Powell and Victory Meet to Discuss Spectrum Management

12/10. The Federal Communications Commission (FCC) and the National Telecommunications and Information Administration (NTIA) issued substantially identical releases announcing that FCC Chairman Michael Powell, NTIA Director Nancy Victory, and staff met on December 10 "to plan and coordinate the efforts of the" FCC and NTIA "to improve U.S. spectrum policy".

The FCC and NTIA added that the meeting's "purpose was to institutionalize and elevate the coordination between the two agencies beyond historical levels, given the importance of spectrum management to the country." The FCC and NTIA added that "in the near future they will execute a new Memorandum of Understanding (MOU) detailing the terms of their interaction. Since the execution of the original MOU in the 1940's, the FCC and the NTIA's predecessor have managed spectrum without updating that document."

Powell stated in a release that "Our spectrum policies need to reflect this dynamic marketplace and to be flexible enough to keep up with innovation. I am pleased that Assistant Secretary Victory has made spectrum policy one of her top priorities. NTIA and the FCC are essential partners on the frontier of spectrum policy reform and I look forward to working closely with Assistant Secretary Victory on these important initiatives."

The FCC and NTIA outlined the topics addressed at the meeting. These included "The existing process for coordinating government and commercial use of the spectrum; A mutual interest in fostering intensive use of the spectrum while diminishing the potential for harmful interference to existing spectrum users and new entrants; Emerging technologies with potential for addressing a variety of spectrum access and interference concerns; The issue of alternative licensing regimes and the success of the unlicensed model in promoting innovation; Strengths and weaknesses of various licensing models, and the factors that should be weighed when considering adoption of particular licensing regimes, with a particular focus on sharing best practices to speed reform."

Other participants in the meeting included Michael Gallagher (Deputy Assistant Secretary of Commerce, NTIA), Fred Wetland (Acting Assistant Administrator for the Office of Spectrum Management, NTIA), Bryan Tramont (Senior Legal Advisor to Powell), Edmond Thomas (Chief of the FCC's Office of Engineering & Technology), and Tom Sugrue (Chief of the FCC's Wireless Telecommunications Bureau).

NTIA Director Victory Addresses Spectrum Management

12/10. National Telecommunications and Information Administration (NTIA) Director Nancy Victory gave a speech on spectrum management to a Department of Defense Spectrum Summit in Washington DC.

She listed and explained a number of goals of the NTIA. For example, she reiterated that "the U.S. government must work together as ``One Spectrum Team´´ in its approach to spectrum." Currently, spectrum management divided between the NTIA, which is responsible of spectrum allocated for government use, and the Federal Communications Commission (FCC), which is responsible for the private sector. In addition, the State Department has responsibilities with respect to international issues.

Victory (at right) also stated that "there is the need to modernize our spectrum policies so that they are forward looking. A concerted effort needs to be made to eliminate unnecessary government micromanaging of spectrum uses. This means taking a fresh look at legacy policies, rules and restrictions to assess their ability to accommodate emerging technologies or spectrum needs."

She elaborated that "Current practice requires users to seek permission from either NTIA or the FCC before changing the services offered over their licensed frequencies. This process can impose time consuming approval processes that can engender lengthy delays. We need to look at policies that permit flexibility. NTIA has supported the FCC's proposal to allow secondary leasing of spectrum to third parties. We will be exploring whether and to what extent this could work for government users."

Victory also said that another goal of the NTIA is to "develop spectrum policies that ensure the deployment of robust wireless networks that are prepared for the worst of crises and that are able to deliver the best of services to the government, defense and public safety communities as well as to the American people."

She then outlined the NTIA's plans for the coming year. First, she said, the NTIA "plans to address and enhance spectrum efficiency among government users. The first part of this initiative is to review just how government agencies are using their spectrum today. In this regard, NTIA will be conducting a study of the current and future use of the Federal land mobile spectrum in the Washington Baltimore area."

Second, the NTIA "will also be examining whether certain market based spectrum policies successful on the private sector side can be applied to the federal government to encourage efficient spectrum use. For example, could secondary leasing options be made available to government licensees to permit them to lease out a portion of their spectrum in non-emergency situations and recover it in the event of an emergency."

Third, the "NTIA also hopes to address spectrum rights relative to interference protection. Right now there is no standard formula or methodology for determining levels of acceptable interference." She added that the NTIA "plans to begin identifying the interference protection criteria for various radio services based on national and international sharing studies with the aid of the IRAC and public sector."

