News from June 11-15, 2002

Internet Shoes: Two Appeals Courts Address Internet Based Jurisdiction
6/14. On Friday, June 14, both the U.S. Court of Appeals (4thCir) and the U.S. Court of Appeals (DCCir) issued opinions which contain lengthy analyses of the Due Process requirements for the exercise of personal jurisdiction over out of state companies whose only connection with the state in which the Court sits is Internet activities. Both cases extend the minimum contacts analysis of International Shoe v. Washington, 326 U.S. 310 (1945), to corporations doing business on the Internet.
The District of Columbia Circuit stopped just short of holding that the District of Columbia has jurisdiction over a Nebraska based online brokerage firm. (It did not actually hold that jurisdiction exists because the District Court had not yet established a factual record, and because it affirmed the District Court's dismissal on other grounds.) The Court mocked the legal arguments of counsel for the brokerage, which fought jurisdiction. The Court wrote that cyberspace "is not some mystical incantation capable of warding off the jurisdiction of courts built from bricks and mortar."
In contrast, the Fourth Circuit identified limits to finding jurisdiction over out of state companies that are on the Internet. It held that the District Court in Maryland cannot exercise personal jurisdiction over a Georgia based ISP in a copyright infringement case on the sole basis that it provided web hosting services to the alleged infringers.
The two cases contain consistent applications of the minimum contacts analysis. In the DC case, the online brokerage conducted a wide range of transactions electronically with its customers in the District of Columbia. In the Fourth Circuit case the ISP had no customers in Maryland.
Fourth Circuit Holds No Personal Jurisdiction Over Out of State Web Host
6/14. The U.S. Court of Appeals (4thCir) issued its opinion in ALS Scan v. Digital Service Consultants, a case holding that the Court lacks personal jurisdiction over an out of state Internet service provider that provides web hosting services to an alleged copyright infringer in a copyright infringement suit.
Background. ALS Scan is a Maryland corporation with its place of business in Columbia, a Maryland suburb situated between Washington DC and Baltimore. ALS Scan is in the business of taking girly pictures, which it then markets over the Internet. ALS Scan alleges that Alternative Products and Robert Wilkins copied some of its photographs, and published them in their web sites for commercial gain. Digital Service Consultants is an ISP in Georgia that provides web hosting services to Alternative Products and Wilkins.
District Court. ALS filed a complaint in U.S. District Court (DMd) against Digital, Alternative, and Wilkins alleging copyright infringement. Digital filed a motion to dismiss for lack of personal jurisdiction over it. Digital alleged that it has no office or customers in Maryland, that it derives no revenues from Maryland, and that it does not advertise in Maryland, except by having a web site. The District Court granted Digital's motion to dismiss for lack of personal jurisdiction. ALS filed this interlocutory appeal.
Appeals Court: Review of Supreme Court Precedent. The Appeals Court affirmed. The Court noted first that historically in personam jurisdiction depended upon personal presence in the state. The Court continued that this  changed with International Shoe v. Washington, 326 U.S. 310 (1945): "Over time, however, and with the introduction of personal service of summons or other forms of notice, the Supreme Court recognized that ``due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend ``traditional notions of fair play and substantial justice.创"
The Court added that "Although the courts have recognized that the standards used to determine the proper exercise of personal jurisdiction may evolve as technological progress occurs, it nonetheless has remained clear that technology cannot eviscerate the constitutional limits on a State's power to exercise jurisdiction over a defendant."
The Court also reviewed the standards for specific and general jurisdiction. "Determining the extent of a State's judicial power over persons outside of its borders under the International Shoe standard can be undertaken through two different approaches -- by finding specific jurisdiction based on conduct connected to the suit or by finding general jurisdiction." It cited Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408 (1984).
It elaborated that "If the defendant's contacts with the State are also the basis for the suit, those contacts may establish specific jurisdiction. In deter mining specific jurisdiction, we consider (1) the extent to which the defendant ``purposefully avail[ed]创 itself of the privilege of conducting activities in the State; (2) whether the plaintiffs' claims arise out of those activities directed at the State; and (3) whether the exercise of personal jurisdiction would be constitutionally ``reasonable.创"
"On the other hand, if the defendant's contacts with the State are not also the basis for suit, then jurisdiction over the defendant must arise from the defendant's general, more persistent, but unrelated contacts with the State. To establish general jurisdiction over the defendant, the defendant's activities in the State must have been ``continuous and systematic,创 a more demanding standard than is necessary for establishing specific jurisdiction."
Appeals Court: Analysis of Internet Contacts. The Court then applied this Supreme Court precedent to Internet based activities. It wrote that "because the Internet is omnipresent" "when a person places information on the Internet, he can communicate with persons in virtually every jurisdiction. If we were to conclude as a general principle that a person's act of placing information on the Internet subjects that person to personal jurisdiction in each State in which the information is accessed, then the defense of personal jurisdiction, in the sense that a State has geographically limited judicial power, would no longer exist. The person placing information on the Internet would be subject to personal jurisdiction in every State. But under current Supreme Court jurisprudence, despite advances in technology, State judicial power over persons appears to remain limited to persons within the State's boundaries and to those persons outside of the State who have minimum contacts ..."
The Court also considered that "the argument could still be made that the Internet's electronic signals are surrogates for the person and that Internet users conceptually enter a State to the extent that they send their electronic signals into the State, establishing those minimum contacts sufficient to subject the sending person to personal jurisdiction in the State where the signals are received." Moreover, the Court noted that "if that broad interpretation of minimum contacts were adopted, State jurisdiction over persons would be universal, and notions of limited State sovereignty and personal jurisdiction would be eviscerated."
The Court added that "it would be difficult to accept a structural arrangement in which each State has unlimited judicial power over every citizen in each other State who uses the Internet."
The Court suggested that "The convergence of commerce and technology thus tends to push the analysis to include a ``stream of commerce创 concept, under which each person who puts an article into commerce is held to anticipate suit in any jurisdiction where the stream takes the article." However, the Court added that this approach "has never been adopted by the Supreme Court as the controlling principle for defining the reach of a State's judicial power."
Appeals Court: Holding. The Court concluded that "a State may, consistent with due process, exercise judicial power over a person outside of the State when that person (1) directs electronic activity into the State, (2) with the manifested intent of engaging in business or other interactions within the State, and (3) that activity creates, in a person within the State, a potential cause of action cognizable in the State's courts. Under this standard, a person who simply places information on the Internet does not subject himself to jurisdiction in each State into which the electronic signal is transmitted and received. Such passive Internet activity does not generally include directing electronic activity into the State with the manifested intent of engaging business or other interactions in the State thus creating in a person within the State a potential cause of action cognizable in courts located in the State."
Then, the Court applied this standard to the facts of the present case. It wrote that "Digi tal's activity was, at most, passive and therefore does not subject it to the judicial power of a Maryland court even though electronic signals from Digital's facility were concededly received in Maryland. Digital functioned from Georgia as an ISP, and in that role provided bandwidth to Alternative Products, also located in Georgia, to enable Alternative Products to create a website and send information over the Internet. It did not select or knowingly transmit infringing photographs specifically to Maryland with the intent of engaging in business or any other transaction in Maryland. Rather, its role as an ISP was at most passive."
The Court hinted that this area of law may be appropriate for Supreme Court review. The Appeals Court inserted the following phrase: "Until the due process concepts of personal jurisdiction are reconceived and rearticulated by the Supreme Court in light of advances in technology ...".
DC Circuit Suggests Personal Jurisdiction Over Out of State Online Brokerage
6/14. The U.S. Court of Appeals (DCCir) issued its opinion in Gorman v. Ameritrade, a case regarding personal jurisdiction over an out of state online brokerage firm. The Appeals Court found that personal jurisdiction over Ameritrade could exist.
Background. David Gorman is the sole proprietor of a business called Cashbackrealty.com. He is based in McLean, a suburb of Washington DC located in northern Virginia. Ameritrade is an online stock brokerage company based in Omaha, Nebraska, that conducts electronic transactions with residents of the District of Columbia (DC). Gorman entered into a contract with Freetrade.com, an Omaha business, under which Freetrade.com agreed to place a hyperlink on the home page of its web site to the Cashbackrealty.com web site. Ameritrade acquired Freetrade.com. Gorman demanded that Ameritrade's home page link to his web site. Ameritrade refused.
District Court. Gorman filed a complaint in U.S. District Court (DC) against Ameritrade alleging breach of contract. Subject matter jurisdiction is based upon diversity of citizenship. DC has a long arm jurisdiction statute that provides for jurisdiction over foreign corporations doing business in DC. The District Court dismissed the case, without allowing discovery, for lack of personal jurisdiction over Ameritrade, and for insufficiency of service of process. The Court held that operating a web site used by DC residents is not enough to establish the "miminum contacts" required by International Shoe v. Washington, 326 U.S. 310 (1945), and its progeny. Gorman appealed.
Appeals Court. Ameritrade argued that it does not do business in DC. Rather it does business in "cyberspace". The Appeals Court was unimpressed. It wrote that "``Cyberspace,创 however, is not some mystical incantation capable of warding off the jurisdiction of courts built from bricks and mortar. Just as our traditional notions of personal jurisdiction have proven adaptable to other changes in the national economy, so too are they adaptable to the transformations wrought by the Internet. In the last century, for example, courts held that, depending upon the circumstances, transactions by mail and telephone could be the basis for personal jurisdiction notwithstanding the defendant's lack of physical presence in the forum. There is no logical reason why the same should not be true of transactions accomplished through the use of e-mail or interactive websites. Indeed, application of this precedent is quite natural since much communication over the Internet is still transmitted by ordinary telephone lines." (Footnotes omitted.)
The Court then applied the "continuous and systematic" contacts test announced in GTE New Media Services v. BellSouth, 199 F.3d 1343 (D.C. Cir. 2000). In that case the Court held that defendants who operated "Yellow Pages" websites accessible to DC residents had insufficient contacts to permit the exercise specific jurisdiction under the DC long arm statute.
