Colorado District Court Holds Do Not Call Registry Violates 1st Amendment

9/25. The U.S. District Court (DColo) issued its Memorandum Opinion and Order [34 pages in PDF] in Mainstream Marketing v. FTC, a constitutional challenge to the Federal Trade Commission's (FTC) do not call registry. The Court held that the FTC's do not call registry violates the First amendment free speech rights of telemarketers. In the analysis of Judge Edward Nottingham, the registry is content based regulation of protected speech, because it applies to commercial telemarketers, but not to communications by charitable organizations.

The telemarketer plaintiffs, Mainstream Marketing Service, Inc., TMG Marketing Inc., and American Teleservices Association, filed a complaint in the District Court against the FTC and each of its Commissioners. It challenged the constitutionality of the FTC's amended Telemarketing Sales Rule, under the First and Fifth Amendments. It also challenged the statutory authority of the FTC.

The District Court noted that the FTC's do-not-call registry does not apply to communications by charitable organizations. It held that "the court finds that the FTC's do-not-call registry does not materially advance its interest in protecting privacy or curbing abusive telemarketing practices. The registry creates a burden on one type of speech based solely on its content, without a logical, coherent privacy-based or prevention-of-abuse-based reason supporting the disparate treatment of different categories of speech. ... Were the do-not-call registry to apply without regard to the content of the speech, or to leave autonomy in the hands of the individual ... it might be a different matter. As the amended Rules are currently formulated, however, the FTC has chosen to entangle itself too much in the consumer's decision by manipulating consumer choice and favoring speech by charitable organizations over commercial speech. The First Amendment prohibits the government from enacting laws creating a preference for certain types of speech based on content, without asserting a valid interest, premised on content, to justify its discrimination. Because the do-not-call registry distinguishes between the indistinct, it is unconstitutional under the First Amendment."

The Court also directed the clerk to enter judgment in favor of the telemarketers enjoining the FTC from implementing its do not call registry.

FTC Chairman Timothy Muris stated in a release that "The court ruled that ``the FTC's Do Not Call registry does not materially advance its interest in protecting privacy or curbing abusive telemarketing practices.´´ Tens of millions of Americans who have registered more than 50 million phone numbers disagree."

"This court's reasoning, if adopted elsewhere, would effectively cripple virtually every do-not-call registry in the United States, whether state or federal. I do not believe that our Constitution dictates such an illogical result. To the contrary, our Constitution allows consumers to choose not to receive commercial telemarketing calls", said Muris.

Muris added that "We will seek every recourse to give American consumers a choice to stop unwanted telemarketing calls."

Federal Communications Commission (FCC) Chairman Michael Powell stated that the decision is "fundamentally flawed. We strongly believe the Do Not Call list withstands constitutional scrutiny." He added that "The FCC will join the FTC in taking every appropriate legal measure to ensure the will of the people is vindicated.  We will vigorously defend the right of Americans to choose not to receive telemarketing calls. We are committed to working tirelessly to effectuate the will of the American people."

This case is Mainstream Marketing Service, TMG Marketing Inc., and American Teleservices Association v. Federal Trade Commission, et al., D.C. No. 03-N-0184, U.S. District Court for the District of Colorado, Judge Edward Nottingham presiding.

Congress Passes Bill to Authorize Do Not Call Registry

9/25. The House passed HR 3161, a bill authorizing the Federal Trade Commission (FTC) to implement a national do not call registry, by a vote of 412-8. See, Roll Call No. 521. Later in the day, the Senate passed the bill by a vote of 95-0. See, Roll Call No. 365. President Bush said he will sign the bill. The Congress passed this bill in immediate response to the September 24 Order [19 page PDF scan] of the U.S. District Court (DOkla) in U.S. Security v. FTC, holding that the FTC's rule creating a do not call registry exceeds the statutory authority of the FTC. See, full story.

House Committee Passes Bill to Restrict P2P File Sharing on Computers and Networks of Federal Agencies

9/25. Rep. Henry Waxman (D-CA), Rep. Tom Davis (R-VA), and others introduced HR 3159, the "Government Network Security Act of 2003" on September 24, 2003. It was referred to the House Government Reform Committee, which approved the bill on September 25.

Rep. Davis (at right) stated in a release that "While most of the news coverage on file sharing focuses on the ability of users to illegally trade copyrighted music, movies, and videos, another less publicized dark side to this technology is the risk it poses to the security of computers and the privacy of electronic information".

He added that "File sharing technology is not inherently bad, and it may turn out to have a variety of beneficial applications ... However, as our Committee has learned, this technology can create serious risks for users. This bill takes a common sense approach to protect the computers and networks of the federal government and the valuable information they contain."

The bill recites in its findings that "Peer-to-peer file sharing can pose security and privacy threats to computers and networks by -- (A) exposing classified and sensitive information that are stored on computers or networks; (B) acting as a point of entry for viruses and other malicious programs; (C) consuming network resources, which may result in a degradation of network performance; and (D) exposing identifying information about host computers that can be used by hackers to select potential targets."

