that "We set forth a path to update our rules to better target regulatory relief to competitive areas, including extending relief to areas that are likely competitive but have been denied regulatory relief under our existing framework."

This R&O asserts that the FCC continues to support the goal of the 1999 order to reduce regulation. However, this R&O states that "there is compelling evidence that our current pricing flexibility rules are not properly matching relief to such areas, combined with allegations that this mismatch is causing real harm to American consumers and businesses and hindering investment and innovation."

Chairman Genachowski wrote in his statement that "Special access services -- services that provide dedicated, high-quality data connections -- are a vital input to our broadband economy. Mobile providers use these connections to link cell towers to wireline backbone networks. Banks, credit card, technology and insurance companies, and other large enterprises use special access links to communicate among their branch offices. Small businesses rely on these services for Internet access and have made clear that promoting competition in the market for special access is essential to helping them grow and create new jobs. And our nation’s schools, libraries, and government institutions use special access connections every day to provide services to their constituents."

Commissioner Jessica Rosenworcel wrote in her statement that 13 year ago the 1999 order "was a good and sensible system. But time and the evolution of technology has rendered these proxies increasingly ill-suited to discern between competitive and noncompetitive markets."

Commissioners McDowell and Pai. FCC Commissioner Ajit Pai wrote a 13 page dissent, unusual both for its length, and the bluntness of its criticism of the majority.

He began that "In Lewis Carroll's Alice's Adventures in Wonderland, the Queen of Hearts impatiently exclaims: ``Sentence first -- verdict afterwards.´´ Unfortunately, the Commission's approach today draws more inspiration from the Queen of Hearts than the Administrative Procedure Act. First, the Commission proclaims its ``sentence´´ by suspending our current pricing flexibility triggers. It then announces its intent to go about collecting the data necessary to reach a ``verdict´´ on the competitiveness of the special access market and the effect of the current rules on prices. In short, the Commission has reversed the steps that a data-driven agency should take. As a result, today’s action appears consistent with the Administrative Procedure Act only when viewed through the proverbial looking glass."

See, book [Amazon] and book [Apple] titled "Alice's Adventures in Wonderland".

Pai wrote that this R&O represents "the demise of the bipartisan deregulatory framework constructed by the Clinton Administration (and maintained by the Bush Administration) so that the Commission can travel down the rabbit hole of re-regulation. I do not expect that special access will be the only stop on this journey. Rather, today's order lays the predicate for the Commission to re-regulate fiber; a consistent regulatory philosophy demands as much. Industry players will likely draw the same conclusion. As a result, the Commission's decision will chill infrastructure investment, slow the deployment of next-generation networks, and impede job creation." (Parentheses in original.)

Commissioner Robert McDowell wrote in his dissent that "the majority has opted to suspend a thirteen-year-old special access regulatory framework without an adequate evidentiary record or market analysis, both of which are necessary to make such a sweeping rule change".

He also wrote that "By all appearances, the majority is wrapping its decision in the protective cloak of “interim” status merely to increase its odds of success during the inevitable appeal."

8/23. Members of Congress who commented on the Federal Communications Commission's (FCC) special access Report and Order [107 pages in PDF], released on August 22, 2012, divided along party lines. Republicans criticized the R&O will Democrats praised it.

Rep. Fred Upton (R-MI) and Rep. Greg Walden (R-OR) stated in a joint release that "The FCC has once again handed down a decision without providing sufficient evidence that action is needed. The decision violates good process and is difficult to square with Chairman Genachowski's previous statements about how this issue would be addressed. The FCC told the D.C. Circuit Court in an October 2011 filing that the commission lacked `an evidentiary record that is sufficient to evaluate current conditions in the special access market,´ in part because of `the failure of some parties to produce information clearly documenting their claims that special access rates are unreasonable.´ Further, the FCC Wireline Bureau Chief said in April that the FCC was still faced with `an incredible dearth of data.´"

Rep. Upton is the Chairman of the House Commerce Committee (HCC), which oversees the FCC. Rep. Walden is the Chairman of the HCC's Subcommittee on Communications and Technology (SCT).
 
The two continued that HCC members recently urged the FCC "to engage in a mandatory data collection and to refrain from taking any action before then. The Chairman acknowledged that the FCC did not have all the information it needed and said that he would move forward expeditiously with a data collection. He made no mention of his plans to suspend the regime and propose changes before gathering the additional material. The FCC has a responsibility as an expert agency to justify its actions with data before intervening in the status quo."