Finally, she said that "Receiver standards is another area that we hope to investigate since it has the potential to reduce interference and increase sharing."

FTC Chairman Muris Speaks on Antitrust Law

12/10. Federal Trade Commission (FTC) Chairman Timothy Muris gave a major speech in New York City regarding antitrust law and policy. The written text is article length, detailed and annotated with 115 footnotes, including many hyperlinks to other sources. See also, FTC release.

Muris began by stating that this speech is about "my philosophy about the appropriate content of the FTC's competition policy strategy and to explain the logic of the positive agenda used to implement the strategy. Because I have discussed our enforcement program in great detail on other occasions, I will place that program in a broader context and describe some of our non-enforcement projects in greater detail than I have previously done."

He then listed four general principles that "should inform the development of the FTC's competition policy strategy and the preparation of a positive agenda for executing the strategy". First, "Play an active role in promoting competition as the basic principle of economic organization through strong enforcement and focused advocacy". Second, "Focus its antitrust enforcement resources on conduct that poses the greatest threat to consumer welfare".

Third, "Make full use of the agency's distinctive institutional capabilities by applying the entire range of its policy instruments to solve competition policy problems". And fourth, "Attach a high priority to improving the institutions and processes by which antitrust policy is formulated and applied".

Muris then elaborated on each of these four principles in order. "More than a mere collection of laws, the antitrust laws and the pro-competition ethic they embody serve as an organizing principle in our country's economy. Antitrust plays a major role in shaping our markets, institutions, and the relationships among market participants", said Muris. "Effective antitrust enforcement may preclude direct, command-and-control regulation of sectors of the economy, avoiding the significant inefficiencies such regulation entails. By spurring competition, antitrust contributes to a market system that provides lower prices, encourages greater innovation, and generates faster responses by business to changing consumer needs and desires."

He stated that "Rules of contract and property law may not provide effective deterrence of, or remedies for, anticompetitive conduct." He added in a footnote that "the rights conferred by other legal regimes, such as intellectual property law, may appear to conflict with the goals of antitrust. Over the past ten months, the FTC and the Department of Justice have been exploring these issues in our hearings on Competition and Intellectual Property Law and Policy in the Knowledge Based Economy. We will issue a report on the topic next year. I think the tensions or conflicts are overblown. Properly understood, IP law and antitrust law both seek to promote innovation and enhance consumer welfare."

He then said government can deal with anticompetitive conduct either through antitrust law, or through "comprehensive sectoral regulation", which is "often at great costs". He praised antitrust law, and criticized sectoral regulation. "Sectoral regulation may be appropriate in certain, limited applications, but it is the antithesis of competition, with its restrictions on price, entry, and conduct. A large and sad literature documents how sectoral regulation often has harmed consumers by imposing needless controls on entry, pricing, and new product development."

He did not address the Federal Communications Commission (FCC), which has long engaged in sectoral regulation, and more recently, antitrust law as well.

Muris next lamented at length two limitations on federal antitrust authority -- the Noerr doctrine and the state action doctrine. He elaborated that government is huge, and state governments engage in rent seeking behavior that harms consumers.

He said that he has formed an FTC "State Action Task Force" that "has been conducting a careful analysis of existing state action case law, seeking to identify opportunities to direct the development of that case law in a manner that promotes competition and enhances consumer welfare. I anticipate that these opportunities will include bringing cases and participating in state and local regulatory proceedings."

He also briefly criticized the notion of creating statutory antitrust exemptions. He said that they "usually cannot withstand scrutiny". Of note to technology lawyers is a reference in his footnote 52, which lists the attempt in the 107th Congress to create an exemption for sharing cyber security related information. Sen. Robert Bennett (R-UT) is a leading proponent of this exemption.

Muris concluded that "Too many business practices stand outside the universe of conduct that should be subject to antitrust scrutiny." However, he did not address the Telecommunications Act of 1996, the Goldwasser case, or related cases.

He then moved on to his second principle, regarding strong enforcement.

Here, he again addressed intellectual property. He said that "The pharmaceutical and standard setting cases discussed infra highlight an area in which the agency is devoting substantial resources to identify enforcement targets -- the nexus between intellectual property and antitrust. Some firms are trying to extend their IP rights unlawfully. A number of our recent non-merger cases focus on whether firms took actions to ``protect´´ their IP rights in a manner that we allege is illegal. The agency has responded to the centrality of intellectual property issues in these cases and other investigations, in part, by forming an Intellectual Property Case Generation Working Group whose responsibility it is to identify and investigate widespread or significant practices that have anticompetitive effects without corresponding consumer benefits."