It then directs that "the head of each agency shall develop and implement a plan to protect the security and privacy of computers and networks of the Federal Government from the risks posed by peer-to-peer file sharing".

Both House and Senate Committees have examined this issue in hearings.

On March 13, 2003, the House Government Reform Committee held a hearing that focused on the prevalence of pormography on P2P networks. See, record of the hearing [123 pages in PDF].

The Senate Judiciary Committee held a hearing on June 17, 2003 titled "The Dark Side of a Bright Idea: Could Personal and National Security Risks Compromise the Potential of Peer to Peer File Sharing Networks". The members and witnesses focused on privacy and pormography, and barely touched national security issues. See, story titled "Senate Committee Holds Hearing on P2P Networks" in TLJ Daily E-Mail Alert No. 683, June 18, 2003.

The Senate Judiciary Committee held a second hearing on September 9, 2003 that addressed both infringement and security on P2P systems. See, stories titled "Senate Judiciary Committee Hears Testimony on Copyright Infringement on P2P Networks" and "Senate Judiciary Committee Hears Testimony on Porm on P2P Networks", in TLJ Daily E-Mail Alert No. 736, September 10, 2003.

HR 3159 only applies to federal government computers and networks. There is another bill pending in the House that would affect private sector computers. On July 24, 2003, Rep. Joe Pitts (R-PA), Rep. Chris John (D-LA), Rep. John Sullivan (R-OK), Rep. Mike Pence (R-IN), and Rep. Jim DeMint (R-SC) introduced HR 2885, the "Protecting Children from Peer-to-Peer Pormography Act of 2003".

The bill provides that "It is unlawful for any person to distribute peer-to-peer file trading software, or to authorize or cause peer-to-peer file trading software to be distributed by another person, in interstate commerce in a manner that violates the regulations prescribed under subsection (b)(2)." Subsection (b)(2), in turn, requires the FTC to write regulations that impose eleven requirements.

See also, story titled "Representatives Introduce Bill to Protect Children from P2P Smut" in TLJ Daily E-Mail Alert No. 706, July 29, 2003.

Cheney Addresses Economy and Tech Sector

9/25. Vice President Dick Cheney gave a speech in Washington DC in which he offered his take on the economy and technology.

He stated that "Since 2000, our economy has been dealt not just one shock, but three -- a set of challenges with few parallels in our history. First, the stock market began a steady decline in March of 2000, as investors realized that the economy was not healthy. Businesses cut their budgets for new investment and technology or equipment. And by early 2001, the economy was in recession. Just as we were beginning to pull out of the recession, our nation was attacked by terrorists on September 11, 2001. And those terrorists brought terrible grief to our people and the attacks were obviously a shock to the economy."

He added that "Earlier this year, we saw that our economy was still not growing fast enough, so we acted again. We passed additional tax relief for America's families and small businesses. ... Under the tax relief package the President signed in May, we raised the annual expense deduction for investments from $25,000 to $100,000 -- a sure way to promote investment in new equipment and software."

Cheney concluded that "We're already seeing the positive effects of our pro-growth policies across the country." For example, "Productivity is high and rising. Factory orders, particularly for high tech equipment, have been climbing since last spring."

People and Appointments

9/25. The Senate confirmed Dana Sabraw to be a Judge of the U.S. District Court (SDCal) by a vote of 95-0. See, Roll Call No. 366.

9/25. The Senate confirmed Michael Mosman to be a Judge of the U.S. District Court (Oregon) by a vote of 93-0. See, Roll Call No. 367.

Oklahoma Court Rules FTC Do Not Call Registry Invalid

9/24. The U.S. District Court (DOkla) issued an Order [19 page PDF scan] in U.S. Security v. FTC, holding that the Federal Trade Commission's (FTC) rule creating a do not call registry exceeds the statutory authority of the FTC.

The District Court wrote that, "Admittedly, the elimination of telemarketing fraud and the prohibition against deceptive and abusive telemarketing acts or practices are significant public concerns; however, ``an administrative agency's power to regulate in the public interest must always be grounded in a valid grant of authority from Congress.´´ ... Absent such a grant of authority in this case, the Court finds the do-not-call provision to be invalid." (Citation omitted.)

The FTC released a statement in which it said that it has filed a motion for stay pending appeal with the District Court, and a notice of appeal. The FTC also stated that "Consumers may continue to sign up for the registry, and telemarketers may continue to access area codes in the registry. The Do Not Call registry currently contains 50.6 million consumers' telephone numbers."

FCC Chairman Michael Powell issued a statement [PDF] that "Congress, the FCC and the FTC have all been in agreement about the need to give consumers the opportunity to choose to prevent intrusions from unwanted telemarketing telephone calls. The do-not-call list is an appropriate mechanism to accomplish this task."

He added that "Despite today's court decision, we will work closely with the FTC and Congress to ensure that the do-not-call registry becomes a reality and American consumers can control the calls that come into their homes."