They added that "Genachowski has said that the House-approved FCC Process Reform Act is unwarranted. Actions such as these provide further evidence to the contrary". See, HR 3309 [LOC | WW], the "Federal Communications Commission Process Reform Act of 2011". See also, story titled "House Passes FCC Process Reform Act" and related stories in TLJ Daily E-Mail Alert No. 2,361, March 30, 2012.

In contrast, Rep. Henry Waxman (D-CA), the ranking Democrat on the HCC, stated in a release that the FCC's special access rules "are not working as intended and may actually harm consumers, competitors, and incumbents."

Rep. Waxman (at right) wrote that "Chairman Genachowski, Commissioner Clyburn, and Commissioner Rosenworcel should be commended for focusing on the record and rejecting calls to allow this broken system to remain in place for no reason other than adherence to deregulatory policies. By temporarily suspending new grants of pricing flexibility as it develops a new path for such flexibility in the future, the Commission demonstrates the sensible and reasoned decision making we expect of an expert agency."

Rep. Ed Markey (D-CA) stated in a release that "The outdated rules currently governing the special access market need to be reformed so the businesses, competitive carriers, wireless service providers and others who rely on it can take full advantage of robust and competitive broadband services".

Rep. Doris Matsui (D-CA) also praised the R&O.

8/23. Many persons commented on the Federal Communications Commission's (FCC) special access Report and Order [107 pages in PDF], released on August 22, 2012.

Walter McCormick, head of the US Telecom, stated in a release that "We are disappointed that the Commission has chosen to take this action despite its recent repeated admissions that it does not have adequate information to evaluate the competitiveness of the high-capacity services marketplace. For more than two years, USTelecom has been urging the Commission to undertake a mandatory data request to obtain the necessary information, particularly in light of the recalcitrance of the very competitors that have sought this action to provide such data voluntarily."

McCormick continued that "It is surprising that the majority has chosen to move forward without even issuing such a data request – let alone without evaluating the results. It also is perplexing why the Commission continues to contemplate changes in policy that serve only to prop up outdated technologies in a manner that will discourage the deployment of new, higher capacity facilities. We urge the Commission to move forward with its promised mandatory data request and hope that future actions will be driven by such data and by policies that encourage the deployment of broadband facilities."

AT&T's Bob Quinn stated in a release that "the FCC is placing the cart before the horse by suspending the existing special access rules before receiving and analyzing the data submissions.  If, as the FCC itself stated earlier this year, it does not have the data to support `claims that special access rates are unreasonable,´ then suspending the existing triggers seems premature."

He continued that "industry -- fueled by demand for mobile Internet data -- is rapidly moving yesteryear's copper-based special access services to fiber-based, IP services".

He argued that "If the goal is to encourage new fiber investment and more broadband to transition to an all-IP world, the Commission must establish the conditions necessary to create incentives for all carriers to continue to invest in new IP technology, not further regulate yesterday’s technology."

Kathy Sloan of the Computer and Communications Industry Association (CCIA) stated in a release that "these 12-year-old regulatory mechanisms are dysfunctional and need to be reformed. We are relieved that the agency has decided to hold the line on further wholesale rate increases by Verizon, AT&T and others while it mandates their production of the market data the FCC needs to determine whether and where American businesses actually do enjoy realistic competitive choices for their telecommunications needs or are captive customers facing monopoly pricing."

Jerry James, head of the Comptel, praised the R&O in a release.

John Bergmayer of the Public Knowledge (PK) praised this R&O. He stated in a release that "While consumers don't pay high special access fees directly, they still bear their cost. When competitive carriers have to pay unreasonably high rates for connectivity they may have to pass the costs along to users, or slow down new deployment."

Matt Wood of the Free Press (FP) praised this R&O in a release. He said that "special access has been little more than a special advantage for AT&T and Verizon, and they've used it to choke off competition and keep prices high".

11:00 AM - 12:30 PM. The American Bar Association (ABA) will host a webcast and telecast presentation titled "Protecting Your Intellectual Property: Best Practices for China in 2012". The speaker will be James Zimmerman (Sheppard Mullin). Prices vary. CLE credits. See, notice.