The Court distinguished the facts in GTE from those in the present case. It wrote that this case "is substantially different from GTE. Ameritrade's contact with the District is not limited to an ``essentially passive创 website through which customers merely access information about the financial markets. ... To the contrary, Ameritrade concedes that District residents use its website to engage in electronic transactions with the firm. ... The firm's customers can open Ameritrade brokerage accounts online; transmit funds to their accounts electronically; and use those accounts to buy and sell securities, to borrow from Ameritrade on margin, and to pay Ameritrade brokerage commissions and interest. Using e-mail and web-posting, Ameritrade transmits electronic confirmations, monthly account statements, and both financial and product information back to its customers. As a result of their electronic interactions, Ameritrade and its District of Columbia customers enter into binding contracts, the customers become the owners of valuable securities, and Ameritrade obtains valuable revenue."
The Court concluded, "it is quite possible that, through its website, Ameritrade is doing business in the District of Columbia by continuously and systematically ``enter[ing] into contracts with residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the Internet.创" (Citation omitted.)
However, since there was no discovery, and no factual record, in the District Court, the Appeals Court merely held that jurisdiction could exist. It did not hold that personal jurisdiction does exist. Although, given the reasoning of the Appeals Court, this would appear to be the inevitable conclusion to be reached eventually by the District Court. Also, since the Appeals Court held that service of process by mail upon the Securities Director of the District of Columbia was insufficient, it affirmed the dismissal of the case.
Notable and Quotable. Judge Merrick Garland, writing for the three judge panel of the Appeals Court, also wrote that "Ameritrade is quite wrong in treating ``cyberspace创 as if it were a kingdom floating in the mysterious ether, immune from the jurisdiction of earthly courts."
DC Circuit Grants Petition for Review in AT&T v. FCC
6/14. The U.S. Court of Appeals (DCCir) issued its opinion in AT&T v. FCC, granting AT&T's petition for review of the Federal Communications Commission's (FCC) Declaratory Ruling holding that long distance carriers have an obligation to purchase interstate switched access services provided by competitive local exchange carriers. The Appeals Court vacated the Declaratory Ruling.
AT&T is an interexchange carrier (IXC), or long distance carrier. It generally carries phones calls that originate with, and terminate with, customers of local exchange carriers (LECs). IXCs charge the caller for the telephone call, and pay originating access charges, and terminating access charges, to the LECs. Since passage of the 1996 Telecom Act, LECs have included both incumbent local exchange carriers (ILECs) and competitive local exchange carriers (CLECs).
The Appeals Court noted that "CLECs possess a ``series of bottleneck monopolies over access to each individual end user.创... If an IXC wants to provide long distance service to customers of a CLEC's local service, the IXC must utilize access services from that particular CLEC." Consequently, the Court wrote, "some CLECs began charging access rates that were well above the rates ILECs charged for similar services."
AT&T then determined not to purchase access services from certain CLECs, and began taking steps to cut off its ties with these CLECs. However, some CLECs continued to send long distance calls to AT&T and then billed AT&T. The Court wrote that "They were able to do so without AT&T's agreement because the CLECs first routed their traffic to a tandem switch operated by the ILEC in their area. By the time the call reached AT&T's network, it was intermingled with the traffic of other carriers, and AT&T was unable to identify and block the traffic on a CLEC specific basis."
AT&T filed a petition for a declaratory ruling with the FCC in 1999. In October 2001 the FCC issued its declaratory ruling, in which it stated that "an IXC cannot refuse to exchange originating or terminating [access] traffic with the CLEC."
The FCC relied upon 47 U.S.C. 201(a) which provides: "It shall be the duty of every common carrier engaged in interstate or foreign communication by wire or radio to furnish such communication service upon reasonable request therefor; and, in accordance with the orders of the Commission, in cases where the Commission, after opportunity for hearing, finds such action necessary or desirable in the public interest, to establish physical connections with other carriers, to establish through routes and charges applicable thereto and the divisions of such charges, and to establish and provide facilities and regulations for operating such through routes."
AT&T filed the present Petition for Review of this declaratory ruling. The Appeals Court granted the petition and vacated the declaratory ruling. Judge Raymond Randolph wrote the opinion of the three judge panel.
The Court reasoned that "The first clause of  201(a) -- the clause preceding the semicolon -- establishes the duty of every common carrier to furnish communication service upon ``reasonable request.创 The second clause -- after the semicolon -- provides that the FCC may order a carrier to establish a through route only after opportunity for a hearing."
The Court continued that "The language of  201(a) is clear: if the FCC wants to compel AT&T to establish a through route with another carrier, then the FCC must follow the procedures specified in the second clause of  201(a). In ruling that AT&T was obligated to purchase access services from CLECs, the FCC sought -- without first having followed the procedures specified in the second clause of  201(a) -- to compel AT&T to establish a through route. It cannot be that a CLEC's demand to an IXC for a physical connection or a through route is a request by the CLEC's customer for such service under the first clause of  201(a). This would allow the first clause in  201(a) to render the second clause meaningless."
Kolasky Advocates Strong Investigative Tools, Fair Procedures, and Checks and Balances in Merger Reviews
6/14. William Kolasky, a Deputy Assistant Attorney General for the Antitrust Division of the Department of Justice, gave a speech in New York City titled "Mergers & Acquisitions: Getting Your Deal Through in the New Antitrust Climate".
This speech followed Kolasky's speech of March 18 in Cape Town, South Africa, titled "Comparative Merger Control Analysis: Six Guiding Principles for Antitrust Agencies -- the New and Old". In that speech the six principles which he advocated were: Protect competition not competitors, recognize the central role of efficiencies, base decisions on sound economics and hard evidence, realize that our predictive capabilities are limited, impose no unnecessary bureaucratic roadblocks, and be flexible and forward looking.
His June 14 speech expands on the third principle: base decisions on sound economics and hard evidence. He added that he hopes this speech will be part of an ongoing series.
He stated that "First, we need a sound analytical framework that is firmly grounded in economic science. Second, we need an infrastructure in which lawyers and economists can work together in evaluating the likely competitive effects of proposed transactions, each bringing their comparative advantage to bear in reaching a sound outcome. Third, we need strong investigative tools, fair procedures, and effective checks and balances."
Economic Science. He emphasized that he used the term "economic science" rather than "economic theory". He elaborated that "the minds of economists are extremely fertile. It is very easy to come up with theories of competitive harm. The difference between theory and science is that science requires that hypotheses be testable empirically. By economic science, I refer to those economic theories that have been tested empirically and not yet disproven. This is the case, for example, with Stigler's theory of oligopoly ..." He then reviewed how the DOJ's 1982 merger guidelines first incorporated economic science into DOJ policy.
Infrastructure. He described at length how the DOJ's 85 person Economic Analysis Group is organized and integrates into the Antitrust Division. He concluded at the end of the speech that "we are now working with other competition authorities around the world, especially those created in just the last few years, to help them do likewise".
Procedure. Finally, he advocated certain investigative tools, fair procedures, and effective checks and balances. On this topic, he first stated that investigations should be thorough, and involve testimony under oath. He said that "we have learned that we cannot rely on the representations of parties to a transaction or of complainants seeking to block it without thoroughly investigating the underlying factual basis for those representations. This requires that we obtain and carefully review underlying business documents, as well as that we interview third parties with a more objective view of the transaction. We often find it helpful also to question employees of the merging parties and complainants under oath ..."
Second, he said that fair procedure includes giving "the parties and complainants an opportunity to present their cases, not just to our staffs but also to senior decision makers".
He also addressed checks and balances. He said that "Under our system, the principal check on our decision making is that we cannot block a transaction without going to court to obtain an injunction. This means that throughout our investigation we must constantly ask ourselves whether we have sufficient evidence to persuade an independent judge, by a preponderance of the evidence, that the merger may substantially lessen competition and thereby harm consumer welfare. It means also that we know that any witnesses or other evidence we present will be subject to searching cross examination by the lawyers for the parties to the transaction."
The prepared text of his speech does not reference the Federal Communications Commission (FCC). However, it advocates procedures that are not in place in the FCC's merger review process.
Kolasky closed with two case studies: Suiza Dean and Comdisco Sungard.
Fairfax Opposes the Classification of Cable Modem Service as Information Service
6/14. The City of Fairfax, in Northern Virginia, submitted a comment [PDF] to the Federal Communications Commission (FCC) in its proceeding regarding the appropriate regulatory classification of cable modem services.
The FCC released its 75 page Declaratory Ruling and Notice of Proposed Rulemaking [PDF] back in March instituting this proceeding. The FCC concluded "that cable modem service, as it is currently offered, is properly classified as an interstate information service, not as a cable service, and that there is no separate offering of telecommunications service. In addition, we initiate a rulemaking proceeding to determine the scope of the Commission's jurisdiction to regulate cable modem service and whether (and, if so, how) cable modem service should be regulated under the law ..." This is CS Docket No. 02-52.
Numerous local governmental entities have submitted comments opposing the classification of cable modem services as an information service. The City of Fairfax wrote that "The FCC's ruling that cable modem service is an interstate information service, as opposed to a cable service, is in contravention of the Cable Act, ignores the constitutional limitations on its authority to regulate cable modem service1, and, quite simply, is lacking in common sense protection for American consumers. By promulgating this Ruling, the FCC challenges the authority of local governments to recover franchise fees related to cable modem service and to provide consumer protection and right of way management with respect to such service."
Fairfax asserted that "It is imperative that local franchising authorities retain the ability to regulate customer service standards for cable modem service." It also argued that "The Ruling will have a significant impact on franchise fee revenues for municipalities across the country."
BIS Red Flags Chinese Electronics and Communications Companies
6/14. The Commerce Department's Bureau of Industry and Security (BIS), which was formerly known as the Bureau of Export Adminstration (BXA), published a notice in the Federal Register "red flagging" nine companies located in the People's Republic of China, and one each in Malaysia and the United Arab Emirates. The unverified list includes several electronics and communications companies.
The BIS conducts pre-license checks (PLC) and post shipment verifications (PSV) on certain export transactions. The notice in the Federal Register lists 11 companies that were parties to past transactions where PLCs or PSVs could not be conducted for reasons outside the control of the U.S. The notice "advises exporters that the involvement of a listed person as a party to a proposed transaction constitutes a ``red flag创 as described in the guidance set forth in Supplement No. 3 to 15 CFR part 732. Under that guidance, the ``red flag创 requires heightened scrutiny by the exporter before proceeding with a transaction in which a listed person is a party."