While the telemarketing industry has won this round, its prospects for permanently stopping a national do not call registry appear slim. The FTC may obtain a reversal of the District Court order. If not, the Congress is likely to amend the statute.

Rep. Billy Tauzin (R-LA) and Rep. John Dingell (D-MI), the Chairman and ranking Democrat on the House Commerce Committee, released a joint statement: "We were disappointed to learn that a federal district court has invalidated the Federal Trade Commission's national do-not-call registry. We are confident this ruling will be overturned and the nearly 50 million Americans who have signed up for the do-not-call list will remain free from unwanted telemarketing calls in the privacy of their own homes."

They added that "Contrary to the court's decision, we firmly believe Congress gave the FTC authority to implement the national do-not-call list. We will continue to monitor the situation and will take whatever legislative action is necessary to ensure consumers can stop intrusive calls from unwanted telemarketers."

Similarly, Sen. John McCain (R-AZ), Chairman of the Senate Commerce Committee, issued a statement criticizing the Court decision. He wrote that "I strongly believe the recent District Court decision in Oklahoma incorrectly concludes that the FTC lacks authority to establish a national do-not-call registry. Earlier this year, Congress made clear its intent to protect consumers by ratifying the FTC's authority to create such a registry. ... to the extent the authority granted to the FTC by Congress needs any further clarification, I will work with my colleagues to provide this."

This case is U.S. Security, et al. v. Federal Trade Commission, D.C. No. CIV-03-122-W, U.S. District Court for the Western District of Oklahoma, Judge Lee West presiding.

Info Tech and Productivity Growth

9/24. Federal Reserve Board Governor Donald Kohn gave a speech titled "Productivity and Monetary Policy" at a Federal Reserve Bank of Philadelphia Monetary Seminar. He examined the growth in labor productivity in the late 1990s and again in the last two years, the consequences of this for aggregate demand, and the implications for monetary policy makers.

While the focus of his speech was not the effect of new technologies on productivity, he did make several statements regarding this topic.

He stated that "Steep decreases in the prices of high-tech equipment contributed to a boom in investment as companies acquired new capital equipment to make use of new technology."

He also said that "Lags between the introduction of new technology and its full effects on productivity have been evident in history, and perhaps we are now seeing a version of these lags with respect to information technology. In the second half of the 1990s, the cost of high-tech equipment was falling so quickly and applications for it were spreading so rapidly that businesses found that they could raise productivity substantially by buying large amounts of this new equipment and other capital goods geared to working with it. In recent years, businesses have concentrated on reorganizing and rationalizing production processes to more fully realize the efficiencies inherent in the new equipment and the changing skills of the workforce."

He elaborated that "The rapid growth of output, the high profits, and the elevated share prices of the second half of the 1990s seemed to lead businesses to concentrate on expanding and on acquiring the latest technology rather than on wringing all they could out of the capital they were buying."

Appeals Court Orders FCC to Respond to Petitions for Writ of Mandamus Regarding Number Portability

9/24. The U.S. Court of Appeals (DCCir) issued an Order [PDF] in the proceeding captioned "In re: Cellular Telecommunications & Internet Association". The CTIA seeks a writ of mandamus compelling the Federal Communications Commission (FCC) to act on several outstanding implementation issues regarding number portability.

The Court ordered that the FCC "file a response to the mandamus petition, not to exceed 30 pages, within 30 days of the date of this order." The one page Order adds that the CTIA may file a reply within 40 days. This is Appeals Court No. 03-1270.

Tom Wheeler, P/CEO of the CTIA, stated in a release that "Wireless carriers have been working overtime on the technical issues within our control. But, this isn’t something that can be done solo; it is up to the FCC to determine the rules of the game -- including telling the wireline carriers that portability applies to them, as well. We went to court only after the FCC didn’t answer a set of basic implementation issues. With this mandamus, we simply asked the court to tell the FCC to make those decisions. We are therefore pleased the court has asked the FCC to justify its inaction."

There is another proceeding in the DC Circuit on a separate petition for writ of mandamus pertaining to number portability. On August 29, AT&T Wireless, Cingular Wireless, and AllTel filed a petition for writ of mandamus. They seek a writ staying or enjoining the November 24, 2003 deadline for wireless carriers to provide number portability. The Appeals Court has also issued an order in that proceeding that the FCC file a response.

Bills Passed

9/24. The House passed the conference report on HR 2555, the Department of Homeland Security appropriations bill for the fiscal year ending September 30, 2004, by a vote of 417-8. See, Roll Call No. 515. President Bush said he will sign the bill. See, statement.

9/24. The House passed the conference report on HR 2658, the Department of Defense appropriations bill for the fiscal year ending September 30, 2004, by a vote of 407-15. See, Roll Call No. 513. The Senate has yet to pass the conference report.

People and Appointments

9/24. The Senate confirmed Larry Alan Burns to be a Judge of the U.S. District Court (SDCal) by a vote of 91-0. See, Roll Call No. 363.

