|News from January
DC Circuit Rules in CALEA Cost Recovery Case
1/18. The U.S.
Court of Appeals (DCCir) issued its opinion
v. FBI, a case regarding the cost recovery and notice of required
capacity provisions of the CALEA. The Appeals Court affirmed the District
Court's grant of summary judgment on the USTA's cost recovery claim, but
reversed and remanded on the notice claim.
CALEA. Congress passed the Communications
Assistance for Law Enforcement Act (CALEA), 47 U.S.C. § 1001 et seq., in
1994 to enable law enforcement authorities to maintain their existing wiretap
capabilities in new telecommunications devices. The Congress had cell phones in
mind. The CALEA provides that wireline, cellular, and broadband PCS carriers
must make their equipment capable of certain surveillance functions. The CALEA
has since been implemented in a manner that expands surveillance capabilities
beyond those provided in the statute, thereby increasing the financial burden on
communications carriers, and hence, their customers.
CALEA: § 1002. This section of the CALEA addresses the required capability
of carriers to conduct electronic surveillance. It is not at issue in the case.
However, it is the subject of a proceeding before the Federal Communications Commission (FCC). See,
August 15, 2000, opinion
of the U.S. Court of Appeals (DCCir) in USTA v. FCC, 227 F.3d 450. See also, the
FCC's CALEA information page.
CALEA: § 1003. This section, which is the subject of this case,
addresses the required capacity of telecommunications carriers to conduct
electronic surveillance. That is, it goes to the "actual number of
communication interceptions, pen registers, and trap and trace devices ..."
and the "maximum capacity required to accommodate all of the communication
interceptions, pen registers, and trap and trace devices ..." It requires
the Attorney General (in this case his designate is the FBI) to publish a notice in the Federal Register
of the actual number and maximum capacity that he estimates that government
agencies authorized to conduct electronic surveillance may conduct and use
CALEA: § 1008. This section covers allocation of costs associated with
compliance with the CALEA. It provides, among other things, that the Attorney
General "may agree, subject to the availability of appropriations, to pay
the telecommunications carrier for the additional reasonable costs of making
compliance with such assistance capability requirements reasonably
FBI Rules. The FBI published its final
notice [94 pages in PDF] implementing § 1003 on March 12, 1998. See,
Federal Register, March 12, 1998, Vol. 63, No. 48, at Pages 12218 - 112310.
District Court. The U.S. Telecom
Association (USTA), a trade association of about 1400 telephone companies,
filed its original complaint
in U.S. District Court (DC)
on August 19, 1998, against the FBI and others alleging that this final notice
violated the cost recovery provisions of the CALEA by erroneously defining the
class of modifications for which carriers might be eligible for reimbursement.
The USTA also alleged that the FBI's concept of the notices of required capacity
misread the statute in a variety of ways, each increasing the carriers' burdens
and their risks of being found noncompliant. The District Court consolidated
this case with a similar case filed by the Cellular
Telecommunications Industry Association (CTIA). The District Court granted
summary judgment in favor of the FBI on all issues.
Appeals Court. A three judge panel of the DC Circuit affirmed the
District Court on the reimbursement scheme, finding that the FBI correctly
defined the modifications required to be reimbursed. However, the Court of
Appeals reversed on the notice of required capacity issue, and instructed the
District Court to remand the case.
Note Regarding Pen Registers and Trap and Trace Devices. These are both
old telephone industry concepts. Pen registers are devices that record telephone
numbers that are dialed or punched. Trap and trace devices record the telephone
numbers of incoming calls. It is also noteworthy that on October 26, 2001,
President Bush signed HR 3162,
the USA PATRIOT Act. It expanded law enforcement agencies' authority with
respect to the use of pen registers and trap and trace devices. Prior law
covered "wire" communications. The USA PATRIOT Act provides that the
concept of a pen register is expanded from merely capturing phone numbers, to
capturing routing and addressing information in any electronic communications,
including Internet communications. The Act similarly expands the concept of trap
and trace devices.
Note Regarding Privacy. The claims plead in the complaint, and ruled upon
by the District and Appeals Courts, in this case, pertain to cost recovery and
notices of required capacity. However, the statute implicates fundamental
notions of individual privacy. Hence, in addition to industry groups (such as
the USTA and CTIA), groups that advocate privacy rights (such as the Center for Democracy and Technology (CDT), the Electronic Privacy Information Center (EPIC),
and others), have also opposed the FBI's and FCC's implementation of the CALEA.
1/18. The U.S.
Court of Appeals (DCCir) issued its opinion
v. Barr Laboratories, a Hatch Waxman Amendments case involving
tamoxifen, a breast cancer drug. The District Court granted summary judgment to
Pharmachemie. Subsequently, Pharmachemie lost its court challenge to the
underlying patent. Hence, the Appeals Court dismissed the appeal for lack of
jurisdiction, vacated the judgment of the District Court, and remanded the case
with instructions to dismiss the complaint.