The notice is effective as of June 14, 2002. See, Federal Register, June 14, 2002, Vol. 67, No. 115, at Pages 40910 - 40911. See also, BIS release.
Rep. Boehlert Says Research Funding is Out of Whack
6/14. Rep. Sherwood Boehlert (R-NY), the Chairman of the House Science Committee, gave a speech to the National Society of Professional Engineers in which he stated that the relative levels of funding for the National Science Foundation (NSF) and National Institutes of Health (NIH) are "out of whack". The NIH, which does medical research, receives far more funding that the NSF, which funds research and education for information technology, nanotechnology, the physical sciences and engineering.
"But the Congress has come to recognize that our national security and our future economic success rest on the investments in research and development (R&D) we make today. And there's a growing recognition that our R&D investments of late have excessively favored the biomedical field," said Rep. Boehlert. "But improving health care is not the only challenge the nation faces, and even health research depends on advances in other fields. Yet just the proposed increase in the NIH budget for next year is larger than the entire proposed research budget of the National Science Foundation. That indicates things may have gotten a little out of whack. We have to ensure that the physical sciences and engineering are also moving forward."
For FY 2002, the NSF has $4.6 Billion in funding. See, OMB document. NIH has $23.6 Billion. See, NIH document.
Rep. Boehlert was speaking about HR 4664, the Investing in America's Future Act, a bill to authorize appropriations for the National Science Foundation. The House passed it by a vote of 397-25 on June 5. See, Roll Call No. 212. It has yet to pass the Senate. The Senate Health, Education, Labor, and Pensions Committee is scheduled to hold a hearing on proposed legislation authorizing funds for the NSF. Moreover, the Appropriations Committees would still need to appropriate the funds authorized by HR 4664.
HR 4664 would authorize the appropriation of $5.5 Billion for FY 2003 for the NSF. Included in the funding authorization is $704 Million for networking and information technology research, $238 Million for the Nanoscale Science and Engineering Priority Area, and $60 Million for the Mathematical Sciences Priority Area.
The bill authorizes an increase in funding for the NSF of 15% in FY 2003, and similar increases in future years. If the funding authorized by this bill were actually appropriated, it would double the NSF's budget within five years.
He also repeated words from his speech in the House on June 5. "When we look at the new fields of science and engineering that will boost our economy in this new century, fields like nanotechnology, where do we turn to ensure that our nation抯 researchers stay at the cutting edge? NSF. When we look at the field of information technology, which facilitates every activity in today's economy, where do we turn to ensure that the U.S. remains at the cutting edge? NSF. When we consider our ever more urgent need for a highly skilled, technologically literate workforce, where do we turn to ensure that our education system from kindergarten through post graduate work is preparing the people we need? NSF."
Rep. Boehlert also spoke about a second bill pending in the Congress, HR 3130, the Undergraduate Science, Mathematics, Engineering, and Technology Education Improvement Act, which was approved by the House Science Committee on May 22.
He stated that "To counter the various forces that conspire to turn students away from math, science and engineering, we've put together a bill to encourage colleges and universities to put more of their resources into undergraduate education. The bill is called the Tech Talent Act, and I've introduced it in the House, and Joe Lieberman has introduced it in the Senate."
He added that "The bill has been strongly endorsed by high tech companies, which are struggling to find well trained Americans to work in their businesses."
He explained that "Under the bill, NSF would award grants to colleges and universities that propose ways to improve their undergraduate education programs in math, the physical sciences or engineering, and in return the institution must increase the number of graduating majors in those fields by a specified number that they select."
Bush Addresses Trade Promotion Authority
6/14. President Bush gave a speech at a Rick Perry for Governor of Texas reception in Houston, Texas. He stated that "This Congress needs to give me a trade bill so I can open up markets for Texas agricultural products, for high tech products. Listen, if you're good at something -- and we're good at a lot of things when it comes to our economy -- we ought to be selling them to people around the world. This country ought to be feeding the people of the world. I need trade promotion authority from the United States Congress for the good of the job creation."
People and Appointments
6/14. President Bush designated Deanna Okun as Chairman of the U.S. International Trade Commission (USITC) for a two year term. Okun has been Vice Chairman since 1999. Before that, she was counsel for international affairs to Sen. Frank Murkowski (R-AK). President Bush designated Jennifer Hillman as Vice Chairman of the USITC. Hillman has been a Commissioner of the USITC since 1998. Before that, she was General Counsel for the U.S. Trade Representative. See, White House release.
More News
6/14. President Bush signed S 1372, the Export Import Bank Reauthorization Act of 2002, a bill that extends the operations of the Export Import Bank through September 2006. See, White House release and release of House Financial Services Committee.
6/14. The U.S. Patent and Trademark Office (USPTO) published the June 2002 issue of the USPTO Pulse in its web site.
6/14. The Federal Bureau of Investigation (FBI) announced that it has added the one millionth DNA profile to the National DNA Index System (NDIS). See, FBI release.
House Judiciary Committee Approves Homeland Security Information Sharing Act
6/13. The House Judiciary Committee amended and approved HR 4598, the Homeland Security Information Sharing Act, a bill to provide for the sharing of homeland security information by Federal intelligence and law enforcement agencies with state and local entities.
The bills provides that "The President shall prescribe procedures under which relevant Federal agencies determine (A) whether, how, and to what extent homeland security information may be shared with appropriate State and local personnel, and with which such personnel may it be shared; and (B) to the extent such information is in classified form, whether, how, and to what extent to declassify (or remove classified information from, as appropriate) such information, and with which such personnel may it be shared after such declassification (or removal)."
The Committee approved an amendment offered by Rep. Mel Watt (D-NC), as amended by an amendment offered by Rep. Mark Green (R-WI). This amendment (as amended) provides that "the procedures prescribed ... shall establish conditions on the use of information shared ... (A) to limit the redissemination of such information; (B) to ensure that such information is not used for an unauthorized purpose; (C) to ensure the security and confidentiality of such information; (D) to protect the constitutional rights of any individuals who are subjects of such information; and (E) to provide data integrity through timely removal and destruction of obsolete or erroneous names and information."
The Committee also approved an amendment offered by Rep. Anthony Weiner (D-NY) that would allow, but not require, the sharing of information acquired in federal grand jury investigations. Rep. William Delahunt (D-MA) opposed the amendment. He stated that "we are diminishing the concept of what a grand jury is about", and that this provision "is ripe for abuse". Rep. Weiner pointed out that there are already civil liabilities for improper release.
House Judiciary Committee Debates Internet Gambling
6/13. The House Judiciary Committee resumed, but did not complete, its mark up of HR 3215, the Combating Illegal Gambling Reform and Modernization Act. Rep. Bob Goodlatte (R-VA) offered an amendment in the nature of a substitute. The Committee debated and narrowly rejected an amendment to Rep. Goodlatte's amendment offered by Rep. Robert Wexler (D-FL) regarding jai alai and dog racing. Then, the Committee recessed for the weekend.
The bill was introduced on November 1, 2001. See, bill as introduced [PDF]. It is sponsored by Rep. Goodlatte and 155 other Members of Congress. The Subcommittee on Crime amended and approved the bill on March 11. (See, TLJ Daily E-Mail Alert No. 387, March 13, 2002.) On May 8, the full Judiciary Committee began its mark up, but only heard opening statements. The Committee has repeatedly noticed, and then postponed, meetings to mark up this bill. No date has been set for a continuation of the mark up.
Rep. Goodlatte stated at the June 13 meeting that the bill "is needed to update a 1961 law that is badly out of date, and to give law enforcement new tools to combat the 2000 offshore sites that are in everybody's living room and den, and are available for a multitude of different types of gambling."
Rep. Barney Frank (D-MA) spoke in opposition. He said, "if you don't like it, don't do it." He also said that "I am going to vote for any amendment that lets more people gamble; and then I am going to vote against the bill."
The Committee rejected by a vote of 15 to 15 an amendment offered by Rep. Wexlar to Rep. Goodlatte's amendment in the nature of a substitute. The Wexler amendment provided an exception pertaining to jai alai and dog racing. Both are lawful businesses in the state of Florida, which Rep. Wexler represents. Had the amendment been adopted, it might have further encouraged other interests to seek their own carve outs in the bill.
The vote on the Wexler amendment broke down mostly on party lines. All 15 "no" votes came from Republicans. 12 of the "yes" votes came from Democrats. 3 Republicans also voted "yes": Sensenbrenner, Hyde, and Coble. Rep. Adam Schiff (D-CA), a former federal prosecutor, voted "pass". Several Democrats who had been present earlier in the meeting, were absent for this vote.
Rep. Goodlatte stated after the hearing that he is confident that the bill will be approved by the Committee. In the 106th Congress, the Judiciary Committee approved another Internet gambling bill sponsored by Rep. Goodlatte. The full House then considered it under a suspension of the rules, meaning that it could not be amended, and required a 2/3 majority for passage. It fell just short of a 2/3 majority. The Senate has also twice passed Internet gambling bills. Sen. Jon Kyl (R-AZ) has led Senate efforts on this issue.
Expansion of the Wire Act. HR 3215 would amend 18 U.S.C. Ё 1081 and 1084, which contain the definitions and prohibition, respectively, of the Wire Act. The Wire Act currently criminalizes the use of "wire communications facilities" in interstate commerce for gambling. The Wire Act does not ban gambling. This is a matter of state law. HR 3215 expands the prohibition to cover all communications between states or with foreign countries. It maintains the principle that gambling is otherwise a matter of state law. Hence, under HR 3215, use of the Internet for gambling purposes would become illegal (if interstate or foreign).
The criminal prohibition of the Wire Act, 18 U.S.C. Ё 1084, currently provides that "Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers ... shall be fined under this title or imprisoned not more than two years, or both." Since the current statute affects only wire communication facilities, and some Internet communications do not involve wires, it leaves open the possibility that some Internet gambling may not be illegal under the Wire Act.
HR 3215 provides that "whoever, being engaged in a gambling business, knowingly (1) for the transmission in interstate or foreign commerce ..." or between the U.S. and abroad "... of bets or wagers ... shall be fined under this title or imprisoned not more than five years, or both." Hence, it pertains to all communications, not just wire communications. Moreover, the maximum penalty for violation is increased from 2 to 5 years.