More News

9/24. The Federal Trade Commission (FTC) published in its web site the Stipulated Final Judgment for Permanent Injunction [PDF] in FTC v. Network Solutions, Inc., dba VeriSign Registrar. The FTC filed its complaint against VeriSign on Friday, September 12, 2003. See, story titled "FTC Sues VeriSign for Deceptive Trade Practices" in TLJ Daily E-Mail Alert No. 739, September 15, 2003. This judgment enjoins VeriSign from making any misleading or false representation that "A domain name registration is about to expire", "The expiration date of a domain name registration is near or on any date by which a consumer must respond ...", or "That the transfer of a domain name registration is only a renewal." The judgment also provides that VeriSign "shall provide redress to all consumers to whom it sent an expiration notice/invoice ... that resulted in the transfer or purchase of a domain name consistent with and under the terms and schdule of the class settlement in the Luxenberg v. VeriSign, Inc. ..." However, VeriSign did not admit liability or wrongdoing. See also, FTC release. 03 1907).

9/24. Ennis Communications Corp. filed a petition for review with the U.S. Court of Appeals (DCCir) against the Federal Communications Commission (FCC) seeking review of the FCC's media ownership rule released on July 2, 2003. This petition, which is now just one of many, is numbered 03-1303. Ennis is represented by John Fiorini, Helgi Walker and Eve Reed of the law firm of Wiley Rein & Fielding.

9/24. Acting head of the National Telecommunications and Information Administration (NTIA) Michael Gallagher gave a speech titled "Returning Health to the Telecom Sector While Opening Doors to Disruptive Technology". He addressed the internet access tax moratorium (including HR 49, the Internet Nondiscrimination Act), Internet Protocol Version Six (IPv6), electronic numbering (ENUM), cyber security, and spectrum related issues.

Senators Write DOJ and FCC Recommending Conditions for News Corp. Directv Merger

9/23. Sen. Mike DeWine (R-OH) and Sen. Herb Kohl (D-WI), the Chairman and ranking Democrat on the Senate Judiciary Committee's Subcommittee on Subcommittee on Antitrust, Competition Policy, and Consumer Rights, wrote a letter to Assistant Attorney General Hewitt Pate and Federal Communications Commission (FCC) Chairman Michael Powell regarding the proposed acquisition by News Corporation of a controlling interest in DIRECTV. They propose that the Department of Justice's (DOJ) Antitrust Division and FCC impose two conditions upon approval of the merger, and consider four others.

They wrote that "we believe that this transaction should only be approved upon the adoption of certain conditions". They listed two conditions. First, "the deal should only be approved on the express condition that the combined company commit to all of the Program Access Commitments News Corporation has already made as part of its FCC filings".

"Second, conditions on the deal should require that News Corporation make any sports programming, such as the World Series, currently broadcast on the Fox television network, available to DIRECTV’s competitors on nondiscriminatory terms."

Sen. DeWine (at right) and Sen. Kohl also wrote that four other "conditions may be appropriate and deserve your consideration".

First, they suggest "A commitment by News Corporation to make its broadcast television programming available to DIRECTV’s competitors on the same financial terms and conditions as it makes its broadcast television programming available to DIRECTV."

Second, they suggest "A commitment to expand DIRECTV’s carriage of local broadcast stations (the so-called “local into local” service) to specified additional markets by specified dates." (Parentheses in original.)

Third, they suggest "A commitment that News Corporation will not purchase a majority interest in Hughes Electronics for the next five years."

Finally, they suggest "A commitment to implement safeguards and procedures to prevent information sharing between DIRECTV and News Corporation regarding pricing or other contract terms for programming offered by News Corporation’s competitors, or regarding pricing or contract terms offered by DIRECTV’s competitors to purchase programming."

House Telecom Subcommittee Marks Up E-911 Implementation Act

9/23. The House Commerce Committee's Subcommittee on Telecommunications and the Internet amended and approved HR 2898, the "E-911 Implementation Act of 2003". Rep. Billy Tauzin (R-LA), the Chairman of the full Committee, stated that "I look forward to working with Mr. Dingell to schedule a full-committee markup as soon as possible."

The bill, which was introduced on July 25, 2003 by Rep. John Shimkus (R-IL), Rep. Anna Eshoo (D-CA), and others, requires the head of the National Telecommunications and Information Administration (NTIA) to create an "E-911 Implementation Coordination Office" to "facilitate coordination and communication between Federal, State, and local emergency communications systems, emergency personnel, public safety organizations, telecommunications carriers, and telecommunications equipment manufacturers and vendors involved in the implementation of E-911 services".

The bill also authorizes the appropriation of $500 Million in grants over five years, to be administered by the NTIA, to enhance emergency communications services.

The bill would also penalize states for redirecting E-911 funds collected from consumer's cell phone bills. See also, story titled "Representatives Introduce E911 Implementation Act" in TLJ Daily E-Mail Alert No. 707, July 30, 2003.