Appeals Courts Rule in Trademark Case
1/18. The U.S.
Court of Appeals (5thCir) issued its opinion
International v. KHK Scaffolding, a case involving ex parte
seizure orders in trademark infringement cases. The Appeals Court affirmed the
PR China, WTO Obligations, and Export Controls
1/18. Representatives of the State and Commerce Departments gave their
assessments of the People's Republic of China's likely compliance with its World Trade Organization (WTO) obligations at a
U.S.-China Commission event. A Defense Department representative also addressed
Shaun Donnelly, Acting Assistant Secretary of State for the Bureau of Economic
and Business Affairs, predicted that "There will likely be bumps in the
road to implementation for the Chinese Government. Government officials may have
difficulty meeting deadlines for certain measures. Local officials initially may
not be able to fully grasp the depth of changes needed. There may be pockets of
resistance within China to full implementation of painful changes in areas like
agricultural liberalization or intellectual property protection." See, transcript.
William Lash, Assistant Secretary of Commerce for Market Access and Compliance,
testified that "I personally believe that the leadership of China is
earnest in its commitments to play by the rules of the WTO system, even with the
enormous structural challenges that WTO membership entails domestically."
Lash also addressed what the U.S. is doing to assist China in its reform
efforts. He stated that "We have already initiated a series of training
programs for Chinese officials on WTO related issues of concern to U.S.
business. Our first team traveled to Beijing and Shanghai in the fall of 2000 to
review China's future WTO obligations in areas like standards, intellectual
property rights and anti dumping requirements with Chinese officials and the
resident U.S. business community. In early 2001, a half dozen sessions were held
in Washington for Chinese officials, on topics ranging from e-commerce
regulation to corporate mergers and acquisitions, to WTO anti-dumping rules.
Subsequently, China Team officers traveled to China with the American National
Standards Institute for seminars in Beijing and Xian, organized Intellectual
Property Rights Enforcement Training sessions in Shenyang, Hangzhou, and Xiamen,
and conducted information technology and semiconductor seminars in
Lisa Bronson, Deputy Under Secretary of Defense for Technology Security Policy
and Counterproliferation, focused on export controls. She stated that PR China
has a "poor record" on proliferation. See, transcript.
She elaborated that "China's modernization program appears to be focusing
on ``pockets of excellence,´´ where advances in select technologies can be
leveraged for disproportionate benefit in a potential conflict. Several such
``pockets´´ include: preemptive long range precision strike capabilities;
information dominance; command and control; and integrated air defense. In
support of these efforts, Beijing has identified the development of an
indigenous microelectronics industry as one of its highest priorities. A cutting
edge domestic microelectronics sector will support both military and commercial
modernization in China. China's increasing emphasis on development of very large
scale integrated circuits will have direct application in future military
systems, for example, advanced phased array radars."
"China is both a problematic proliferator and the largest potential future
market for the U.S.", said Bronson. "The challenge of China is
striking the balance between the desire to successfully compete in a vast
untapped commercial market and the need to protect national security, including
through effective nonproliferation. Our policies and practices must strive to
minimize transfers of technologies that could contribute to potentially
threatening modernization efforts. Our focus is already on the areas Beijing has
identified as its ``pockets of excellence,´´ but we need to continually be
vigilant in the licensing process for new areas where our high technology might
be exploited to our detriment."
However, she added that "If a commodity is widely available, and not
amenable to multilateral controls, then export controls may not be the best tool
for addressing a national security or proliferation concern."
FCC Tentatively Fines SBC $6 Million
1/18. The Federal Communications Commission
(FCC) released a Notice
of Apparent Liability (NAL) proposing that SBC
be fined $6 Million for non-compliance with a competition related condition
imposed by the FCC in approving license transfers in connection with the 1999
merger of SBC and Ameritech. The NAL states that "it appears that SBC
failed to offer shared transport in the former Ameritech states under terms and
conditions substantially similar to those that it offered in Texas as of August
27, 1999, in violation of the SBC/Ameritech Merger Order." See also, FCC
SBC disputes the FCC's NAL. It stated in a release
that "SBC has met our obligations under the SBC/Ameritech Merger Conditions
to provide competitors with shared access to our networks in the Ameritech
region and elsewhere. That's one reason why CLECs are serving 12 million access
lines in our territory."
Eli Lilly Settles with FTC over Inadvertent E-Mail
1/18. The Federal Trade Commission (FTC)
initiated an administrative proceeding against Eli
Lilly alleging violation of the Federal Trade Commission Act (FTCA) in
connection with Eli Lilly's accidental disclosure of of personal information of
subscribers to an e-mail remainder service. See, administrative complaint [PDF].