Also, HR 3215 would amend 18 U.S.C. 1081, which currently defines ''wire communication facility'' as "any and all instrumentalities, personnel, and services (among other things, the receipt, forwarding, or delivery of communications) used or useful in the transmission of writings, signs, pictures, and sounds of all kinds by aid of wire, cable, or other like connection between the points of origin and reception of such transmission." As amended, it would provide that "communications facility" means "any and all instrumentalities, personnel, and services (among other things, the receipt, forwarding, or delivery of communications) used or useful in the transmission of writings, signs, pictures, and sounds of all kinds by aid of wire, cable, satellite, microwave, or other like connection (whether fixed or mobile) between the points of origin and reception of such transmission."
Skill Versus Chance. On March 12, the Crime Subcommittee amended the bill's definition of "bets or wagers". The language of this amendment, which is also in the June 13 version, amends the Wire Act to provide that "bets or wagers" is "the staking or risking by any person of something of value upon the outcome of a contest of others, a sporting event, or a game predominantly subject to chance, not skill, upon an agreement or understanding that the person or another person will receive something of greater value than the amount staked or risked in the event of a certain outcome". (Emphasis added.) The words "not skill" have been added to the language of the bill as introduced. Hence, games based on skill, such as fantasy sports leagues, would thus not be covered by the Wire Act.
Illegal Gambling Funding. HR 3215 also criminalizes "the transmission of a communication in interstate or foreign commerce ... which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers". Also, like HR 556, the Unlawful Internet Gambling Funding Prohibition Act, sponsored by Rep. James Leach (R-IA), HR 3215 would prohibit the use of credit, electronic funds transfers, and checks in connection with illegal gambling.
Enforcement. In addition to criminal penalties, HR 3215 would allow federal, state, local, and tribal law enforcement agencies to obtain injunctions against violation of the act. It also provides that "any common carrier, subject to the jurisdiction of the Federal Communications Commission" may be enjoined from providing service to entities in violation of the act, and gives such carriers immunity from suit for discontinuing such service.
Internet Service Providers. The amendment in the nature of a substitute offered June 13 changes the bill on the matter of ISPs, or interactive computer services, as they are called in this bill. The new language is as follows: "Relief granted under paragraph (1) against an interactive computer service (as defined in section 230(f) of the Communications Act of 1934) shall -- (A) be limited to the removal of, or disabling of access to, an online site violating this section, or a hypertext link to an online site violating this section, that resides on a computer server that such service controls or operates; except this limitation shall not apply if the service is violating this section or is in active concert with a person who is violating this section and receives actual notice of the relief; (B) be available only after notice to the interactive computer service and an opportunity for the service to appear are provided; (C) not impose any obligation on an interactive computer service to monitor its service or to affirmatively seek facts indicating activity violating this section; (D) specify the interactive computer service to which it applies; and (E) specifically identify the location of the online site or hypertext link to be removed or access to which is to be disabled."
This is a notice and take down provision, which enables law enforcement authorities to obtain a court order compelling an ISP to take down a gambling web site, and a hyperlink to gambling web site. Previous versions of the bill had language protecting ISPs. What is new about the June 13 version is that ISPs are entitled to notice and an opportunity to appear.
Rep. Goodlatte described this new language at the June 13 meeting. He said that "this change makes clear that injunctions issued against interactive computer services to take down illegal gambling web sites, or web sites containing hypertext links hosted by the ISP, would issue only after notice and a hearing, would specify that the service to which the order applies, and provide enough information so that the interactive computer service could locate the site, or hypertext link. These are the banner ads that you see all over the computer when you go online linking you to these offshore sites. Law enforcement, upon notice and due process would, under this language, be able to, upon an order of the court, require that the links be broken."
State Lotteries. An amendment adopted on March 12 also changed the bill as introduced on the subject of state lotteries. It includes a technical amendment which allows states to operate intrastate Internet lotteries with servers out of state. This language, which is maintained in the June 13 version, is as follows: "Nothing in this section prohibits ... the interstate transmission of information relating to a State-specific lottery between a State or foreign country where such betting or wagering is permitted under Federal, State, tribal, or local law and an out-of-state data center for the purposes of assisting in the operation of such State-specific lottery."
Information Exchanged Between Pari Mutuel Wagering Facilities. The amendment in the nature of a substitute offered on June 13 also contains a new exception in the definitional section. It provides that "The term 慽nformation assisting in the placing of bets or wagers means information knowingly transmitted by an individual in a gambling business for use in placing, receiving, making, or otherwise enabling or facilitating a bet or wager and does not include ... information that is exchanged between or among 1 or more pari-mutuel wagering facilities licensed by the State or approved by the foreign jurisdiction in which the facility is located, and any support services, wherever located, if the information exchanged is used exclusively for the pooling or processing of bets or wagers made by or with the facility or facilities under each State's applicable law."
Rep. Goodlatte offered this explanation. He said that the June 13 version "has a provision that was in the last bill, that was omitted from this bill, dealing with a term called common pool wagering. It is a common practice as a book keeping matter when taking wagers on pari-mutuel contests to include those wagers in a wagering pool established specifically for that contest, and to pay any wagers out of the same pool. The transmission of information in regard to common pools is a purely technical activity. The current Wire Act permits the transmission of information assisting in the placing of bets or wagers on a sporting event or contest from a state where it is legal into a state where it is also legal."
Transfer of Information. The June 13 version of the bill also adds a new paragraph (d) to the 18 U.S.C. 1084 (which contains the criminal prohibition of the Wire Act) regarding the transfer of information. Rep. Goodlatte stated that "To address the concern that authority be restored to the states to control their own borders with the regard to the enforcement of their gambling statutes, a new paragraph (d) was added to the bill which provides that the interstate transmission of bets of wagers is permitted under certain enumerated conditions. This provision, however, does not authorize the transmission of bets or wagers between a state and a foreign country regardless of the legality of such bet or wagering in the foreign country."
Bush Announces Technology Agenda
6/13. President Bush gave a speech to a group of corporate executives in Washington DC in which he addressed a range of technology related issues, including broadband deployment, research and development spending, the R&D tax credit, trade promotion authority, and the Export Administration Act.
The Bush administration also released a document [PDF] titled "Promoting Innovation and Competitiveness: President Bush's Technology Agenda". See also, the White House web site's technology agenda web page.
Trade Promotion Authority. Bush told his audience that "Now, I'd like your help to convince both the members of the Senate and the House to reconcile their differences in the conference committee and get me a trade promotion authority as quickly as possible. And with that trade promotion authority, not only will I work to expand free trade throughout our hemisphere, my attitude is good foreign policy starts with a neighborhood which is democratic, free, prosperous, and strong. But I will work in other parts of the world to open up markets -- markets for high-tech products, markets for our agricultural people. And I'll be aggressive at it. I will. And if I find unfair trade practices, by the way, I'm going to enforce the law, the laws on the books."
The House passed its version of HR 3005, the Bipartisan Trade Promotion Authority Act of 2001, by a roll call vote of 215 to 214, on December 6, 2001. See, TLJ Daily E-Mail Alert No. 323, December 7, 2001. The Senate passed its vastly different bill last month. Differences will have to be worked out by a conference committee.
Export Administration Act. Bush stated that "We're also working to reform the Export Administration Act, known as the EAA. We've got a bill out of the Senate; we're working to get a bill out of the House. And I want you all to understand -- you've probably been told this already, but I want to tell you what else we've done. We've raised the control limits for computer systems, and I'm eliminating outmoded controls on computer chips. The idea is to understand the difference between national security and free trade. And I think we've brought some common sense to this issue."
S 149, the Export Administration Act, sponsored by Sen. Mike Enzi (R-WY), was passed by the Senate on September 6, 2001 by a vote of 85 to 14. The Bush administration supports this bill. A much different bill was reported by the House International Relations Committee last summer. There has been no action since September 11 on these bills.
R&D Spending. The President stated that "We're also spending a lot of money on research and development, which I believe is a legitimate federal function. We spend a lot of money at the NIH, which is good for health care in America, and we're spending over about $100 billion in research and development for your fields."
R&D Tax Credit. Bush also said that "one of the things I hope Congress joins me on is making the R&D tax credit permanent, as well. You see, research has made a huge difference for product development." The Congress has been passing only temporary extensions of the R&D tax credit.
Technology and War. Bush stated that "It is fortuitous that America is on the cutting edge of high technology at this time in history, because of the nature of the war. In the old days, there would be columns of tanks and artillery moving here and airplanes flying there. And now we're facing sophisticated killers who hide in caves, who communicate in shadowy ways, and who are plenty lethal. And we're going to win the war because of our resolve and our determination and our love for freedom. But we're also going to win the war, thanks to the incredible technology and technological breakthroughs that we have achieved here in America."
Technology and Intelligence Gathering. Bush said that "I can envision a lot of new technologies that enable us to communicate with first responders, and to be able to communicate between the federal and state and local governments. As you probably have read, we've had a -- we can do a better job of gathering intelligence and sharing intelligence between different agencies of our government. All of this is going to require, by the way, in order to do so, new technologies within the FBI and the CIA, and the ability to communicate with each other, and the ability to filter out what information should go from one agency to the next, all aimed at protecting the homeland."
Bush Talks About Broadband Deployment
6/13. President Bush also spoke in vague terms about broadband deployment in his June 13 speech to corporate executives. He stated that "This country must be aggressive about the expansion of broadband". He reiterated his opposition to "access taxes on the Internet". He also said he is working to "eliminate hurdles and barriers to get broadband implemented". However, he did not identify any of these "hurdles or barriers", or what he is doing to eliminate them.
The Bush administration also addressed broadband in its 11 page agenda [PDF]. It lists numerous things in sections on broadband deployment, such as reforming education, reducing taxes, extending the moratorium on Internet access taxes, and promoting e-government. However, none of the cited initiatives are broadband specific.
President Bush did not propose any legislation. Nor did he state his position on any of the many pending broadband related bills pending in the House and the Senate.
Otherwise, Bush said that he is leaving broadband related policy to the Federal Communications Commission (FCC), a telecommunications regulatory agency. He stated that "I'm confident that the chairman and the board is focusing on policies that will bring high speed Internet service, will create competition, will keep the consumers in mind, but to understand the -- kind of the economic vitality that will occur when broadband is more fully accessible."