2:00 - 4:00 PM. The Small Business Administration (SBA) will host a webcast program on the Small Business Innovation Research (SBIR) and Small Business Technology Transfer Program (STTR) reauthorization act. See, notice in the Federal Register, Vol. 77, No. 151, Monday, August 6, 2012, at Page 46909.

6:00 - 9:15 PM. The DC Bar Association will host a presentation titled "Federal Lobbying 2012: A Guide to Regulation and Compliance". The speaker will be Andrew Siff (Siff & Associates). The price to attend ranges from $89 to $129. Reporters are barred from attending most DC Bar events. CLE credits. See, notice. For more information, call 202-626-3488. Location: DC Bar Conference Center, 1101 K St., NW.

Day one of a two day event hosted by the American Intellectual Property Law Association (AIPLA) titled "AIPLA Patent Prosecution Practical Patent Prosecution Training for New Lawyers". See, notice. For more information, contact aipla at aipla dot org or 703-415-0780. Location: Alexandria, VA.

Deadline to submit initial comments to the Federal Communications Commission (FCC) in response to the Wireline Competition Bureau's WCB) Public Notice [23 pages in PDF] regarding expanding FCC subsidies for rural health care providers to include broadband. The FCC released this item on July 19, 2012. It is DA 12-1166 in WC Docket No. 02-60. See, notice in the Federal Register, Vol. 77, No. 144, Thursday, July 26, 2012, at Pages 43773-43780.

12:00 NOON - 1:30 PM. The DC Bar Association will host a presentation titled "Building Momentum: Advanced LinkedIn for Lawyers". The speaker will be Tasha Coleman (Upward Action). Free. No CLE credits. See, notice. For more information, call 202-626-3488. The DC Bar has a history of barring reporters from its events. Location: DC Bar Conference Center, 1101 K St., NW.

1:00 - 2:30 PM. The American Bar Association (ABA) will host a webcast and telecast panel discussion titled "The America Invents Act: The Boundaries of Prior Art". The speakers will be Steve Chang (Banner & Witcoff), Susanne Jones (O'Brien Jones), and Janet Hendrickson (Senniger Powers). Prices vary. CLE credits. See, notice.

Day two of a two day event hosted by the American Intellectual Property Law Association (AIPLA) titled "AIPLA Patent Prosecution Practical Patent Prosecution Training for New Lawyers". See, notice. For more information, contact aipla at aipla dot org or call 703-415-0780. Location: Alexandria, VA.

Day one of four of the Republican National Convention.

Deadline to submit comments to the Office of the U.S. Trade Representative (OUSTR) regarding the complaints filed with the World Trade Organization (WTO) by the US, Japan and EU against the People's Republic of China (PRC) regarding its rare earth materials export policies. See, notice in the Federal Register, Vol. 77, No. 146, Monday, July 30, 2012, at Pages 44706-44707.

Day two of four of the Republican National Convention.

Day three of four of the Republican National Convention.

9:30 AM - 1:00 PM. The Department of Commerce's (DOC) National Telecommunications and Information Administration (NTIA) will hold one in a series of meetings regarding consumer data privacy in the context of mobile applications. See, notice in the Federal Register, Vol. 77, No. 149, Thursday, August 2, 2012, Pages 46067-46068. Location: Auditorium, DOC, Hoover Building, 14th Street and Constitution Ave., NW.

12:00 NOON. The World Wide Web Consortium's (W3C) Tracking Protection Working Group will meet by teleconference. The call in number is 1-617-761-6200. The passcode is TRACK (87225).

2:00 - 4:00 PM. The Small Business Administration (SBA) will host a webcast program on the Small Business Innovation Research (SBIR) and Small Business Technology Transfer Program (STTR) reauthorization act. See, notice in the Federal Register, Vol. 77, No. 151, Monday, August 6, 2012, at Page 46909.

Day four of four of the Republican National Convention.

6:00 - 9:15 PM. The DC Bar Association will host a presentation titled "Can They Fire Me For Putting That on Facebook?". The speakers will be Diane Seltzer (Seltzer Law Firm), Julienne Bramesco (Clearspire Law Co.), and Lily Garcia (Clearspire Law Co.). The price to attend ranges from $89 to $129. Reporters are barred from attending most DC Bar events. CLE credits. See, notice. For more information, call 202-626-3488. Location: DC Bar Conference Center, 1101 K St., NW.