He then waded through enforcement involving horizontal mergers and horizontal agreements, single firm conduct, and vertical mergers and vertical agreements. In particular, he covered the Dell and Rambus matters, which involved standard setting and patents. For example, wrote Muris, the Dell matter "involved the alleged failure of a participant in a standard setting process to disclose its patent position, contrary to the rules of the organization, and then, after its technology was adopted in the standard, the company sought to enforce the patent. Such conduct can result in higher costs for consumers when there are substantial costs in switching to an alternative technology. The competitive danger is greater in these IP cases than in some other standard setting situations because of the risk of monopolization by a single firm. In addition, patent obstacles may make the monopoly more durable than would otherwise be the case."

He also reviewed the Synopsys Avant merger, which involved two complementary integrated circuit design software products.

He then addressed his third principle, regarding making use of the FTC's institutional attributes. He stated that "These capabilities include expansive power to conduct studies or perform research about the economy; a broad charter to act as an advocate for competition before other government bodies; and authority to use administrative adjudication to resolve competition policy disputes."

And here, he focused on the FTC's e-commerce task force. He said that "In August 2001, I created a Task Force to examine possible anticompetitive efforts to restrict competition on the Internet. The Task Force is analyzing state regulations, such as occupational licensing and physical office requirements, that may have pro-consumer or pro-competition rationales, but that nevertheless may restrict the entry of new Internet competitors. The Internet Task Force also is examining barriers that arise when private parties employ potentially anticompetitive tactics, such as when suppliers or dealers apply collective pressure to limit online sales. These possible barriers fall at the intersection of competition and consumer protection (with restrictions on the former often justified in the name of the latter) and at the intersection of law and empirical economics -- confluences that the Commission is particularly well suited to address." (Parentheses in original.)

He added that the FTC "has opened several investigations concerning possible anticompetitive restrictions on e-commerce, and the Task Force has taken the lead in drafting several competition advocacy pieces."

He also called for more economic research and development. He said that "To position ourselves to make intelligent contributions to competition policy through litigation or non-litigation instruments, we must make substantial investments in what might be called competition policy research and development."

Finally, he addressed his fourth principle, regarding improving competition policy institutions and processes. He discussed, among other things, various international agreements and cooperation.

The speech was titled "Looking Forward: The Federal Trade Commission and the Future Development of U.S. Competition Policy". Muris addressed the Milton Handler Annual Antitrust Review.

Bush Picks New SEC Chairman

12/10. President Bush announced his intent to nominate William Donaldson to be Chairman of the Securities and Exchange Commission (SEC), for the remainder of a five year term ending June 5, 2007. He is currently Chairman of Donaldson Enterprises, an investment firm he founded in 1981. He co-founded the investment banking firm of Donaldson Lufkin & Jenrette in 1959 and served as its CEO until 1973.

Donaldson stated that "Until my nomination is confirmed by the Senate, I believe it would be inappropriate for me to comment on exactly what I hope to accomplish as chairman of the SEC. Let me just simply say that I am firmly committed to doing everything that I can do to restore the confidence of investors in the U.S. corporate and financial industry." See, White House release and transcript of President Bush's remarks at event introducing Donaldson.

Sen. Paul Sarbanes (D-MD), who will be the ranking Democrat on the Senate Banking Committee in the next Congress, stated in a release that "I look forward to a thorough confirmation process in which Mr. Donaldson's record will be carefully examined and his views on the challenges facing the SEC fully reviewed. Among these challenges is effective implementation of the accounting reform and investor protection legislation, including immediate full funding for the SEC and appointment of a highly qualified chairman of the accounting oversight board."

EchoStar and DirecTV Terminate Proposed Merger

12/10. EchoStar Communications Corporation and General Motors and its subsidiary, Hughes Electronics Corporation, announced that they have reached a settlement to terminate the proposed merger of Hughes and EchoStar, effective immediately. EchoStar and Hughes both provide direct broadcast satellite (DBS) service via their Dish Network and DirecTV.

EchoStar wrote in a release that "Under terms of the settlement, EchoStar has paid to Hughes $600 million in cash, and Hughes will retain its 81 percent ownership position in PanAmSat".

The proposed merger floundered because of the controversial decision of the Federal Communications Commission (FCC) declining to approve the transfer of FCC licenses associated with the merger, followed by the Department of Justice's (DOJ) action to block the merger.

See also, TLJ story titled "FCC Declines to Approve EchoStar DirectTV Merger", October 10, 2002.