The following excerpt from Bush's speech is everything that he had to say pertaining to broadband:

"And so, which really leads me to an interesting question that I know is on your mind, and that is broadband technology. This country must be aggressive about the expansion of broadband; we have to. I used to travel around our state of Texas a lot. I saw some really innovative health programs. I remember going to the Texas Tech Medical Center, and seeing a fellow have his ear examined by a nurse practitioner in I think it was Alpine, Texas. And the picture was clear and the specialist was able to diagnose the disease.

We have virtual classrooms in Texas, virtual school districts in Texas, where we've hooked up a fairly wealthy school district with rural or poor school districts. It made a huge difference. It would have been a heck of a lot better if there had been broadband technology, however, to make the process move a lot quicker.

I get -- when I'm down at Crawford, I'm in constant contact with our administration. We've got secure teleconferencing capacity there. And it's pretty good. It can be better. It can be more real-time. It's an important part of life and it's time for us to be -- time for us to move, move with an agenda.

Hopefully, we're doing a pretty good job of working to eliminate hurdles and barriers to get broadband implemented. I've fought off -- or worked with Congress, is a better way to put it -- to prevent access taxes on the Internet. It ought to be a tax-free environment in order to encourage use. And, of course, a lot of the action is going to come through the FCC. I know that, you know that. And I'm confident that the chairman and the board is focusing on policies that will bring high speed Internet service, will create competition, will keep the consumers in mind, but to understand the -- kind of the economic vitality that will occur when broadband is more fully accessible."
Several groups praised Bush's comments regarding broadband. Jeffrey Eisenach of the Progress and Freedom Foundation (PFF) stated in a release that "President Bush left no doubt that FCC Chairman Michael Powell has his full support to move ahead on broadband deregulation ... Just as the Administration lent its support to the FCC's decision to lift ownership caps on wireless spectrum, the President has now personally given the green light to move forward on broadband."
Robert Cresanti of the Business Software Alliance (BSA) stated in a release the the "BSA commends President Bush's efforts in bringing the issues of broadband deployment, international trade and research and development funding to the fore ... The technology industry serves as an engine of growth for the U.S. economy, and it follows that the administration would make the health of this industry a priority. Policies that promote a safe and legal online world are policies that enhance the U.S. economy's expansion."
Walter McCormick, P/CEO of the U.S. Telecom Association (USTA) stated release that "We are delighted by the President's comments, which put him squarely on the side of the broad majority who want to see facilities based broadband deployment, the removal of hurdles to investment, and who support the leadership and vision of FCC Chairman Powell in the important broadband policy initiatives that he has underway." Actually, the President did not reference "facilities based" competition or deployment in either his speech or his 11 page agenda.
Similarly, Michael Boland, SVP for Legislative Affairs at Verizon, stated in a release that "There's a growing demand for a greater supply of broadband. Today the president joined that chorus and we're thrilled. We, too, have confidence that Michael Powell and the FCC commissioners will adopt the right policies to make billion dollar investments in broadband make sense again. The House has spoken, the president has spoken, and now it's time for the Senate to act."
Several Groups Criticize Bush for Lack of Digital Divide Policy
6/13. Several groups criticized the President's meeting with, and speech to, corporate executives on June 13. The Consumer Federation of America (CFA), Consumers Union (CU) and Leadership Conference on Civil Rights (LCCR) stated in a release that "It has become increasingly clear that the Bush Administration is abandoning the federal government's decade long commitment to bridging the digital divide. After a year of public speculation over whether the White House was committed to expanding information age opportunity to all communities, the Administration has finally broken its silence and the news is not good."
These groups also stated that "the Bush Administration proposed eliminating two critically important community technology programs in the 2003 budget: the Technology Opportunities Program (TOP) administered by the Department of Commerce; and the Community Technology Center (CTC) initiative, a competitive grant program administered by the Department of Education."
"Now more than ever, federal leadership is crucial to ensure that urban, rural, and Indian tribal land residents have access to technology and can acquire the high tech job skills necessary to compete in the 21st Century economy," said Wade Henderson, Executive Director of the LCCR. " This will not happen ... with the public interest community being excluded from key meetings at the White House."
11th Circuit Rules in Pole Attachments Act Case
6/13. The U.S. Court of Appeals (11thCir) issued its opinion [MS Word] in Southern Company v. FCC, a challenge to the Federal Communications Commission's (FCC) rules implementing the 1996 amendments to the Pole Attachments Act. The Appeals Court ruled on several consolidated petitions for review brought by electric utility companies. The Appeals Court granted the petitions for review of two FCC determinations: that the Pole Attachments Act's coverage extends to electric transmission facilities, as opposed to merely "any pole, duct, conduit, or right of way", and that utilities must expand the capacity of their facilities to ensure that attaching entities have access to those facilities.
However, the Appeals Court rejected the petitions for review of four other determinations of the FCC: (1) "that utilities may not reserve available capacity on their facilities for future utility related use unless the reservation is made pursuant to a bona fide development plan, and that utilities must permit use of such reserved space by third-party attachers until the utility has an ``actual need创 for the space", (2) "that if the utilities use some of their poles, ducts conduits, and rights of way for wire communications services, the Act grants third party attachers access to all of the utilities' poles, ducts, conduits, or rights of way", (3) "that the utilities may not limit those who place and maintain attachments on their poles to their own specially trained employees or contractors" and (4) "that the utilities must comply with a series of guidelines regarding notification to third party attachers in the event a pole needs to be modified, and must bear certain costs associated with pole modifications".
The National Cable and Telecommunications Association (NCTA) commented on the ruling. Dan Brenner, SVP for Law and Regulatory Policy, stated that "We're pleased that the court of appeals broadly upheld the FCC in this case. The court rejected the utilities' numerous schemes to obstruct cable operators' access to utility poles. This decision bodes well for the efforts by cable operators to bring consumers new products and services." See, NCTA release.
Qwest Files Long Distance Applications
6/13. Qwest Communications filed Section 271 applications with the Federal Communications Commission (FCC) to provide in region interLATA services in the states of Colorado, Idaho, Iowa, Nebraska and North Dakota. Qwest also announced that "Over the summer and fall, Qwest plans to file similar applications for long distance authority in the nine other Western states where it provides local communications." See, Qwest release.
Jim Lewis, WorldCom's SVP for Public Policy, stated in a release that "Qwest is asking far too much, way too soon. The fact is tests show Qwest's region wide local phone systems are not ready to perform at commercial volumes." He also asserted that Qwest charges its competitors "exorbitant rates" to access its phone network. He concluded that "It's now up to the Department of Justice and Federal Communications Commission to force Qwest to fix its problems before it gets into long distance."
SEC's Pitt Speaks to Financial Writers
6/13. Securities and Exchange Commission (SEC) Chairman Harvey Pitt gave a speech in New York City to the New York Financial Writers Association. He stated that "I hadn't realized this when I took the job, but there really are a lot of critics and skeptics out there, shooting at us! And rulemaking doesn't make for the sexiest news stories. But, bear with us. We are constrained by rules dating back to the days of manual typewriters and carbon paper, while you and the rest of the world are on computers, cell phones and BlackBerrys!"
He added that "I am grateful to the financial reporters who ``invest创 the time to understand that the rules we propose -- the faster disclosure rules we proposed yesterday, the new accounting regulatory regime we will propose a week from today, and the myriad of additional rules we have been churning out at a breakneck pace -- are all aimed at stopping the abuses that festered over the past five or ten years. Reporting on the rules, even if unglamorous, is an important way investor confidence legitimately can be raised."
People and Appointments
6/13. Thomas Horton was appointed Senior EVP and CFO of AT&T. He was previously SVP and CFO of  AMR Corporation, the parent company of American Airlines. He succeeds Charles Noski as CFO. Noski will leave AT&T when its merger with Comcast is complete. See, AT&T release.
6/13. Sen. Charles Grassley (R-IA), the ranking Republican on the Senate Finance Committee, named Everett Eissenstat Chief International Trade Counsel. He has been International Trade Counsel since March 2001. The Senate Finance Committee's jurisdiction includes trade promotion authority, trade agreements, and oversight of the Office of the U.S. Trade Representative (USTR). Eissenstat was previously Legislative Director for Rep. Jim Kolbe (R-AZ). Before that, he was a Special Assistant in the Office of the Western Hemisphere at the USTR. And before that, he was an attorney in the law firm of Dixon and Dixon in Dallas, Texas.
More News
6/13. The Federal Trade Commission's (FTC) Marian Bruno gave a speech in New York City titled "Mergers & Acquisitions: Getting Your Deal Through the New Antitrust Climate". She addressed the history of antitrust enforcement under the Hart Scott Rodino Act. She also spoke at length about gun jumping and the Computer Associates case. Bruno is Assistant Director of the Premerger Notification Office in the FTC's Bureau of Competition.
Senate Subcommittee Holds Hearing on ICANN
6/12. The Senate Commerce Committee's Subcommittee on Science, Technology, and Space held a hearing on governance of the Internet Corporations for Assigned Names and Numbers (ICANN), the non-profit corporation created in 1998 that manages the system of Internet domain names and addresses, pursuant to a Memorandum of Understanding (MOU) with the Department of Commerce (DOC). This MOU is up for renewal. It is set to expire on September 30, 2002.
Sen. Ron Wyden (R-OR) presided. Sen. Conrad Burns (R-MT) and Sen. George Allen (R-VA) also participated throughout the two hour hearing. All three were in general agreement that there is dissatisfaction with the performance of the ICANN, that ICANN needs to narrow its focus, and that the Congress needs to exercise closer oversight. However, neither they, nor any of the witnesses, advocated replacing ICANN.
Sen. Wyden stated that "there is a widespread feeling that changes are needed". He added that "To be successful, ICANN needs a clearly defined mission. It needs sufficient resources to fulfill that mission. Its needs an organizational structure that ensures input from a wide range of voices and interests. And it needs processes that are transparent and fair, to earn the trust and confidence of the broad Internet community."
Sen. Allen stated "there has been expressed concerns to me, and many of these will be developed and addressed during this hearing this afternoon, that as a private corporation ICANN is attempting to become the Internet's governing body, or global regulator. There have been concerns expressed about how the selection process goes forward in the new generic top level domains".