The FTC and Eli Lilly simultaneously entered into a proposed settlement
agreement under which Eli Lilly agrees to "establish
and maintain an information security program for the protection of personally
identifiable information". See, Agreement Containing Consent
Eli Lilly is a pharmaceutical company. It offered an e-mail reminder service
regarding use of the drug Prozac. On one occasion it sent an e-mail reminder to
669 subscribers to the service using the "To:" method of addressing
the e-mail, rather than the "BCC:" method. The ACLU submitted a letter
complaint to the FTC.
"Our Web sites have security measures in place, including the use of
industry standard secure socket layer encryption (SSL), to protect the
confidentiality of any of Your Information that you volunteer".
The complaint alleges that Eli Lilly "has not employed measures and has not
taken steps appropriate under the circumstances to maintain and protect the
privacy and confidentiality of personal information obtained from or about
consumers through its Prozac.com and Lilly.com Web sites." The complaint
further alleges that this constituted unfair or deceptive acts or practices in
or affecting commerce in violation of Section 5(a) of the FTCA.
FTC Commissioner Orson Swindle wrote a concurring statement.
He stated that "Lilly's unfortunate and unintended disclosure of
prescription drug users' personal information has given us all the opportunity
to evaluate how to improve upon security practices for confidential
Eli Lilly did not admit wrongdoing. The consent order contains no fine. Eli
Lilly is represented by Karen Silverman of the law firm of Latham & Watkins. There is a thirty day period
for public comments on the proposed consent order, before it is given final
approval. See also, FTC
release and FTC
PPI Advocates Greater Use of IT to Fight Terrorism
1/18. The Progressive Policy Institute (PPI)
released two papers that call on government to increase the use of information
technology to prevent terrorist attacks and to facilitate coordination between
local, state, and national law enforcement authorities. The two papers are Using Technology to
Detect and Prevent Terrrorism [PDF], by Shane Ham and Robert Atkinson, and The State and Local
Role in Domestic Defense [PDF], by John Cohen and John Hurson.
Ham and Atkinson argue in their paper that "The information technology
revolution that transformed our economy has also given us the tools,
infrastructure, and commercial capabilities to make domestic defense easier,
less expensive, and more effective, making all Americans safer."
The Ham Atkinson paper continues that "Technology has revolutionized the
economy with dramatic productivity improvements and an array of new
communications and information processing tools. We must bring that same
revolution to domestic defense, to gain maximum security and public confidence
with minimum investment. The IT revolution has given us many tools -- wireless
data networks, encryption, powerful miniature computer chips, the global
Internet, data mining software, and many more -- that weren’t available for
domestic security just a few years ago. Now that we have these tools, it is time
to roll them out to make our nation safer."
Data Sharing. The paper recommends the use of "improved data
sharing, combining criminal records and intelligence information from a variety
of federal, state, and local agencies that can be accessed wirelessly to
identify wanted criminals and suspected terrorists when they encounter law
enforcement or attempt to enter secure facilities."
Digital Surveillance. The paper also calls for increased use of
"digital surveillance, extending longstanding principles of law enforcement
and surveillance to the Internet by permitting surveillance of email and other
electronic data while preserving traditional safeguards on searches by
The paper continues that "The recent antiterrorism legislation signed by
President Bush extended many of those surveillance techniques to their Internet
counterparts, but unfortunately there is still a good deal of unjustified
concern about the new technologies developed for law enforcement over the
Carnivore. The paper advocates the use of two recently developed tools,
DCS 1000, which is also known as Carnivore, and Magic Lantern. It describes DCS
1000 as a "device ... installed, by court order, at Internet service
providers to search email traffic. (Contrary to popular belief, the system does
not search through the email of every customer looking for suspicious content.)
By looking only for certain specific recipients or keywords in email sent by
suspects, DCS 1000 saves time for agents by letting them focus their efforts on
the e-mails that are most relevant, even though they would be entitled by court
order to read all of the email that DCS 1000 searches." (Parentheses in
Magic Lantern. The paper states that "Magic Lantern and other ``key
logging´´ programs allow agents with search warrants to record every keystroke
on a targeted computer. Reading the keystrokes can give agents passwords, which
are critical when criminals are using strong encryption for their data and
The Ham Atkinson paper concludes that "Without tools such as these, the old
system of wiretapping is rendered all but useless -- criminals will simply use
Internet chats and encrypted e-mails rather than telephones."
Shane Ham and the other authors spoke at an event for the release of the two
papers. He stated that "the fight over the USA PATRIOT Act is not over yet.
We are going to be arguing about that for a long time." Robert Atkinson
stated that "I think that the civil libertarian community is actively
organizing opposition to virtually any sort of expansion or modernization of our
law enforcement and intelligence system through technology. And, the way they
are doing it is by preying upon fears, by using overblown rhetoric, like ``smart
cards will turn America into a Nazi, show us your papers, police state´´. ...