NCTA Debates Content Providers on Openness of Internet

12/10. National Cable Telecommunications Association (NCTA) P/CEO Robert Sachs wrote a letter [3 pages in PDF] to Federal Communications Commission (FCC) Chairman Michael Powell and other FCC Commissioners regarding access to Internet network facilities by content, applications and service providers, and their users. The NCTA letter responds to a November 18 letter [3 pages in PDF] from the Coalition of Broadband Users and Innovators (CBUI) to the FCC.

The debate at this point is largely hypothetical. It perhaps reflects early positioning by participants in a possible future legal and regulatory contest.

The CBUI, which includes Microsoft, Disney, NAM, ITAA, CEA, Apple, Amazon, eBay, and others, wrote last month to state that "The myriad benefits of the Internet Age flow from one fundamental feature -- the ability of consumers and businesses to communicate with one another and lawfully to create, share and access information, all without obstruction from network service providers."

Of course, the "network service providers", including the cable companies providing cable modem service, and the ILECs providing DSL service, have not blocked or limited anyone's ability to communicate over their network facilities. Hence, there is not yet a ripened conflict between any CBUI member and any network service provider.

The NCTA, which represents cable companies, wrote in response that "We agree that consumer access to Internet content is, and should be, full and unfettered. To the extent the Coalition suggests that government action is necessary to achieve this result, however, we must strongly disagree." That is, it points out that there is now no conflict, but the FCC should do nothing that might prevent it from discriminating against any content, application or service provider operating on the periphery of its members' networks. Thus, this suggests that it is possible that a cable company might do so in the future, and the FCC, and other policy making bodies, would then be faced with a concrete dispute.

The content group (CBUI) elaborated in its letter on Internet openness. It wrote that "Even before the Internet was invented, the FCC and policymakers around the globe recognized the value of this principle. They are to be commended for having assured for decades that, by law, network operators cannot infringe or encumber the relationships among their customers or between their customers and destinations on the network. Adherence to this principle has led to the development of a competitive market for data processing, content distribution, Internet access, interactive services, and the development of devices attached to those offerings. We urge the Federal Communications Commission to bring this fundamental rule forward, into the broadband era."

The CBUI added that "We are extremely concerned, however, that the robustness and innovativeness of the Internet will be at risk and broadband adoption will be slowed unless the FCC takes the necessary steps to preserve this principle."

NCTA, in rebuttal, called this "common carrier-like requirements on cable operators". It wrote that "Cable operators offer their subscribers unrestricted access to Internet content and the ability to run applications of their choice because consumers demand those capabilities, not because cable companies were ordered to do so by the government. The imposition of cumbersome, unneeded government requirements on cable operators would actually impede broadband deployment. It would entangle operators in regulatory disputes and create the risk that market participants will exploit government process to delay or hobble rivals."

The NCTA goes on to state that the CBUI "does not provide any evidence of harm". But then, the NCTA offers no assurances that it will not, in the future, create such evidence.

The NCTA letter dismisses the Coalition of Broadband Users and Innovators as "led by Microsoft and The Walt Disney Company". In fact, the group is far larger and broad based.

It includes major companies that conduct sales, provide services, and facilitate discussion, over the Internet, but do not themselves own any part of the network, or have contracts with network companies guaranteeing access to the network. These companies include Amazon, eBay and and Yahoo.

The CBUI also includes companies (and the trade groups that represent them) that make computer equipment and consumer electronics equipment used in Internet communications. These include the Apple, Consumer Electronics Association, Radio Shack, and the National Association of Manufacturers.

High Court Rules Australia Has Jurisdiction Over Dow Jones Based on Web Site

12/10. The High Court of Australia issued its opinion in Dow Jones v. Gutnick, a case involving three procedural issues (jurisdiction, choice of law, and convenient forum) in a tort action brought in Australia for an allegedly defamatory news story published on the Internet by Dow Jones, a U.S. publisher. The Court held that because of publication on the Internet, the Australian courts have jurisdiction, that Australian law applies, and that the case should proceed in the trial court in the Australian state of Victoria.

Dow Jones publishes the Wall Street Journal and Barrons, both in paper, and on the Internet. Dow Jones is incorporated in the state of Delaware, and based in New York City in the state of New York. The web servers containing Barrons news articles are located in the state of New Jersey.

Joseph Gutnick resides in the town of Melbourne, in the state of Victoria, in the nation of Australia.