Rep. Tauzin stated that "this bill sends a clear signal to states to stop raiding E-911 funds. States are delaying E-911 deployment and costing lives by stealing E-911 funds and diverting them to other purposes." He added that "No states that divert E-911 funds should be eligible to participate in the grant program established under H.R. 2898. And the bill correctly penalizes all other entities within states that raid funds. Pressure should be generated from the bottom up to stop states from raiding E-911 funds."

Rep. Fred Upton (R-MI), the Chairman of the Subcommittee, summarized the bill. He stated that it "will provide a much-needed boost to our nation's PSAPs as they meet the challenges facing them -- both in terms of resources and coordination -- in the provision of Phase II services to our constituents. More specifically, the bill as introduced establishes an E-911 Implementation and Coordination Office at the NTIA to facilitate coordination and communications between federal, state, and local emergency personnel that are involved in the implementation of E-911 services and serve as a central body for coordinating E-911 implementation nationwide. In addition, the bill as introduced establishes a grant program to assist states and municipalities with implementation of Phase II E-911 services."

Rep. Upton (at right) offered an amendment in the nature of a substitute that makes some changes to the bill as introduced. He summarized the bill, and the changes made by his amendment, in a pair of statements.

HR 2898 is similar to S 1250 the "Enhanced 911 Emergency Communications Act of 2003", sponsored by Sen. Conrad Burns (R-MT) and others. On July 17, 2003, the Senate Commerce Committee approved its bill by unanimous voice vote, without amendment. See, story titled "Senate Commerce Committee Approves E-911 Bill" in TLJ Daily E-Mail Alert No. 701, July 18, 2003. See also, Senate Report No. 108-130.

FTC Files Administrative Complaint Against AOL and Compuserve

9/23. The Federal Trade Commission (FTC) filed an administrative complaint [3 pages in PDF] against America Online (AOL) and Compuserve Interactive Services alleging deceptive trade practices in violation of Section 5 of the Federal Trade Commission Act (FTCA), codified at 15 U.S.C. § 45, in connection with their failure to honor customer requests to stop subscribing to internet access services, and their failure to deliver rebates within the promised time period. The FTC and AOL and Compuserve simultaneously settled the complaint. See also, FTC release.

The complaint alleges that "AOL failed to implement appropriate measures to ensure that all customers' requests for cancellation were properly executed. As a result, in numerous instances, subscribers who requested cancellation were not cancelled and continued to be charged monthly service fees."

The complaint also alleges that AOL and Compuserve developed a cash rebate program for customers who purchased a three year subscription, but "failed to deliver the rebates to consumers within the promised time period" and "extended the time period in which they would deliver the rebates to consumers without consumers agreeing to this extension of time".

The FTC and AOL and Compuserve also entered into an Agreement Containing Consent Order [15 pages in PDF] that will remain in effect for twenty years.

It orders that AOL and Compuserve "shall establish and maintain appropriate measures for ensuring that consumers' requests for cancellation of such service or continuity program are promptly processed and that billing for such product or service will cease prior to the next billing cycle." It also orders the two companies not to continue to charge for service after a customer "has requested cancellation of such service".

The Order contains no fine. It contains no admissions of wrongdoing by AOL or Compuserve.

CompTel Files Petition for Review of FCC TCPA Order

9/23. The Competitive Telecommunications Association (CompTel) filed a petition for review with the U.S. Court of Appeals (DCCir) against the Federal Communications Commission (FCC) seeking review of the FCC's rules implementing the Telephone Consumer Protection Act (TCPA) on constitutional, and other, grounds.

This is a challenge to the FCC's order, FCC 03-153, in CG Docket No. 02-278, released on July 3, 2003. See also, notice in the Federal Register, July 25, 2003, at Vol. 68, No. 143, at Pages 44143 - 44179.

The just filed action is Competitive Telecommunications Association v. FCC and USA, U.S.C.A. No. 03-1296. CompTel is represented by Ian Heath Gershengorn of the law firm of Jenner & Block.

Ashcroft and Critics Continue Debate Over Section 215 Access to Business Records

9/23. Attorney General John Ashcroft and his critics continued their debate over Section 215 of the PATRIOT Act, which pertains to access to business records under the Foreign Intelligence Surveillance Act (FISA). Most recently, the American Library Association (ALA) demanded that the Department of Justice (DOJ) release its data on how many times the section has been used to obtain records from libraries. Ashcroft responded that it has never been used, for library records, or any other business records.

Ashcroft's critics remain skeptical. ALA President Carla Hayden responded that "In any case, we hope members of Congress will restore the historic protections of library records and pass one of the legislative proposals currently on the floor".

On September 23, the Center for Democracy and Technology (CDT) responded that "It's a little hard to say what's really going on here. One factor to consider is that the DOJ has at its disposal many different authorities other than Sec. 215 for getting business records."