Privacy is not an absolute standard. We trade it off every single day when we
have to show our drivers license at the airport ... So, I think we can address
-- we can deploy all of these technologies without really really damaging or
The Ham Atkinson paper also recommends the use of smart ID cards "with
biometric identifiers, adding chips containing thumbprint scans or other
biometric data to driver’s licenses, as well as standardized security features
for preventing forgery and fraud". The paper also recommends the use of
smart visas and face recognition technologies.
Legislative Recommendations. The paper then calls upon Congress to assist
in funding the deployment of these new technologies. The report also states that
"Congress should mandate that any standardization efforts by the state
motor vehicle agencies include upgrading all ID cards to smart cards. In
addition, Congress should provide matching grants to state agencies to deploy
hardware that can read smart cards, and should fund pilot programs for states
that seek to integrate multiple functions into the smart cards, such as voter
registration. The paper also recommends that Congress pass S 1749, the
Enhanced Border Security and Visa Entry Reform Act of 2001, a smart visa bill.
It also recommends that Congress boost funding to deploy technology hardware to
Atkinson also called for a Chief Information Officer for Homeland Defense, to
see that new technologies are deployed quickly and efficiently.
Finally, Atkinson argued that there would be economic benefits to use of these
technologies. For example, he stated: "Those of you who followed the
digital signatures act a few years ago in Congress -- it was passed with great
whoopla -- that now all Americans would now be able to sign documents on line
digitally. It hasn't happened. It won't happen. It won't happen until most
Americans have a way to authenticate themselves on line through some sort of PKI
system. If we were to give every American a smart card, a chip card, biometric,
on their driver's license, overnight we would jump start this market
Cohen and Hurson argue in their paper, The State and Local
Role in Domestic Defense [PDF], that "we must redefine our concept of
national security. We can no longer afford to think of national security as the
sole province of the military, or even the federal government’s intelligence,
law enforcement, and border control agencies. Keeping America safe from
terrorists and responding when they elude our defenses is also the urgent task
of state and local law enforcement and response agencies."
They also argue that "our approach to domestic defense must be national and
seamless. To this end, we must improve information sharing with our front line
law enforcement officers ..."
The PPI is a Washington DC based think tank affiliated with the Democratic Leadership Council, which is also
known as the New Democrats. Robert
Atkinson is VP of the PPI and Director of the PPI's Technology & New
Economy Project. Shane
Ham is a Senior Policy Analyst at PPI's Technology & New Economy
Cohen is the Director of the PPI's Community Crime Fighting Project.
1/18. Michael Logan plead guilty in U.S.
District Court (NDCal) to unauthorized access to a protected computer
causing damage in violation of 18 U.S.C. §
1030(a)(5)(C). Logan stated in his written Plea
Agreement [PDF] that he "intentionally accessed a computer of Catholic
Healthcare West (CHW) without authorization. I thereafter sent electronic mail
(e-mail) to approximately 30,000 employees and associates of CHW which purported
to be from a named employee of CHW and which contained insulting statements
about that named employee and other CHW employees." Sentencing is scheduled
for April 26, 2002. See also, September 25, 2001, Indictment,
and January 18, 2002, release.
People and Appointments
1/18. David Dorman resigned from the Board of Directors of the 3Com Corporation, effective immediately. He is
President of AT&T Corporation. See, 3Com
Commissioner O'Leary Addresses FTC Merger Policy
1/17. Federal Trade Commission (FTC)
Commissioner Thomas O'Leary gave a speech in Paris,
France, titled "The Essential Stability of Merger Policy in the United
States". He reviewed the history of merger policy in the U.S. He argues
that the popular conception about merger policy swinging like a pendulum is
incorrect. He argues that the Reagan revolution in merger policy had been in the
making since the late 1960s, and that there was no 1990s counter reaction.
Rather, he paints a picture of continuity and stability in policy over the last
O'Leary also reflected on the FTC's recent review of the merger of AOL and Time
Warner. He stated that "Had it gone to trial, a case like AOL/Time Warner
could also have raised some interesting vertical issues relating to the
potential for strategic behavior, as well as issues of non-price competition.
The AOL/Time Warner transaction was a vertical combination at three distinct
levels: (i) media entertainment of various kinds, in which one wing of Time
Warner had arguably the broadest portfolio in the world; (ii) internet service,
in which AOL was the dominant ``narrowband´´ provider with the arguable
potential to become the dominant ``broadband´´ company; and (iii) cable
services, for which another wing of Time Warner was the dominant -- and often
exclusive -- provider in approximately 20% of the country."
O'Leary continued that "Consistent with Chicago school learning, the
Commission focused on the possible horizontal competitive effects of each of
these three levels as a result of the vertical combination. However, we
considered not only the possible impact of total foreclosure, but also the
impact of strategies short of foreclosure suggested by post Chicago theories. In
this connection, we considered whether traditional ``market share´´ statistics
could adequately capture the potential for strategic deployment of Time Warner's
He concluded that "The interesting thing to me, as a participant in the
decision, was the sophistication of the economic arguments advanced in support
of, and in opposition to, the merger. This was not a dispute between adherents
of ``pre Chicago,´´ ``Chicago´´ and ``Post Chicago´´ theories; it was a
dispute between people who largely shared the same economic philosophy but had
very different opinions about what was likely to happen in fast moving
industries with little history to draw on for guidance."