Barrons ran a news article titled "Unholy Gains" that referenced Gutnick. Gutnick filed a complaint in the Supreme Court of Victoria against Dow Jones. He alleges that he has a reputation, and that Dow Jones has defamed him. He further seeks monetary damages.

Dow Jones entered a special appearance for the purpose of contesting the jurisdiction of the Victoria court. The trial court (Supreme Court of Victoria) ruled that publication of the allegedly defamatory statements occurred in the Australian state of Victoria, on the basis that it could be downloaded on the Internet by web users in Victoria.

Dow Jones appealed to the Court of Appeal of Victoria, which "refused leave to appeal". Dow Jones then brought the present appeal, to the High Court of Australia. The High Court dismissed Dow Jones' appeal and issued a lengthy opinion.

The High Court wrote in its opinion that "The principal issue debated in the appeal to this Court was where was the material of which Mr Gutnick complained published? Was it published in Victoria? The answer to these questions was said to affect, even determine, whether proceedings in the Supreme Court of Victoria should, as Dow Jones contended, be stayed on the ground that that Court was a clearly inappropriate forum for determination of the action." It answered that publication occurred in Victoria.

The Court elaborated that "defamation is to be located at the place where the damage to reputation occurs. ... In the case of material on the World Wide Web, it is not available in comprehensible form until downloaded on to the computer of a person who has used a web browser to pull the material from the web server. It is where that person downloads the material that the damage to reputation may be done. Ordinarily then, that will be the place where the tort of defamation is committed."

And hence, since the alleged tort occurred in Victoria, the courts of Victoria have jurisdiction to hear the case. Moreover, the law of Victoria is applicable. Finally, the Court also rejected the argument that the U.S. would provide a more convenient forum. The High Court did not address the merits of the defamation claim. The case will now proceed on the merits in the Australian state of Victoria.

The Court noted that Dow Jones raised the "spectre" of "a publisher forced to consider every article it publishes on the World Wide Web against the defamation laws of every country from Afghanistan to Zimbabwe", but concluded that this the point is without merit.

As a consequence of this ruling Dow Jones will have to defend against a defamation action in Australia. Others who publish on the Internet could also be subjected to defamation lawsuits in Australia. Moreover, if the courts of other nations were to adopt the same analysis as the Australia High Court, any Internet publisher anywhere in the world could be sued in any court anywhere in the world.

There are, however, some limiting aspects of the opinion. First, it does not permit unlimited forum shopping. It permits a person to bring a defamation action where that person has a reputation. In the present case, Gutnick lives in, and is known in, Victoria, Australia. Second, there is the matter of enforcement of judgments. A judgment of a foreign nation may be enforceable in that nation. Assets of the publisher within that nation may be seized to satisfy a monetary judgment. Further publication may be enjoined. However, the foreign court will likely be powerless to enjoin further publication on web servers located within the U.S., or to seize assets of the publisher within the U.S. If Gutnick wants to actually recover money beyond the value of Dow Jones' assets in Australia, or to obtain meaningful injunctive relief, he would have to bring suit within the U.S.

Seven justices participated. Four joined in the majority opinion. A review of the citations in the opinion of the Court reveals that most of the cases relied upon as precedent precede the World Wide Web. Indeed, some date from the 19th Century. The Court rejected the notion that the novel nature of the Internet should change the Court's application of long standing principles of the laws of defamation, jurisdiction, and choice of law. It simply extended and reformulated pre-existing legal principles.

However, Justice Kirby wrote a lengthy concurring opinion. He concurred in the result, but suggested that the current laws need to be re-examined. Or, as he put it, "When a radically new situation is presented to the law it is sometimes necessary to think outside the square."

He continued that "The genius of the common law derives from its capacity to adapt the principles of past decisions, by analogical reasoning, to the resolution of entirely new and unforeseen problems. When the new problem is as novel, complex and global as that presented by the Internet in this appeal, a greater sense of legal imagination may be required than is ordinarily called for." He suggested that this may be the case for tax law and commercial transactions law, in addition to defamation law.

People and Appointments

12/10. President Bush named David Leitch Deputy Counsel and Deputy Assistant to the President. Most recently, Leitch as worked in the Office of Management and Budget as the Counsel to the Transition Planning Office for the Department of Homeland Security. He was previously a partner in the law firm of Hogan & Hartson. He is also a former law clerk of Chief Justice William Rehnquist, and like Rehnquist, a veteran of the Department of Justice's Office of Legal Counsel. See, White House release.