Ashcroft commenced that latest round of exchanges on September 15, when he gave a speech in Washington DC in which he stated that claims by the ALA and others that the Federal Bureau of Investigation (FBI), which is a part of the DOJ, is using the PATRIOT Act to monitor the reading habits of Americans are "hysteria and hyperbole". See, story titled "Ashcroft Says American Library Association Attacks on PATRIOT Act Are Hysteria and Hyperbole" in TLJ Daily E-Mail Alert No. 740, September 16, 2003.

ALA President Carla Hayden then issued a statement on September 16 calling for the release of information. She stated that "librarians have a history with law enforcement dating back to the McCarthy era that gives us pause. For decades, and as late as the 1980s, the FBI's Library Awareness Program sought information on the reading habits of people from ``hostile foreign countries,´´ as well as U.S. citizens who held unpopular political views."

Hayden then wrote that "Rather than ask the nations' librarians and Americans nationwide to ``just trust him,´´ Ashcroft could allay concerns by releasing aggregate information about the number of libraries visited using the expanded powers created by the USA PATRIOT Act."

So, on September 18, Attorney General Ashcroft provided the data. He gave a speech in Memphis, Tennessee in which he stated that "The fact is, with just 11,000 FBI agents and over a billion visitors to America's libraries each year, the Department of Justice has neither the staffing, the time nor the inclination to monitor the reading habits of Americans. No offense to the American Library Association, but we just don't care."

He continued that "But just in case there are those who persist in these fantasies, I asked the FBI and the Department of Justice to declassify the report on how many times we have used the power to check library records. And wouldn't you know it. So prying are we, so overheated is our passion to know the reading habits of Americans that we have used this authority exactly ... never. No one's reading habits have been reviewed. Not a single American's library records has been reviewed under the Patriot Act."

"Not a single court in America has validated any of the charges of violations of Constitutional rights in connection with the Patriot Act" said Ashcroft. "And so the charges of the hysterics are revealed for what they are: castles in the air. Built on misrepresentation. Supported by unfounded fear. Held aloft by hysteria."

Ashcroft only addressed the use of Section 215 to obtain library records in his speech. He went a step further in a memorandum dated September 18, that states that Section 215 has not been used for any types of records.

The memorandum states, in part, that "This memorandum confirms I have declassified the number of times to date the Department of Justice, including the Federal Bureau of Investigation (FBI), has utilized Section 215 of the USA PATRIOT Act relating to the production of business records. The number of times Section 215 has been used to date is zero (0)."

However, Ashcroft's critics persist. On September 18 the ALA's Hayden stated in a release that ""In any case, we hope members of Congress will restore the historic protections of library records and pass one of the legislative proposals currently on the floor, such as the Freedom to Read Protection Act sponsored by Congressman Bernie Sanders (I-Vermont)". This is HR 1157.

She added that "Legislators and the general public can be assured that traditional legal protections extended to library records are not an obstacle to ensuring national security. We hope Congress will reject any additional measures -- such as H.R. 3037, which would allow federal agents to use administrative subpoenas to obtain library and business records without any judicial review -- that might abridge the rights and protections afforded by our Constitution."

On September 23 the Center for Democracy and Technology (CDT), a group that argued against many provisions of the PATRIOT Act while it was being debated in 2001, issued a statement.

"Now, the DOJ claims that criticism and defense were both misguided, for Section 215 has never been used, not for the travel records covered pre-PATRIOT, not for library records, not for records of people taking scuba lessons or buying bomb-making materials or anything else. What gives?", the CDT asked rhetorically.

The CDT offered that "It's a little hard to say what's really going on here. One factor to consider is that the DOJ has at its disposal many different authorities other than Sec. 215 for getting business records."

The CDT then outlined various other mechanisms that the FBI might use to obtain library and other records, other than through Section 215. For example, the government can ask for records holders to voluntarily turn over records. Second, the government can purchase data from data warehousing and aggregating companies. Third, the government can use the grand jury process, including grand jury subpoenas for business records. Fourth, the government can use National Security Letter authority.

The CDT concluded that "It's still not clear that we have the full picture. It seems very strange that since the PATRIOT Act was enacted in October 2001 the DOJ has never once used Section 215 to compel disclosure of travel records or car rentals records or records of the purchase of bomb-making material or anything else."

Section 215 amends the Foreign Intelligence Surveillance Act of 1978 (FISA), which is codified at 50 U.S.C. § 1861 et seq. That is, it is a FISA provision that only applies to foreign powers, and agents of foreign powers, including international terrorists.

Section 215 amends the section of the FISA that provides for "Access to Certain Business Records for Foreign Intelligence and International Terrorism Investigations". Section 215 provides, in part, that "The Director of the Federal Bureau of Investigation or a designee of the Director (whose rank shall be no lower than Assistant Special Agent in Charge) may make an application for an order requiring the production of any tangible things (including books, records, papers, documents, and other items) for an investigation to protect against international terrorism or clandestine intelligence activities, provided that such investigation of a United States person is not conducted solely upon the basis of activities protected by the first amendment to the Constitution." (Parentheses in original.)