O'Leary was appointed to the FTC in 1999 by former President Clinton. He was
previously a partner in the Washington DC office of the law firm of Hogan & Hartson, focusing on antitrust and
trade practices law.
Representatives Seek Stricter Enforcement of Telecom Act
1/17. Six Members of the House of Representatives wrote a letter [PDF]
to Federal Communications Commission (FCC)
Chairman Michael Powell
requesting better enforcement of the provisions of the Telecom Act of 1996
regarding nondiscriminatory provisioning of unbundled network elements and
special access services.
The six wrote that "We are concerned that the ILECs have not take all of
their obligations under the Telecommunications Act of 1996 seriously. It appears
that American consumers are suffering as a result. Congress enacted the 1996 Act
in order to bring innovative voice and data services to all Americans from a
multitude of service providers at reasonable prices. Without better enforcement
of the Act, we may soon regress to the days of monopoly
The letter pertains to two pending Notice of Proposed Rulemakings (NPRMs),
numbered CC Docket No. 01-318 and CC Docket No. 01-321. The six signatories are Rep. Steve Largent (R-OK), Rep. Bart Stupak (D-MI), Rep. Chris Cannon (R-UT), Rep. Karen McCarthy (D-MO), Rep. Anna Eshoo (D-CA), and Rep. Joe Pitts (R-PA).
AOL TW Reports on Status of IM Interoperability
1/17. AOL Time Warner submitted to the Federal
Communications Commission (FCC) its second progress
report [PDF] on the interoperability of instant messaging (IM) systems.
These reports are required by the FCC's January 22, 2001, order approving the
merger of AOL and Time Warner.
AOL Time Warner wrote that "it has continued to make progress in this area.
... AOL has completed development and testing of an initial prototype gateway
server designed to translate basic text based IMs and presence information
between the internal protocol used by AOL Instant Messenger ("AIM")
and one that is based on the protocol that the Internet Engineering Task Force's
("IETF") SIP for Instant Messaging and Presence Leverage
("SIMPLE") Working Group is designing. Then, AOL conducted a server to
server interoperability trial with Lotus Development Corporation
AOLTW also stated that this trial was conducted under "tightly controlled
circumstances". The gateway server "was not designed to be scalable in
order to handle large amounts of traffic, nor was it designed to address
security threats such as distributed denial of service attacks, data hijacking,
identity spoofing, namespace discovery, and spam." It concluded,
"There remains, however, much work to be done."
First Circuit Rules in Music Copyright Case
1/17. The U.S.
Court of Appeals (1stCir) issued its opinion
Gonzalez v. Fonovisa, a pair of cases involving music copyright
infringement. The Appeals Court affirmed the District Court. It held that a
distributor can be liable for copyright infringement where the plaintiff has not
established that the producer was guilty of copyright infringement.
Appeals Courts Rule in Generic Drug Cases
1/17. The U.S.
Court of Appeals (FedCir) issued its opinion in Biovail
v. Andrx, an Abbreviated New Drug Application (ANDA) case. The
District Court shortened the statutory 30 month delay of approval of Andrx's
pending ANDA and ordered that the ANDA be approved by the FDA. The Appeals Court
vacated the judgment and remanded.
FTC and DOJ Postpone Antitrust Reorganization Announcement
1/17. Charles James, Assistant Attorney General in charge of the Antitrust Division, and Timothy Muris,
Chairman of the Federal Trade Commission
(FTC), had scheduled a press conference for January 17 to "unveil an
agreement between the two agencies concerning clearance procedures for antitrust
investigations". See, notice.
However, the event was cancelled.
FCC Announces Reorganization
1/17. The Federal Communications Commission
(FCC) announced the adoption of an order containing a reorganization plan. The
FCC issued a short release,
but not the order.
The FCC release states that a new "Media Bureau will be responsible for the
policy and licensing programs for media services, including cable television,
broadcast television and radio. It will handle matters pertaining to
multichannel video programming distribution, broadcast radio and television,
direct broadcast satellite service policy, and associated matters." It will
be "comprised of staff and functions from the current Mass Media Bureau and
Cable Services Bureau ..."
The FCC stated that a new "Wireline Competition Bureau will be responsible
for the policy programs of communications common carriers and ancillary
operations (other than wireless telecommunications services). It will conduct
rulemakings, resolve waiver petitions and adjudications, determine the
lawfulness of carrier tariffs, act on applications for authorizations,
administer accounting requirements for incumbent local exchange carriers, review
carrier performance, and administer reporting requirements." It will be
"comprised of staff and functions from the current Common Carrier Bureau
The FCC release states that the "International Bureau will be realigned
along functional lines, with consolidation of the international policy and
spectrum rulemaking functions, and intergovernmental and regional leadership and
planning functions, which are currently distributed throughout the Bureau."