Deadline to submit post meeting comments to the President's National Security Telecommunications Advisory Committee (NSTAC) regarding its August 16 meeting. The agenda includes discussions of (1) the Nationwide Public Safety Broadband Network (NPSBN), (2) the DHS's National Cybersecurity and Communications Integration Center (NCCIC), and (3) the proposal to develop a separate out of band data network supporting communications among carriers, ISPs, vendors, and additional critical infrastructure owners and operators during a severe cyber incident that renders the internet unusable. See, notice in the Federal Register, Vol. 77, No. 146, Monday, July 30, 2012, at Pages 44641-44642.

Deadline to submit requests to the U.S. International Trade Commission (USITC) to testify at its September 12 hearing on the probable economic effect of providing duty free treatment for imports under the U.S.-Trans-Pacific Partnership Free Trade Agreement. See, notice in the Federal Register, Vol. 77, No. 155, August 10, 2012, at Pages 47880-47882.

Deadline to submit comments to the National Institute of Standards and Technology's (NIST) Computer Security Division (CSD) regarding its draft SP 800-94 Rev. 1 [111 pages in PDF] titled "Guide to Intrusion Detection and Prevention Systems (IDPS)".

Deadline to submit comments to the National Institute of Standards and Technology's (NIST) Computer Security Division (CSD) regarding its draft SP 800-83 Rev. 1 [45 pages in PDF] titled "Guide to Malware Incident Prevention and Handling for Desktops and Laptops".

Deadline to briefs and statements to the U.S. International Trade Commission (USITC) in advance of its September 12 hearing on the probable economic effect of providing duty free treatment for imports under the U.S.-Trans-Pacific Partnership Free Trade Agreement. See, notice in the Federal Register, Vol. 77, No. 155, August 10, 2012, at Pages 47880-47882.

EXTENDED TO OCTOBER 31. Deadline to submit applications to the U.S. Patent and Trademark Office (USPTO) under its Humanitarian Awards Pilot Program. See, original notice in the Federal Register, Vol. 77, No. 26, February 8, 2012, at Pages 6544-6548. See also, extension notice in the Federal Register, Vol. 77, No. 160, August 17, 2012, at Pages 49782-49783.

8/21. The Office of the U.S. Trade Representative (OUSTR) filed a complaint (nominally a request of consultations) with the World Trade Organization (WTO) against Argentina.

The OUSTR alleges that Argentina is in violation of its WTO obligations "concerning certain measures imposed by Argentina on the importation of goods into Argentina".

The complaint alleges that Argentina subjects imports to non-automatic import licensing. The OUSTR added in a release that this licensing regime covers, among other things, laptop computers and home appliances.

The complaint also alleges that "Argentina often requires the importers of goods to undertake certain commitments, including, inter alia, to limit their imports, to balance them with exports, to make or increase their investment in production facilities in Argentina, to increase the local content of products manufactured in Argentina (and thereby discriminate against imported products), to refrain from transferring revenue or other funds abroad and/or to control the price of imported goods." (Parentheses in originals.)

8/22. The Federal Trade Commission (FTC) released a notice [5 pages in PDF], to be published in the Federal Register, that announces, describes, recites, and sets the effective date for, its changes to its Telemarketing Sales Rule (TSR). The FTC is increasing the fees that it charges to entities that access the National Do Not Call Registry. The effective date is October 1, 2012.

This notice states that "the revised rule increases the annual fee for access to the Registry for each area code of data from $56 to $58 per area code; increases the fee per area code of data during the second six months of an entity’s annual subscription period from $28 to $29; and increases the maximum amount that will be charged to any single entity for accessing area codes of data from $15,503 to $15,962."

The "Do-Not-Call Registry Fee Extension Act of 2007", Public Law No. 110-188, requires that the FTC raise fees with the Consumer Price Index. This was S 781 [LOC | WW] in the 110th Congress.

8/22. PayPal announced in a release that "PayPal and Discover are teaming up to bring the convenience, security and functionality of PayPal to millions of participating in-store locations starting in 2013. What that means in a nutshell is that PayPal can be enabled as a payments option for our 50+ million active users in the U.S. at any in-store location that accepts Discover."

8/23. The U.S. Patent and Trademark Office (USPTO) announced in a release that it has selected the Byron Rogers Federal Building in downtown Denver, Colorado, as the location of its Denver satellite patent office.

8/20. The Government Accountability Office (GAO) released a report [45 pages in PDF] titled "Information Security: Environmental Protection Agency Needs to Resolve Weaknesses".

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