More News

12/10. The Kaiser Family Foundation published a report titled "See No Evil: How Internet Filters Affect the Search for Online Health Information". It finds that "the Internet filters most frequently used by schools and libraries can effectively block pornography without significantly impeding access to online health information -- but only if they aren't set at their most restrictive levels."

Bush Names Tech Sector Representatives to Trade Agreement Advisory Committee

12/9. President Bush announced his intention to appoint 32 members to the Advisory Committee for Trade Policy and Negotiations (ACTPN), each for a two year term. See, White House release.

The ACTPN advises the U.S. Trade Representative (USTR) on matters concerning objectives and bargaining positions before entering into a trade agreement, the operation of any trade agreement once entered into, and other matters arising in connection with trade policy of the United States. See, ACTPN Charter.

The list of prospective members includes representatives of major export industries, including technology companies, as well as domestic industries threatened by foreign imports, such as steel and textiles.

The President's list includes several heads of several leading technology companies, including Samuel Palmisano (P/CEO of IBM), Meg Whitman (P/CEO of eBay), Hector Ruiz (P/CEO of Advanced Micro Devices), and Thomas Mottola (Ch/CEO of Sony Music Entertainment).

Many software, hardware, equipment, services, telecommunications, and entertainment media companies derive a significant proportion, if not most, of their revenues from international sales. Hence, they tend to have a strong interest in free trade, and low or zero tariffs. Technology and entertainment companies also tend to support trade agreements that include provisions strengthening intellectual property laws, and enforcement, abroad. Telecom companies tend to support trade agreements that include provisions that require other nations to remove barriers to competition with incumbent government telecom monopolies or dominant providers.

The 2001 list of ACTPN members includes Louis Gerstner (IBM) and Jack Valenti (Motion Picture Association of America). The telecom sector was represented by Roy Neel (formerly head of the U.S. Telephone Association), and Solomon Trujillo (formerly with US West).

The list just announced by President Bush contains no CEOs of ILECs or IXCs. However, it does include Robert Grady, of Carlyse Group. This is a private global investment firm that focuses on, among other things, information technology, telecommunications, and media. Louis Gerstner will become its Chairman on January 7, 2003. See, release. Its managing directors include William Kennard (former FCC Chairman), and veterans of U.S. telecom and tech companies. Grady himself was previously a Managing Director at Robertson Stephens, a technology investment bank based in San Francisco. He is now the managing partner of Carlyle Venture Partners I and II, which focus on technology infrastructure for enterprises, software, technology and services for communications networks, and healthcare information technology and devices.

The list of new ACTPN members may also include a telecom sector representative. Although, it is not a well known person. It lists a "Morgan Yaping Wang, CEO and Chairman, Angeles Optics, Inc."

The White House press office did not return calls from TLJ. The Office of the USTR refused to comment to TLJ. Reports filed with the Federal Elections Commission (FEC) record contributions made by a Morgan Yaping Wang, a Yaping Wang, and a Morgan Wang. See, for example, Political Money Online's page [PDF] from the Republican National Committee's (RNC) Republican National State Elections Committee June 2001 report, covering receipts for the month of May, 2001. It lists a $100,000.00 soft money contribution from a Morgan Yaping Wang.

A RNC representative responded to TLJ that "after my extensive search for Mr. Morgan Yaping Wang, I have found no information on him."

State Department Official Addresses Trans-Atlantic Trade

12/9. Anthony Wayne, Assistant Secretary for Economic and Business Affairs, gave an upbeat speech in Athens, Greece, titled "The U.S. and the EU Today: Trade and Economic Issues in the Trans-Atlantic Relationship". He stated that "The reality is that on economic policy as well as on foreign policy, the U.S. and the EU collaborate on far more than we fight."

He cited the Information Technology Agreement as an example. He stated that "The convergence of our trade interests at times manifests itself in trade liberalizing initiatives from the private sectors on both sides of the Atlantic. My favorite is the Information Technology Agreement, which was a joint initiative of the U.S. and European IT sectors together, asking governments to eliminate duties and quotas hampering trade and innovation in this fast-growing (or formerly fast-growing) sector. The ITA initially caught us by surprise in government, but when we looked at it we said why not? In all, nearly 30 countries joined us in 1995 in eliminating duties on IT and networking equipment, and the laptop in your bag probably became more affordable as a result." (Parentheses in original.)

He stated that the "U.S.-EU antitrust cooperation is ongoing, substantive and effective."

He also said that "President Bush made a firm commitment to get Congressional support to change the Foreign Sales Corporation tax provisions. In light of this commitment, mirrored by key congressional leaders, the EU decided not to use, for now, its WTO authorization to retaliate against us."