Section 215 further provides that "Each application under this section ... shall be made to ... a judge of the court ... or ... a United States Magistrate Judge ..."

Also, Section 215 requires that this application "shall specify that the records concerned are sought for an authorized investigation conducted in accordance with subsection (a)(2) to obtain foreign intelligence information not concerning a United States person or to protect against international terrorism or clandestine intelligence activities."

More Petitions for Review of the FCC's NorthPoint Orders

9/23. Several more satellite industry entities, including Directv and Skybridge, have filed petitions for review with the U.S. Court of Appeals (DCCir) against the Federal Communications Commission (FCC) seeking review of various of the FCC orders regarding subsidiary terrestrial use of the 12.2 - 12.7 GHz band.

These petitions challenge the NorthPoint orders. See also, story titled "Echostar Files Petition for Review of FCC's Northpoint Orders" in TLJ Daily E-Mail Alert No. 744, September 23, 2003.

One of the orders under review is the FCC's Memorandum Opinion and Order and Second Report and Order, adopted on April 11, 2002. The FCC released the text of this order on May 23, 2002. It published its notice in the Federal Register on June 26, 2002, at Vol. 67, No. 123, at Pages 43031-43044. This is FCC 02-116. See also, story titled "FCC Acts on Northpoint Application" in TLJ Daily E-Mail Alert No. 417, April 24, 2002.

Another of the orders under review is the FCC's Fourth Memorandum Opinion and Order, announced on April 22, 2003. The FCC released the text of this order on April 29, 2003. It published its notice in the Federal Register, on July 25, 2003, at Vol. 68, No. 143, at Pages 43942 - 43946. This is FCC 03-97.

On September 23, Directv filed its petition for review (03-1300) challenging three FCC orders, including the 4th MO&O released on April 29, 2003. It states that "Among other things, the FCC rulings have unlawfully and arbitrarily authorized a new terrestrial service to operate on the same frequencies that are currently used to provide Digital Broadcast Satellite (``DBS´´) television service ... exposing DBS providers (including DIRECTV) and their customers to harmful interference from the new service." (Parentheses in original.)

On September 23, Skybridge filed its petition for review (03-1298) challenging the FCC's 1st R&O, MO&O, 2nd R&O, and 4th MO&O. It states that Skybridge "is an applicant for a Commission license to operate a constellation of non-geostationary orbit (``NGSO´´) fixed satellite service (``FSS´´) satellites using, inter alia, the 12.2-12.7 GHz frequency band." It alleges that sharing with terrestrial users will "cause harmful interference to NGSO FSS operations in the same band". Skybridge is represented by Jeffrey Cohen of the law firm of Paul Weiss.

Petitions for review were also filed by the Satellite Broadcasting and Communications Association (SBCA) (No. 03-1297) and by SES American Inc. (No. 03-1299).

These petitions for review challenge the FCC's decision to allow sharing in the 12 GHz band. There is a second major issue. That is whether NorthPoint will have to purchase its licenses at auction, or will obtain the spectrum licenses for free. The FCC decided that NorthPoint should purchase. However, the Senate Commerce Committee and the Senate Appropriations Committee have both passed bills that provide for NorthPoint to obtain spectrum licenses for free. However, the House Commerce Committee, has not passed any such bill.

See also, TLJ story titled "Senate Appropriations Bill Includes Northpoint Spectrum Amendment", also published in TLJ Daily E-Mail Alert No. 733, September 5, 2003.

People and Appointments

9/23. President Bush nominated Louis Guirola to be a Judge of the U.S. District Court for the Southern District of Mississippi. See, White House release.

9/23. President Bush nominated Judith Herrera to be a Judge of the U.S. District Court for the District of New Mexico. See, White House release.

9/23. The Senate confirmed Kim Gibson to be a Judge of the U.S. District Court (WDPenn) by a vote of 94-0. See, Roll Call No. 357.

9/23. Vice President Dick Cheney gave a speech in Manchester, New Hampshire, in which he addressed "fixing the judicial confirmation process". He stated that "far too many nominations to the federal bench are being held up by the threat of filibuster. Our friends on the other side of the aisle refuse to allow nominees of great merit to even have a vote on the Senate floor. Well qualified nominees have been attacked by Senate Democrats who have blocked an up-or-down vote. Earlier this month, an outstanding nominee, Miguel Estrada, withdrew his name from consideration after waiting more than two years for a vote. The treatment of this fine man, who was deemed by everybody to be well qualified for the court, has been truly disgraceful. It's time to restore dignity and civility to the confirmation process by making sure that every person nominated to the federal bench gets a timely up-or-down vote." President Bush had nominated Estrada to be a Judge of the U.S. Court of Appeals (DCCir). Judicial confirmations was also a frequent theme in President Bush's political speeches leading up to the 2002 mid-term elections.