Sen. Burns stated that "Congress does have a critical oversight role to play". He also stated that "ICANN is an experiment that has to succeed. And, if it is to succeed, serious structural reform must be undertaken. To accomplish this aim, I am seriously considering legislation that will condition the extension of the Memorandum of Understanding between the Department of Commerce and ICANN, on reform efforts. For ICANN to function effectively in the future, it must narrow its mission, to administrative, rather than regulatory, matters, and implement transparency and due process in its operations." See, excerpt from Sen. Burns' opening statement, below.
Nancy Victory testified. She is the Director of the National Telecommunications and Information Administration (NTIA), the unit of the DOC responsible for matters pertaining to the Internet domain name system (DNS) and the MOU with ICANN. She stated in her prepared testimony that the DOC "continues to support the goal of private sector management of the DNS." She added that "While generally supportive of private sector management, some stakeholders have urged abandonment of ICANN in favor of a new private sector entity. At this time, the Department considers this approach premature."
She then elaborated about reforms that ICANN should make, including narrowing its focus. She said that "it is critical for ICANN reform to take place in a timely manner. If it is going to be effective, ICANN must instill confidence and legitimacy in its operations and focus solely on the business of DNS management. The September termination date of the MOU will be a key time for the Department to determine whether ICANN is on track for doing so. What will we be looking for in making this analysis? In general, we need to see that ICANN is on track to be professionally run and managed, in a stable manner, for the long term."
Victory elaborated that "ICANN's mission and responsibilities need to be clarified. Understanding its core functions, and formulating its structure and process accordingly, is key to any organization's success. Further, especially for a new, experimental organization, a limited, rather than an expansive, view of its functions is prudent. The Department believes ICANN's efforts should be focused around coordination of the core technical and directly related policy areas initially set forth in the Department's 1998 Statement of Policy. We agree with the majority of stakeholders that ICANN's mission must ``stay narrow.创 ICANN is not, and should not become, the ``government of the Internet.创 "
She also stated that "ICANN's processes must be revised to provide transparency and accountability for decisionmaking" and that "ICANN's processes must be designed to ensure all Internet stakeholders have the opportunity to get a fair hearing."
Alan Davidson of the Center for Democracy and Technology (CDT) offered blunt criticism of ICANN, but supported its underlying concept. He stated in his prepared testimony that "Today ICANN is at a crossroads, and in our view it is failing. Its authority over central naming and numbering functions gives it both a public trust and an enormous potential to exercise power over Internet activities. Its original conception is sound. Yet three years into its existence ICANN has not yet lived up to that original vision in key areas."
He continued that "Its current efforts appear likely to create a global Internet regulator with increasing powers, reduced public accountability, and a diminishing voice for the public's interests in its stewardship of public resources. ICANN is in need of substantial reform if it is to succeed."
Davidson also stated that "While ICANN was originally conceived as a narrow technical manager, it has increasingly acted as a broader policy maker, demanding massive and detailed contracts with registries, making subjective and at times arbitrary decisions, and reducing trust that there are meaningful limits on its powers."
The Subcommittee also heard testimony from Stuart Lynn, the President of the ICANN. He stated that "ICANN has serious problems to address", but that it is open, transparent and accountable, and that its "reform efforts are well on track". See, prepared testimony [PDF].
See also, prepared testimony [PDF] of Peter Guerrero of the Congress' General Accounting Office (GAO), prepared testimony [PDF] of Karl Auerbach, a Member of the ICANN Board of Directors, prepared testimony [PDF] of Roger Cochetti of VeriSign, and prepared testimony [PDF] Cameron Powell of SnapNames.
Extended Excerpt From Opening Statement of Sen. Burns
6/12. Sen. Conrad Burns (R-MT) had the following to say at the Senate Commerce Committee's Subcommittee on Science, Technology, and Space hearing on governance of the Internet Corporations for Assigned Names and Numbers (ICANN):
"Congress does have a critical oversight role to play in these issues of Internet infrastructure and governance. The Internet has become so important to our nation's well being that we in Congress need to become better informed about its operations. It is particularly true in critical areas, such as the domain name system, which is highly technical in nature.

The critical issue which concerns this Subcommittee is the deregulation of the control over the domain name system from the Department of Commerce to ICANN. The formation of ICANN originated with the so called green and white papers of the Clinton administration back in 1998 that proposed the privatization of the domain name system. The White Paper called for the creation of a ``new non profit corporation formed by the private sector Internet stock holders to administer policy for Internet name and address system创 and declared that the U.S. government, and this is a quote, should end its role in the Internet number and name address system, unquote. Soon thereafter, ICANN was created and the Commerce Department began to delegate certain parts of the Internet domain names system to it.

The eyes of many critics -- this delegation of authority has happened way, far too swiftly. When ICANN is supposed to function by consensus of Internet community, its operations have often been controversial, and they have been shrouded in mystery.

Nearly a year and a half ago when I convened a hearing on ICANN governance, in my former role as Chairman of the Communications Subcommittee, we heard from numerous witnesses about serious and troubling concerns about the very legitimacy of ICANN. However, many of these criticisms were tempered with the qualification that ICANN was still an experiment. We are now nearly four years into the experiment.

However, we must make some hard judgments right now on where we stand. After last year's hearing, given my numerous concerns about ICANN, I requested a comprehensive GAO report on the organization's legitimacy, and also on its performance. I was particularly troubled that while ICANN was initially created to address purely technical concerns associated with maintaining the domain name system, it had transformed into a policy making body. However, it had none of the due process requirements placed on agencies given policy making power.

After examining the GAO's testimony, I am convinced that, more than ever, that ICANN is an experiment that has to succeed. And, if it is to succeed, serious structural reform must be undertaken. To accomplish this aim, I am seriously considering legislation that will condition the extension of the Memorandum of Understanding between the Department of Commerce and ICANN, on reform efforts. For ICANN to function effectively in the future, it must narrow its mission, to administrative, rather than regulatory, matters, and implement transparency and due process in its operations.

The status quo simply is not acceptable. And, nor is it sustainable. Simply put, ICANN was never meant to be a super national regulatory body. Now, the issues are complicated. But the stakes are high. We tune in, and click in, to the Internet, and it works. We want to make sure it continues to do that around the world."
City Coalition Submits Comment to FCC on Classification of Cable Modem Service
6/12. The City Coalition submitted a comment [38 pages in PDF] to the Federal Communications Commission (FCC) in its proceedings pertaining to the classification of cable modem service. It wrote that cable modem service should be classified as a cable service, and hence, be subject to local regulation.
The FCC released its Declaratory Ruling and Notice of Proposed Rulemaking [PDF] on March 15 addressing the legal classification and the appropriate regulatory framework for broadband access to the Internet over cable system facilities. See also, FCC release.
The FCC concluded "that cable modem service, as it is currently offered, is properly classified as an interstate information service, not as a cable service, and that there is no separate offering of telecommunications service. In addition, we initiate a rulemaking proceeding to determine the scope of the Commission's jurisdiction to regulate cable modem service and whether (and, if so, how) cable modem service should be regulated under the law ..."
The DR & NPRM further states that "The Communications Act does not clearly indicate how cable modem service should be classified or regulated", but nevertheless "conclude[s] that cable modem service as currently provided is an interstate information service, not a cable service, and that there is no separate telecommunications service offering to subscribers or ISPs." This is GN Docket No. 00-185 and CS Docket No. 02-52.
The City Coalition wrote in its comment that "Continued supervision of cable modem service by local governments is important to promote competition and open access. Because cable modem service provides more attractive features than its one viable competitor, digital subscriber line (``DSL创) service, it will soon develop into a natural monopoly. Without the oversight of a local regulatory body, many opportunities will exist for the cable modem operator to engage in anticompetitive behavior."
It also wrote that the FCC "should not preempt the local government's authority to impose open access requirements on the provision of cable modem service."
The City Coalition also addressed rights of way in its comment. "Previously charged franchise fees were assessed by the local government under its authority to charge a fee for use of the public ROW. The authority of local governments to assess such a fee is determined under state law. The Commission should not adjudicate the validity of each local government's exercise of its independent authority. Disputes regarding the scope of such authority should be determined by state courts which are more familiar with the extent of local power."
District Court Denies Microsoft's Motion to Dismiss Non Settling States Demands
6/12. The U.S. District Court (DC) issued a Memorandum Opinion [PDF] in New York v. Microsoft, denying Microsoft's motion to dismiss the non-settling states demand for equitable relief.
Microsoft argued in its February 26, 2002, memorandum in support of its motion to dismiss that "the non-settling States are limited to seeking redress for state specific injuries caused by Microsoft's conduct. They cannot displace the United States in its role of establishing national competition policy."
Clarification Re Vote on North Dakota Privacy Bill
6/12. The TLJ Daily E-Mail Alert No. 449 (June 12, 2002) stated that "The state of North Dakota held a primary election on June 11. The voters approved Ballot Item No. 2 [PDF], which pertains to the disclosure of customer information by financial institutions, by a vote of 69,802 to 25,737."
The North Dakota legislature previously passed Senate Bill 2191 [PDF], which relates "to disclosure of financial information by financial institutions and notification of privacy policies". Ballot Item No. 2 asked voters whether the bill should be upheld or repealed. The "no" votes, to "repeal" the bill, were in the majority. The "yes" votes, to "uphold" the bill, were in the minority. Also, the vote of 69,802 to 25,737 was a preliminary vote total. The vote total as of early on June 13 is 86,218 voting "no" and 33,196 voting "yes". Hence, the law was repealed. See, elections results.
People and Appointments
6/12. America Online named John Buckley Executive Vice President for Corporate Communications, effective July 8. He replaces Ann Brackbill, who was named Vice President, AOL Time Warner, reporting to Executive Vice President Kenneth Lerer. See, AOL release.
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6/12. The Federal Communications Commission (FCC) announced that it will hold a meeting on June 21 to receive input from industry and other affected parties on proposals to reform the FCC's universal service contribution methodology. See, notice [PDF].
6/12. The Agriculture Department's Rural Utilities Service (RUS) announced that it will hold a meeting to receive public input on "the challenges of deploying broadband services to rural America, the successes, the role of competition in providing access to rural areas". See, notice in Federal Register, June 12, 2002, Vol. 67, No. 113, at Pages 40268 - 40269.