The FCC release also states that the "Enforcement Bureau will handle pole
attachment complaints and some multichannel video and cable television services
complaints currently handled in the Cable Services Bureau. It will also handle
common carrier audit functions."
SEC Chairman Addresses Regulation of Accounting
1/17. Securities and Exchange Commission (SEC)
Chairman Harvey Pitt released a statement titled
"Regulation of the Accounting Profession". He wrote that "Over
the last decade or so, this Country's vaunted system of disclosure, financial
reporting, corporate governance and accounting practices has shown serious signs
of failing to keep up with the needs of today's investors, our economy, and new
technology that makes rapid communications not only possible but essential. The
latest example – a most tragic and unprecedented one – is the failure of
Enron." He stated that the SEC would "erect a system that will restore
public confidence in the integrity of the accounting profession."
State Dept. Official Addresses Export Controls and China
1/17. Vann Van Diepen, the Acting Deputy Assistant Secretary of State for Nonproliferation Controls, testified
before the U.S. China Commission regarding export controls and the PR of China.
He stated that "China is a focus of our export control policy because it is
a growing regional military power and because Chinese entities have been
involved in proliferation related activities. The Administration applies strong
export controls on both dual-use items and munitions with the goal of not
contributing to nuclear, missile, CBW and other military programs of concern in
China or elsewhere."
He added that "Our policy also allows us to treat flexibly areas where the
technology is widely available as commodity items or physically impractical to
control, such as low-level computers or encryption, thus helping U.S. companies
to compete in China on a level playing field. The Administration continually
reviews export control policies for China and other countries in an effort to
take into account the realities of the market and technology." See, transcript.
FCC Reviews Policies and Procedures
1/17. The Federal Communications Commission
(FCC) held a meeting at which it reviewed FCC policies and procedures.
NIPC Cautions Internet Content Providers
1/17. The FBI's National Infrastructure
Protection Center (NIPC) issued an advisory in
which it cautioned Internet content providers against publishing in web sites
"details on critical infrastructures, emergency response plans and other
data of potential use to persons with criminal intent".
The advisory elaborates that "Search engines and similar technologies have
made arcane and seemingly isolated information quickly and easily retrievable to
anyone with access to the Internet. The National Infrastructure Protection
Center (NIPC) has received reporting that infrastructure related information,
available on the Internet, is being accessed from sites around the world."
People and Appointments
1/17. Edmond Thomas will be appointed Chief of the FCC's Office of Engineering and Technology (OET).
He has previously held jobs at Bell Atlantic/NYNEX, AT&T, and a subsidiary
of Philips Electronics. See, FCC
1/17. Allan Singer was promoted to SVP of Programming of AT&T Broadband and President of
Satellite Services, Inc., a subsidiary that manages the acquisition of video
programming services. See, AT&T release.
1/17. Frances Preston, P/CEO of BMI,
renewed her contract through 2004. See, BMI release.
1/17. The Securities Industry Association (SIA)
announced changes to its Board of Directors. Stephen Lessing, who is
currently a board member, will replace Stanley O'Neal as Vice Chairman. Three
new members of the board are David Denison, James Gorman and Seth
Waugh. Lessing is Managing Director of Lehman Brothers Holding. Denison is
President of the Institutional Brokerage Group at Fidelity Investments. Gorman
is EVP of the U.S. Private Client Group at Merrill Lynch. Seth Waugh is CEO of
Corporate and Investment Banking - Americas at Deutsche Bank Securities. See, SIA release.
1/17. The U.S.
Court of Appeals (9thCir) issued its opinion
[PDF] in Brown
v. MCI WorldCom, a case regarding the filed rate doctrine.
William Brown filed a class action complaint in the U.S.
District Court (CDCal) against MCI WorldCom alleging overcharging for phone
services. The District Court dismissed his complaint, holding that his suit was
barred by the filed rate doctrine. (That is, no one may bring a judicial
challenge to the validity of a filed tariff, or to enforce any rate other than
the rate established by the filed tariff.) The Appeals Court reversed, on the
grounds that Brown's complaint only seeks to enforce an existing tariff approved
by the FCC.
1/17. Verizon filed a Section 271
application with the Federal Communications
Commission (FCC) to provide in region interLATA services in the state of
Vermont. See, Verizon
release. Verizon has already won approval to provide long distance services
in other states, including New York, Massachusetts, Connecticut, and
Pennsylvania. It also has applications pending for Rhode Island and New Jersey.
1/17. The FBI's National Infrastructure
Protection Center (NIPC) published in its web site the January issue
[PDF] of Cyber Notes.
1/17. The U.S.