He also offered recommendations for policies that are "necessary for restoring more vigorous and lasting economic growth", including "Lowering barriers to trade", "Promoting high-tech investments for productivity enhancement", and "Freer transmission of technological innovations".

FCC Releases Local Phone Competition Data

12/9. The Federal Communications Commission (FCC) released a report [20 pages in PDF] titled "Local Telephone Competition: Status as of June 30, 2002. The report states, among other things, that "Total CLEC switched access lines increased by 10% during the first half of 2002, from 19.7 million to 21.6 million lines. By comparison, total CLEC switched access lines increased by 14% during the preceding six months, from 17.3 to 19.7 million lines." It also states that "About 11.4% of the 189 million total switched access lines were reported by CLECs, compared to 9.0% a year earlier."

The report also provides data and trends on the competitive local exchange carriers' (CLEC) use of their own facilities, resale of services of other carriers, and use of unbundled network elements (UNEs).

The report also states that cable telephony lines increased by 16% in the first half of 2002, and now account for about 1% of all switched access lines.

The report also states that mobile wireless telephone subscribers increased by 13% in the first half of 2002, to nearly 129 Million.

The report was prepared by the Industry Analysis and Technology Division of the Wireline Competition Bureau. This report is based on data collected from FCC form 477. However, this report focuses on switched access lines. It does not contain data on either basic Internet access or broadband lines.

People and Appointments

12/9. President Bush announced his intention to nominate John Snow to be Secretary of the Treasury. See, White House release and remarks by Bush at a White House event announcing the nomination. Sen. Charles Grassley (R-IA), who will be reinstated as Chairman of the Senate Finance Committee in January, stated in a release that "From what I know, he has several interesting attributes. One is his extensive business experience. We need a Treasury secretary who understands job creation. Another is his earlier comments about cleaning up corporate wrongdoing. I agree that restoring confidence in corporations is a key part of rejuvenating economic growth." Sen. Grassley also wrote about outgoing Secretary Paul O'Neill in a second release. "I worked very closely with Paul O'Neill to get the largest tax cut in a generation passed through Congress. Mr. O'Neill deserves a lot of credit for his work on the tax relief package. I enjoyed Paul O'Neill's candor about everything. More of his unreserved, honesty is needed inside the beltway. Paul O'Neill serves as an example of unselfish service for the good of the American people that more of corporate America should follow."

12/9. Verizon announced that Daniel Whelan, President of Verizon Pennsylvania, will retire on December 31. James O'Rourke, who is currently regional sales vice president for major metropolitan areas in Verizon's Consumer Sales and Service division, will succeed Whelan, effective January 1, 2003. See, Verizon release.

12/9. Microsoft hired Ken DiPietro to be corporate vice president of human resources. He will report to CEO Steve Ballmer. He previously was vice president of human resources for the Americas at Dell. See, MSFT release.

More News

12/9. The World Trade Organization's (WTO) Appellate Body issued its report [78 pages in PDF] titled "United States -- Countervailing Measures Concerning Certain Products from the European Communities". The U.S. imposed tariffs, or countervailing duties, on certain steel product imports. Various European nations complained to the WTO. The WTO established a Panel to consider the complaints. The Panel concluded that the relevant U.S. legislation is inconsistent with the Agreement on Subsidies and Countervailing Measures. The Appellate Body's report reverses this conclusion. However, the Appellate Body upheld the Panel's finding that the U.S. acted inconsistently with that Agreement by imposing and maintaining countervailing measures on steel products from privatized steel companies in the European Communities without determining whether subsidies continued to exist.

12/9. The U.S. Court of Appeals (5thCir) issued its opinion [17 pages in PDF] in Quick Technologies v. Sage Software, a trademark infringement and unfair competition case. The Appeals Court affirmed.

People and Appointments

12/7. Incumbent Sen. Mary Landrieu (D-LA) won the Louisiana Senate runoff election.

FCC's NRIC Proposes Security Measures for Telecoms and ISPs

12/6. The Federal Communications Commission's (FCC) Network Reliability and Interoperability Council (NRIC) held a quarterly meeting to discuss telecommunications network security and cyber security. The NRIC reviewed 300 "best practices" for voluntary implementation by regulated telecommunications companies, as well as by data service providers and ISPs.

The NRIC has until December 20 to vote on its recommendations. The FCC issued a release [3 pages in MS Word] summarizing the issues discussed.