6/12. The Federal Election Commission (FEC) published in its web site a copy of a Request for Advisory Opinion [38 pages in PDF] from Careau & Co. and Mohre Communications regarding the application of the Federal Election Campaign Act (FECA) to the sale and use of ISP services for Internet based political fundraising to make federal contributions.
6/12. The Securities and Exchange Commission (SEC) announced that it has initiated a rule making proceeding to adopt rules that would require a company's principal executive officer and principal financial officer to certify the contents of the company's quarterly and annual reports. Public comment on the proposed rules will be due within 60 days after publication in the Federal Register. See, SEC release.
6/12. The Federal Bureau of Investigation's (FBI) National Infrastructure Protection Center (NIPC), the Small Business Administration (SBA), and the National Institute of Standards and Technology (NIST) announced that they signed an agreement to provide assistance to small businesses pertaining to computer and information security. This assistance includes workshops in Washington DC (July 11), San Francisco (August 2), and Chicago (September 26). See, NIPC release.
6/12. Secretary of Commerce Donald Evans gave a speech at an awards banquet in Washington DC in which he addressed R&D spending. He stated that "In our post-9/11 world, technology's role is more important than ever. It is no less than central to our nation's economic security, national security and homeland security. That's why President Bush has called for an unprecedented federal investment in research and development in next year's budget -- a record-breaking $111.8 billion, up 8 percent from 2002. This is the first time in history that a President will have requested more than $100 billion for R&D."
DC Circuit Denies Petition for Review in Echostar v. FCC
6/11. The U.S. Court of Appeals (DCCir) issued its opinion in EchoStar v. FCC. EchoStar is a direct broadcast satellite (DBS) television service provider. Comcast is cable television service provider. Comcast refused to sell to EchoStar the right to carry Comcast SportsNet, a variety of sport programming, including games of several Philadelphia sports teams. EchoStar filed a program access complaint with the Federal Communications Commission (FCC) under to 47 U.S.C. 548. The FCC denied the complaint. EchoStar filed this petition for review, which the Court of Appeals denied.
9th Circuit Issues Order Supplementing Opinion in Thornton v. McClatchy
6/11. The U.S. Court of Appeals (9thCir) issued its Order Supplementing Opinion [PDF] in Thornton v. McClatchy, affirming its original opinion [PDF] that repetitive stress injuries that limit one's ability to use a computer keyboard do not constitute a disability within the meaning of the Americans with Disabilities Act (ADA).
The Appeals Court had stayed the mandate of this case pending resolution of the Supreme Court's decision in Toyota Motor Mfg., Kentucky, Inc. v. Williams, 122 S. Ct. 681 (2002). The Appeals Court affirmed, but clarified its original opinion, issued on August 15, 2001. See also, 261 F.3d 789 (9th Cir. 2001).
Facts. Thornton worked for the Fresno Bee, a McClatchy newspaper, as a writer. This required her to work with a keyboard. She suffered from work related repetitive stress disorder and could not operate a keyboard or write by hand for more than brief periods. McClatchy concluded that she could not perform her job, and terminated her employment.
District Court. Thornton filed a complaint in the U.S. District Court (EDCal) against McClatchy alleging violation of the ADA and the California Fair Employment and Housing Act for terminating her on the basis of disability. The District Court granted McClatchy summary judgment on the grounds that she was not disabled.
Court of Appeals. The Appeals Court affirmed the summary judgment on the ADA claim. It wrote in its original opinion that "Thornton was able to perform a wide range of manual tasks, including grocery shopping, driving, making beds, doing laundry, and dressing herself. Her inability to type and write for extended periods of time is not sufficient to outweigh the large number of manual tasks that she can perform. The ADA requires a "substantial limitation" in performing manual tasks ..." However, it reversed on the state law claim. Judge Hawkins wrote the opinion of the Court, in which Judge Kozinski joined.
The June 11 order was written by Judge Kozinsky. Judge Berzon dissented from the original opinion, and the June 11 order.
Magistrate Judge Issues Recommendations Re Personal Jurisdiction in Baan Case
6/11. A Magistrate Judge of the U.S. District Court (DC) issued his Report and Recommendation [PDF] in In Re Baan Company Securities Litigation on the FRCP 12(b)(2) motions to dismiss for lack of personal jurisdiction over defendants Paul Baan and Vanenberg Group.
This is a class action against the Baan Company and certain of its officers and directors alleging securities fraud. This recommendation is a rather standard 12(b)(2) determination, except for the Court's characterization of the arguments made by plaintiffs' counsel regarding Baan's deposition. The Court wrote: "I have never seen and I hope that I will never see again such utter mischaracterizations of what a witness actually said or such bold assertions based on absolutely nothing the witness said." The Magistrate Judge recommended granting the motions to dismiss.
Sen. Leahy Introduces Contact Lens Bill
6/11. Sen. Patrick Leahy (D-VT) and Sen. Charles Schumer (D-NY) introduced S 2609, the Contact Lens Prescription Release Act of 2002. The bill would require the Federal Trade Commission (FTC) to promulgate a rule to establish requirements with respect to the release of prescriptions for contact lenses.
The bill was referred to the Senate Commerce Committee. However, neither Senator is a member. The bill, if adopted, would, among other things, facilitate the sale of contact lens over the Internet.
Sen. Leahy stated in the Senate that the bill "will rectify a troubling anomaly in competition and health care law: Eye doctors have long been required to provide patients with the prescriptions for their eyeglasses, but not for contact lenses."
He added that "Patients must then pay for medical services they do not want, and cannot shop around for the best price or most convenient delivery service for their contact lens, like on-line ordering, or discount dealers."
The FTC has recently examined the sale of contact lens. On March 27, 2002, it filed a comment with the State of Connecticut regarding the sale of disposable replacement contact lenses over the Internet. The FTC wrote that "requiring stand alone sellers of replacement contact lenses to obtain Connecticut optician and optical establishment licenses would likely increase consumer costs while producing no offsetting health benefits" and "serve as a barrier to the expansion of Internet commerce".
The FTC first noted that "In contrast to prescription drugs, virtually no consumer is likely to try to ``self prescribe创 vision correcting contact lenses." Rather, wrote the FTC, "the medical purpose of the prescription requirement (aside from describing the proper lenses) is to induce the customer to have regular eye exams -- not to control where the customer may purchase replacement lenses with a valid prescription." (Parentheses in original.) The FTC concluded that there is "no systematic evidence that sales through alternative channels, such as Internet or mail order, pose any additional health risk as long as the retailer sells in accordance with a valid prescription."
The FTC wrote that "A variety of other laws and regulations help protect contact lens consumers and ensure that customers purchasing contact lenses from sources other than doctors receive the lenses that are specified in the prescription." It also stated that "Consumers have relatively easy recourse if an Internet or mail order firm fails to deliver the proper lenses. Unlike the situation with prescription drugs, consumers can easily determine if they have received the correct product by checking the box to ensure that it matches the prescription. In some instances, even if the consumer does not notice that he or she received the incorrect product, the customer may well discover the error when trying to wear the lenses. The customer can then simply remove the incorrect lens. Obviously, this does not rise to the kind of serious risk of harm as would occur if a consumer took the wrong prescription drug."
The FTC's comment concluded that "we believe that requiring stand alone sellers of replacement contact lenses to obtain Connecticut optician and optical establishment licenses would likely increase consumer costs while producing no offsetting health benefits. Indeed, such licensing could harm public health by raising the cost of replacement contact lenses, inducing consumers to replace the lenses less frequently than doctors recommend or to substitute other forms of contact lenses that pose greater health risks. An overly narrow interpretation of Connecticut law on these issues will likely have two significant detrimental effects: (1) it will restrict the choices available to Connecticut consumers, raise their costs, and reduce their convenience unnecessarily, and (2) it will serve as a barrier to the expansion of Internet commerce in the State of Connecticut."
Also, on March 13, 2002, the Progressive Policy Institute (PPI) released a related report [PDF] that addressed state regulation of e-commerce. It included a section on sale of contact lenses. This report concluded that "Buying contact lenses online can provide consumers with substantial savings. In addition, purchasing lenses online appears to pose no health risks, and in fact in some cases, may improve health since patients may replace older lenses more often. However, depending on the state in which they live, consumers may find it very easy or virtually impossible to buy contact lenses online."
This PPI report also found that "Under the guise of patient protection, optometrists and other contact lens providers have successfully lobbied in many states for laws that limit online competition. Fifteen states effectively prohibit competition from online lens providers. For example, Georgia requires contact lenses to be dispensed through a face to face transaction. Texas' law essentially prohibits purchasing contact lenses over the phone or through the Internet. Similarly, New Mexico requires that only a New Mexico licensed physician or optometrist can sell and dispense contact lenses."
Rep. Tauzin Writes FCC Re Triennial Review
6/11. Rep. Billy Tauzin (R-LA) wrote a letter to Federal Communications Commission (FCC) Chairman Michael Powell regarding the FCC's upcoming triennial review. In particular, he recommended that the FCC consider the May 24, 2002 opinion of U.S. Court of Appeals (DCCir) in USTA v. FCC, which remanded the FCC's local competition order and line sharing order.
"The D.C. Circuit was clearly uncomfortable with the Commission's decision to create unbundling rules that applied on a uniform national basis, without regard to the level of competition or availability of alternative means of providing a particular service in types or classes of geographic areas or within a particular class of customers", said Rep. Tauzin. "As the Commission conducts its triennial review, the Commission must evaluate the rationale for requiring the unbundling of a network element based upon specific geographic and class-of-customer characteristics of individual markets across the nation."
Rep. Tauzin also wrote that "The D.C. Circuit appeared equally concerned with the impact of the Commission's unbundling rules on investment in telecommunications facilities. The court found that ``[i]f parties who have not shared the risks are able to come in as equal partners on the successes, and avoid payment for the losers, the incentive to invest plainly declines.创 The court concluded that the Commission's unbundling rules, and the pricing at which those elements must be leased, provided a disincentive to CLEC investment in their own facilities".
He continued that "True competition will emanate from facilities based deployment by all carriers. Removing either an ILEC's or a CLEC's incentive to invest in its own facilities reduces the likelihood that our markets will experience facilities based competition. Removing both an ILEC's and a CLEC's incentive to invest in new facilities virtually eliminates the possibility of achieving true facilities based competition and increases the likelihood that any competition would be of the ``wholly artificial创 type feared by the D.C. Circuit."