Court of Appeals (9thCir) issued its opinion
[PDF] in USA
v. Guagliardo, an appeal from a conviction and sentencing in a
pormography case. The noteworthy aspect of this case is the Appeals Court's
reasoning that copying files onto a computer disk manufactured abroad satisfies
the interstate or foreign commerce element of the offense. Thomas Guagliardo
sold an Iomega disk to an undercover law enforcement officer. He had copied onto
that disk images that constitute child pormography. Guagliardo argued that this
evidence did not meet the statutory requirement that it "was produced using
materials that have been mailed, or shipped or transported in interstate or
foreign commerce by any means, including by computer." The prosecution
argued that since he copied the images onto an Iomega disk that was manufactured
in another country, the statute's interstate or foreign commerce requirement was
satisfied. Both the District Court and the Appeals Court agreed with the
Supreme Court Holds FCC Can Set Rates for Pole Attachments for
Broadband Internet and Wireless
1/16. The Supreme Court issued its opinion
[PDF] in NCTA v. Gulf Power, the pole
attachments case. It reversed the decision of the U.S. Court of Appeals (11thCir). The
Supreme Court held that the Federal Communications
Commission (FCC) can set rates that cable companies pay for access to the
utility poles of phone companies for lines that provide both cable TV and high
speed Internet access. The opinion also covers rates paid by wireless
Introduction. Justice Anthony Kennedy wrote the opinion of the Court. He
began with the observation that "Since the inception of cable television,
cable companies have sought the means to run a wire into the home of each
subscriber. They have found it convenient, and often essential, to lease space
for their cables on telephone and electric utility poles. Utilities, in turn,
have found it convenient to charge monopoly rents." The Pole Attachments
Act prevented the charging of monopoly rents by instructing the FCC to set rates
for pole attachments by cable TV companies and telecommunications providers.
This case addresses the question of whether the FCC continues to have authority
to set rates when the lines used by the cable companies provide both new
broadband Internet access services and old fashioned one way programming.
Section 224. Congress has addressed the question of pole attachments in
several bills, which are now codified at 47 U.S.C. § 224. §
224(b)(1) provides, in part, that the FCC "shall regulate the rates, terms,
and conditions for pole attachments to provide that such rates, terms, and
conditions are just and reasonable, and shall adopt procedures necessary and
appropriate to hear and resolve complaints concerning such rates, terms, and
conditions." Sec. 224(a)(4), in turn, defines the term ''pole attachment''
as "any attachment by a cable television system or provider of
telecommunications service to a pole, duct, conduit, or right-of-way owned or
controlled by a utility."
Proceedings Below. The FCC asserted in an order that Section 224 applies
to traditional cable TV service, as well as to commingled TV and Internet
service. However, pole owning utilities petitioned the U.S. Courts of Appeal for
review of this FCC order. The 11th Circuit sided with the phone companies. Cable
companies then petitioned the U.S. Supreme Court for writ of certiorari. The
Supreme Court agreed to hear this case.
Broadband Internet Service. Justice Kennedy wrote (in Part II of the
opinion) that "No one disputes that a cable attached by a cable television
company, which provides only cable television service, is an attachment ``by a
cable television system.´´ If one day its cable provides high-speed Internet
access, in addition to cable television service, the cable does not cease, at
that instant, to be an attachment ``by a cable television system.´´ The
addition of a service does not change the character of the attaching entity --
the entity the attachment is ``by.´´ And this is what matters under the
statute. This is our own, best reading of the statute, which we find
Justice Kennedy added that "Even if a cable company is a common carrier
because it provides telephone service, of course, the attachment might still
fall under the second half of the ``pole attachments´´ definition: ``any
attachment . . . by a provider of telecommunications service.´´ "
Justice Kennedy also noted that the FCC's order did not determine whether
broadband Internet access services over cable are a "cable service"
within the meaning of Title 47. However, Kennedy continued that it was not
necessary to resolve this question to reach a decision in the present case.
Wireless Telecommunications Services. Justice Kennedy wrote (in Part III
of the opinion) that "A provider of wireless telecommunications service is
a ``provider of telecommunications service,´´ so its attachment is a ``pole
Dissent. Justice Clarence Thomas wrote a separate opinion, in which
Justice Souter joined. Thomas concurred with the analysis in Part III of the
opinion, regarding wireless service. However, he wrote that "The Court's
conclusion in Part II of its opinion that the Act gives the FCC the authority to
regulate rates for attachments providing commingled cable television service and
high-speed Internet access may be correct as well. Nevertheless, because the FCC
failed to engage in reasoned decisionmaking before asserting jurisdiction over
attachments transmitting these commingled services, I cannot agree with the
Court that the judgment below should be reversed and the FCC's decision on this
point allowed to stand. Instead, I would vacate the Court of Appeals' judgment
and remand the cases to the FCC with instructions that the Commission clearly
explain the specific statutory basis on which it is regulating rates for
attachments that provide commingled cable television service and high-speed
Internet access. Such a determination would require the Commission to decide at
long last whether high-speed Internet access provided through cable wires
constitutes cable service or telecommunications service or falls into neither
FCC Chairman Michael Powell
stated in a release that "I am pleased by the Supreme Court's decision
upholding the FCC's authority to set rates for attachments to telephone and
electric poles. It is important that the Court rejected an interpretation of the
Communications Act that could have raised the rates that consumers pay for
high-speed Internet access services and derailed the broadband revolution."