9th Circuit Dismisses Appeal in Knisley v. Network Associates

12/6. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in Knisley v. Network Associates, dismissing for lack of standing an appeal from an order awarding attorneys fees in a class action against Network Associates Inc. (NAI).

NAI entered into a settlement (which included attorneys fees) with the attorneys for the class, the law firm of Lieff Cabraser. Noel Gage, a NAI shareholder covered by the class action and its settlement, objected to the settlement. The District Court approved the settlement.

The Appeals Court noted that "One risk of class action settlements is that class counsel may collude with the defendants, tacitly reducing the overall settlement in return for a higher attorney’s fee." Hence, District Courts must review both the fairness and reasonableness of attorneys fees in class action settlements.

However, the Appeals Court's decision turned on the issue of standing. It found that Gage lacked standing to challenge the settlement. He was not a named plaintiff. He did not submit a claim form. He rejected the settlement. And, he is not the one who pays the attorneys fees. The Appeals Court concluded that he "has failed to show that the relief he seeks will redress the injury he claims to have suffered. He therefore lacks standing to appeal."

6th Circuit Buries Protectionist Statute in Tennessee Casket Case

12/6. The U.S. Court of Appeals (6thCir) issued its opinion in Craigmiles v. Giles, a constitutional law case that may make it easier to overturn some protectionist state statutes that impede electronic commerce. The Court held unconstitutional a state statute that it found to be an "attempt to prevent economic competition".

This case does not specifically involve Internet commerce, the use of technology, or even technology companies. It deals with the sale of caskets. This case involves a challenge to an obscure Tennessee statute regarding funeral directors. Nevertheless, this case may have broader consequences for other businesses, and particularly those involved in electronic commerce. The Court held unconstitutional on Due Process and Equal Protection grounds a statute enacted to protect state funeral directors from competition.

Numerous state protectionist statutes have the effect of banning many forms of e-commerce, including sales of cars, wines, contact lenses, and other products. These types of laws also obstruct Internet based travel agencies, pharmacies, mortgage brokers, and many other services. See, for example, story titled "House Subcommittee Holds Hearing on State Impediments to E-Commerce", TLJ Daily E-Mail Alert No. 518, September 27, 2002. See, full story.

O'Neill and Lindsey Resign

12/6. Secretary of the Treasury Paul O'Neill and Director of the National Economic Council Larry Lindsey both resigned. O'Neill's frank comments often upset other members of the Bush administration, but made good copy for journalists.

Several media reports have stated that President Bush may appoint CSX CEO John Snow to replace O'Neill. CSX is a railroad freight transportation company. Snow is a former lawyer, government official, and professor, who has worked for CSX since 1977. He was a Deputy Undersecretary of Transportation in the Ford administration. CSX is not a technology company. However, it does license other companies to place fiber optic cable in conduits along its railway rights of way.

President Bush released a statement. He wrote that "My economic team has worked with me to craft and implement an economic agenda that helped to lead the Nation out of recession and back into a period of growth. I appreciate Paul O'Neill's and Larry Lindsey's important contributions to making this happen. Both are highly talented and dedicated, and they have served my Administration and our Nation well. I thank them for their excellent service."

These latest departures add to the list of key government positions that are vacant. Other positions to be filled include Chairman of the Securities and Exchange Commission (SEC), Assistant Attorney General for the Antitrust Division, and numerous federal judgeships.

More News

12/6. The U.S. Patent and Trademark Office (USPTO) announced that it "launched a prototype to test replacing its standard paper processing of patent applications with electronic processing." See, USPTO release.

12/6. IBM announced that it has entered into an agreement with Rational Software to acquire the equity of Rational at a price of approximately $2.1 Billion. See, IBM release and substantial identical Rational release. Rational makes open, industry standard tools, best practices and services for developing business applications and building software products and systems, including embedded software for cell phones. The deal will require regulatory approval.

12/6. The Securities and Exchange Commission (SEC) issued orders instituting administrative proceedings against, and imposing sanctions upon, three former WorldCom executives, Buford Yates (former Director of General Accounting), David Myers (former Comptroller and SVP), and Betty Vinson (former Director of Management Reporting), for materially overstating earnings of WorldCom. See, SEC release regarding Yates, release regarding Myers, and release regarding Vinson. The SEC previously filed civil enforcement actions in U.S. District Court (SDNY) against Yates, Myers, Vinson, and WorldCom. Judgments have been entered in those actions. See, SEC release summarizing those actions.

Go to News from December 1-5, 2002.