"Finally," wrote Tauzin, "the D.C. Circuit agreed with petitioners that the Commission's Line Sharing Order ``completely failed to consider the relevance of competition in broadband services coming from cable (and to a less extent satellite).创 The court clearly rejected the Commission's contention that permitting CLECs to unbundle the high frequency portion of a copper loop was the only way that consumers would enjoy the benefit of competition among broadband providers".
Rep. Tauzin concluded that the FCC's "triennial review presents an excellent opportunity for the Commission to rectify many of the problems with the Commission's unbundling rules identified by the D.C. Circuit. The Commission's unbundling rules must take into account the unique characteristics of markets that are differentiated by geography and economics. The unbundling rules should also maximize the incentives that both ILECs and CLECs have to invest in new facilities, especially facilities that can be used for advanced services. If the rules are crafted properly, we will witness an investment boom that will hopefully bring the telecommunications equipment sector out of its current slump."
If the FCC does not do these things, wrote Tauzin, "I fear that the Commission will be perpetuating a policy that has limited broadband deployment and deprived consumers of the type of meaningful competition that only facilities based carriers can provide."
Rep. Tauzin is the Chairman of the House Commerce Committee, which oversees the FCC. He is also the sponsor, along with Rep. John Dingell (D-MI), of HR 1542. This bill would address some of these issues. It passed the House on February 27, 2002, but faces the adamant opposition of Sen. Ernest Hollings (D-SC), the Chairman of the Senate Commerce Committee.
With few legislative days left in the current session, and an election looming in November, it is unlikely that either HR 1542, or any other major telecommunications or broadband legislation will pass in this Congress. Hence, the most viable opportunity for changing the regulatory environment is the FCC's triennial review, and pending FCC rule making proceedings.
FCC Inspector General Reports on E-Rate Fraud
6/11. The Federal Communications Commission (FCC) released the most recent Semiannual Report [32 pages in PDF] to Congress of its Inspector General, covering the period October 1, 2001 through March 31, 2002. This report focuses on fraud, waste and abuse in the FCC's Schools and Libraries program, which is also known as the e-rate.
The e-rate provides subsidies to schools and libraries for telecommunications services, Internet access, and internal connections. The program is administered by the FCC's Universal Service Administration Company (USAC).
The report states that "In calendar year 2000, USAC contracted with a public accounting firm to conduct audits of eighteen (18) beneficiaries of funding from the first year of the Schools and Libraries program. Their audit resulted in a major investigation by the Federal Bureau of Investigation (FBI) and OIG representatives. The matter has been referred as a civil false claims suit to the Department of Justice, where it is under consideration. Additionally, the audit report disclosed weaknesses (ranging from regulatory non-compliances to computation errors) at 14 locations of the 17 beneficiaries reported on and $8 million in inappropriate funding disbursements."
The report states that these matters remain under consideration because, under the structure of the e-rate program, it is not clear that "federal funds" are involved.
The report also states that "Building on the work done last year, USAC has contracted to conduct audits at twenty-two (22) beneficiaries this calendar year. The results of this audit are currently under review by USAC and the Wireline Competition Bureau (WCB) of the FCC. The preliminary results indicate there may be findings at nearly all locations including several millions of dollars in inappropriate disbursements and unsupported costs."
Finally, the report states that "we have been impeded by difficulties in obtaining access to the resources necessary to establish an effective oversight program."
Rep. Pickering Predicts No Broadband Bill Will Pass This Year
6/11. Rep. Chip Pickering (R-MS) spoke at an American Enterprise Institute (AEI) conference titled "The Future of Telecom Regulation". He predicted that neither the Tauzin Dingell bill, nor any competing legislation, will pass the Congress this year.
Rep. Pickering is a member of the House Commerce Committee, and its Telecom Subcommittee. Prior to his election in 1996 he worked on the staff of then Senate Majority Leader Trent Lott (R-MS) on the Telecommunications Act of 1996. He also addressed the status of Section 271 applications, Third Generation (3G) wireless services and spectrum management.
Pending Legislation. He stated that "I would like to also talk about the state of legislation. As you all know, we had broadband legislation, the Tauzin Dingell bill, pass in the House. We now have most of the action focused on the Senate. You have competing, conflicting, contradictory efforts in the Senate. You have Senator Hollings who would push for full compliance, full enforcement, of the '96 Act, focusing on the local market. You have incentives, from a number of Senators, to build out, either in tax policy, or in regulatory policy, for broadband deployment, stressing under served and rural areas. You also have efforts to direct the FCC and their regulatory proceedings by Senator Breaux and Nichols. You have Senator McCain, who has taken a market by market approach."
Rep. Pickering continued, "What does all of that mean? The House has taken action. The Senate has multiple conflicting, competing -- in a political, a campaign year. What is the likely outcome? The likely outcome is that nothing happens. The prediction is that no legislation will pass or be signed into law. And what does this all mean? Or, what is the purpose or the focus of all of this debate, all of the churning, all of this action in the House, and now in the Senate? This is all, in my view, or almost all, geared towards a message of communicating to the FCC what their next decision should be as they have teed up, and have prepared, regulatory procedures and processes and decisions that are coming on the UNE platform, on broadband definition, and the triennial review."
Rep. Pickering was one of the leaders of the opposition to passage of the Tauzin Dingell bill by the House Commerce Committee.
3G Wireless and Spectrum Management. Rep. Pickering stated that "we are beginning a task force with Chairman Tauzin, and the Subcommittee Chairman Upton, to begin looking at spectrum reform, and any legislation that we might present, but not this year, which would be difficult to do, but by the first of the next Congress, because it is an issue that was teed up, was prepared, pre September 11. With the events of September 11, national security concerns, DOD objections at that point, made moving forward in a positive political way very difficult. But I do think that we have been to have enough time to step back. NTIA has come forward with some of its recommendations. The industry has continued to make a good case among all of the different policy makers, both on the Hill and in the Administration."
He added that "I do think that the environment will be more favorable as we come back next year. And we need to be able to strike very quickly, with a legislative proposal and recommendations on how to achieve both the procedural changes of how we make spectrum management decisions, but also what we do in the very short term to get more spectrum available, how we can move to 3G, what is the clear process, not only short term, but long term."
Section 271. Rep. Pickering also talked about the Section 271 applications by Regional Bell Operating Companies (RBOCs) to provide in region interLATA (long distance) services. He stated that "We have, over the last six years, regulation, litigation, acquisition, concentration. We are beginning to see emerging competition in multiple platforms -- in cable, and wireless, and wireline on the telephone, and telephony side, Internet telephony. As we look at where we are from the regulatory process, 271s, the process by which Bell companies are given permission and authority to then enter into long distance, all distance, all services, we have currently 13 approved."
He predicted that "By some time this year we expect to have over half of the states granted -- or half of the regional Bell operating companies in their states granted -- the authority and permission to enter into long distance. 65% of all population in the country by the end of this year will be under 271 and the full competition that we envisioned as we enacted the Telecommunications Act of 1996."
"We hope that by the mid of next year, '03, that we will see all states and all RBOCs, ILECs, have their 271s, the full implementation of the competitive checklist, all of the market opening requirements that they will be implemented completely. And I think that is the appropriate time for us to begin looking then at what type of regulatory modification, modernization, that we should undertake at that point. We need to make sure that the first step, the first objective, of opening local markets, or having a competitive climate, and a competitive checklist fully implemented, and full compliance, to then see to where we need to go next," said Rep. Pickering.
FTC Chairman Muris Addresses Privacy
6/11. Federal Trade Commission (FTC) Chairman Timothy Muris gave a speech titled "Protecting Consumers' Privacy: Goals and Accomplishments" in Reston, Virginia. He reviewed efforts by the FTC to protect consumer privacy. He also discussed legislative proposals.
He stated that "The question is: do we know enough now to fashion workable general privacy legislation that will provide cost efficient protection for consumer privacy? Our experience shows we do not."
He continued that "I am also troubled that many current legislative proposals would apply only to online information collection. Legislation subjecting one set of competitors to different rules, simply based on the medium used to collect the information, is likely to distort the market. Indeed the sources of information that lead to our number one privacy complaint -- ID Theft -- are frequently offline."
North Dakota Voters Approve Financial Privacy Ballot Measure
6/11. The state of North Dakota held a primary election on June 11. The voters rejected Ballot Item No. 2 [PDF], which pertains to the disclosure of customer information by financial institutions, by a vote of 69,802 to 25,737. See, elections results.
The ballot measure reads, in part, as follows: "Senate Bill No. 2191, approved by the 2001 Legislative Assembly, became law on July 1, 2001. The law pertains to the disclosure of customer information by financial institutions, including banks and credit unions, and notification of privacy policies by financial institutions. The law changes the definitions of a ``customer创 of a financial institution and ``customer information创 to be similar to that provided in federal law. It permits financial institutions to disclose nonpublic personal information to third parties unless the customer does not agree to the disclosure and so notifies the financial institution, a process described as ``opting out.创 The law also requires financial institutions to notify their agricultural and commercial customers about the financial institution's privacy policies and to notify those customers annually of their right to ``opt out创 of having their nonpublic information disclosed."
See also, N.D. Senate Bill 2191 [PDF], providing for this ballot measure.
People and Appointments
6/11. The Consumer Electronics Association (CEA) named Tara Dunion to be a director in its communications department. See, release.
More News
6/11. The New Hampshire Public Utilities Commission voted to support Verizon's Section 271 application to the Federal Communications Commission (FCC) to provide in region interLATA services. Verizon stated in a release that it "expects to file its application with the Federal Communications Commission later this month".
6/11. BellSouth Ch/CEO Duane Ackerman gave a speech in Hilton Head Island, South Carolina. He stated that "While technology is getting smaller and faster, the gulf between technology and the Southern workforce is threatening to get bigger. We have come far in developing the microchip, but somehow we have left too many Mables and Mikes behind, stranded with neither the skills to compete nor the tools to learn. We've moved on to the digital age of networks and connectivity, but our workforce system is stuck in the old machine age of smokestacks and assembly lines." He concluded that "we must invest in a Southern workforce for the digital age".

Go to News from June 6-10, 2002.