FRB Vice Chair Addresses Affect of Tech on Economy
1/16. Federal Reserve Board Vice
Ferguson gave a speech
in Denver, Colorado, to the Economic Club of Colorado titled "Developments
in the U.S. Economy: Review and Outlook".
He stated that "Booming investment in the 1990s owed importantly to steep
declines in prices of high-tech equipment, which largely reflected rapid
technical progress. About half a percentage point of the increase in
productivity growth in the 1995-99 period can be attributed to this so-called
capital deepening. I believe that technological progress will continue to drive
down information technology costs in the coming years. Moreover, businesses have
reaffirmed their intentions to improve productivity by substituting cost-saving
high-tech capital for labor."
Verizon CEO Advocates ILEC Deregulation
1/16. Verizon President and Co-CEO Ivan Seidenberg
gave a speech
to the U.S. Chamber of Commerce in
Washington DC in which he argued for less regulation of services provided by
He stated that "Unlike those of Microsoft or AOL Time Warner or AT&T
Comcast, our regulated assets are subject to a long list of price regulations,
sharing obligations, and separate subsidiary requirements that put us on an
unequal footing in the marketplace and remove the incentives for investing in
He continued that "Traditional policies have shifted value, growth and
innovation away from the incumbent telephone companies to less-constrained
segments of the industry. And, since they are based largely on resale and the
forced sharing of telephone company assets, they do little to promote the robust
competition among multiple technologies and service providers that would benefit
American consumers and businesses."
He concluded that "It's time to take down the ``do not enter´´ signs at
the entrance to the broadband future. ... Now it's time for the FCC, along with
the Congress, to take action to open the gates to broadband investment and let
us put our resources to work where they can do the most good for America."
Seidenberg also advocated passage of legislation giving the President trade
promotion authority. He also advocated legislation that would provide incentives
and tax breaks for businesses that reinvest in lower Manhattan.
People and Appointments
Otellini was named President and Chief Operating Officer of Intel. See, Intel
1/16. Lawrence Ricciardi, IBM's general
counsel, will retire in July, 2002.
1/16. Evelyn Sroufe rejoined the law firm of Perkins Coie as a partner in the firm's
Corporate Finance Group in the Seattle office. She was previously President and
CEO of The WebSea Group, Inc., a Seattle based consulting firm to technology
companies. Before that, she worked for Visio, and for Microsoft after it
acquired Visio. See, PC release.
1/16. The Department of Justice
published in its web site a redacted copy of its brief filed with the U.S. Court of Appeals
(10thCir) in USA
v. American Airlines, an antitrust case involving Section
2 of the Sherman Act, (15
U.S.C. § 2). At issue is whether American violated Section 2 of the Sherman
Act by adding money losing capacity to drive lower cost competitors out of four
of American's Dallas Fort Worth Airport.
1/16. The Federal Communications Commission
(FCC) extended the deadline, from February 1 to March 8, for submitting comments
in response to its Further Notice of Proposed Rulemaking regarding the current
state of the market for local and advanced telecommunications services in multi
tenant environments. See, FCC
notice of extension of deadline [PDF]. This is WT Docket No. 99-217.
1/16. The FBI's National Information Protection
Center (NIPC) released a report titled
"Best Practices for Wireless Fidelity (802.11b) Network
Vulnerabilities". It warns that "Computer security experts have
successfully intercepted and broken the security built into the IEEE 802.11b
Wireless Local Area Network (WLAN) standard. The software tools used to exploit
the vulnerability are simple to use and available on the Internet as
freeware." It refers 802.11b users to a set of best practices recommended
by the Wireless Ethernet Compatibility Alliance (WECA).
1/16. The USPTO published in its web site
issue of USPTO Today [PDF].
1/16. Sen. Ted Kennedy (R-MA) gave a speech [PDF] in Washington
DC in which he advocated delaying tax cuts enacted by the Congress last year. Sen. Charles Grassley (R-IA), the ranking
Republican on the Senate Finance Committee, responded in a release that "If
the Democrats succeed in raising taxes, they'll cost even more Americans their
jobs. I believe the American people will oppose Senator Kennedy's bad idea, and
it won't gain traction in the Senate."
1/16. The European Commission stated that it "has cleared the acquisition
by KPNQwest NV of the European operations of Global TeleSystems Inc. (GTS), a
US-based telecommunications operator. The Commission's review has shown that the
markets concerned, which range from data communications services to Internet
connectivity and access, would remain sufficiently competitive." See, release.
Go to News Briefs from January 11-15,