9/23. Mark Corallo was named Director of Public Affairs at the Department of Justice (DOJ). He has been the Principal Deputy Director of Public Affairs at the DOJ since March 2002. Before that, he was Communications Director of the House Government Reform Committee from 1999 to 2002. And before that, he was Press Secretary for former Rep Bob Livingston (R-LA) from 1997 to 1999. See, DOJ release.

More News

9/23. Polygram Holdings, Inc., Decca Music Group Limited, UMG Recordings Inc., and Universal Music & Video Distribution Corp. filed a petition for review with the U.S. Court of Appeals (DCCir) against the Federal Trade Commission (FTC). The seek review of the FTC's Final Order [PDF] holding that several music companies illegally agreed to restrict competition for audio and video products featuring The Three Tenors. See also, FTC Opinion [PDF] and FTC release of July 28, 2003.

Abernathy Addresses Broadband Over Powerline

9/22. Federal Communications Commission (FCC) Commissioner Kathleen Abernathy gave a speech to the United PowerLine Council Annual Conference in Washington DC in which she addressed broadband over powerline (BPL). She advocated regulatory restraint.

Abernathy (at right) stated that she wants "to facilitate the deployment of broadband services to all Americans" and that "that the FCC can best promote consumer welfare by relying on market forces, rather than heavy-handed regulation."

She continued that the "development of BPL networks will serve both of these key goals. It will not only bring broadband to previously unserved communities, but the introduction of a new broadband pipeline into the home will foster the kind of competitive marketplace that will eventually enable the Commission to let go of the regulatory reins."

She then articulated her general approach of "regulatory restraint". She said that "It is tempting for regulators to take every new technology or service that comes along and apply the same rules that govern incumbent services. After all, regulatory parity and a level playing field are intuitively appealing concepts. But I believe that it would be a huge mistake to carry forward legacy regulations whenever new technology platforms are established. Many of our regulations are premised on the absence of competition, and when that rationale is eroded, we must not reflexively hold on to regulations that no longer serve their intended purpose. In fact, many of our old rules not only become unnecessary as markets evolve, but they can be fatal to new services that need room to breathe."

She again described and advocated what she calls the "nascent services doctrine". That is, "By avoiding the imposition of anachronistic regulations, regulators can best allow new technologies and services to flourish. Once facilities-based competition has taken root, regulators can begin to dismantle legacy regulatory regimes, rather than extend those regimes to include the new platforms."

She added that this "is about creating an environment conducive to investment in new infrastructure, because new platform providers create competition and innovation that ultimately benefits consumers far more than prescriptive regulation. In essence, short-term regulatory disparities are tolerated to generate long-term facilities-based competition."

Abernathy then focused on BPL and the FCC's current proceeding regarding BPL.

On April 23, 2003, the FCC adopted a Notice of Inquiry [21 pages in PDF] in its proceeding titled "In the Matter of Inquiry Regarding Carrier Current Systems, including Broadband over Power Line Systems". It released the text on April 29. See also, notice in the Federal Register, May 23, 2003, Vol. 68, No. 100, at Pages 28182 - 28186. August 6 was the deadline to submit comments; and September 5 was the deadline for reply comments.

See also, story titled "FCC Announces NOI Regarding Broadband Over Powerlines" in TLJ Daily E-Mail Alert No. 628, April 24, 2003, and story titled "FCC Releases NOI on Broadband Over Power Lines" in TLJ Daily E-Mail Alert No. 656, May 7, 2003. This is ET Docket No. 03-104. The NOI is FCC 03-100.

She stated that "I am especially pleased that, when the FCC adopted its Notice of Inquiry on BPL systems in April, we rejected proposals to seek comment on the application of legacy regulatory requirements to this platform. For example, some argued that the Commission should consider issues such as nondiscriminatory access for unaffiliated ISPs, and other regulatory requirements imposed on common carriers. I opposed such efforts because it is premature even to consider such regulatory intervention."

However, she also stated that "it is important to recognize that although the emergence of new platforms like BPL will eliminate the need for many competition-related regulations, other types of regulation may well remain necessary. For example, the FCC must implement public policy goals unrelated to competition, or even at odds with competition. Universal service and access for persons with disabilities are examples of this kind of regulation."

The FCC has received thousands of comments in response to its NOI. Although, most are short comments from amateur radio operators who state that BPL will interfere with their activities. Radio astronomers and short wave broadcasters have similar objections. Many of the longer comments also address interference, and studying interference.

See, for example, the lengthy comment [PDF] of the National Association for Amateur Radio. The Wireless Communications Association International also submitted a comment [PDF] expressing concern about harmful interference with wireless broadband service providers.

Some BPL related entities submitted comments stating the BPL has the potential to bring more facilities based competition to the broadband services market, and can coexist, without harmful interference, with preexisting power line infrastructures with minimal changes to Part 15 of the FCC's rules.

(Comments can be retrieved at the FCC's web page titled "Search for Filed Comments". Enter the docket number of this proceeding, 03-104, in the first box.)

The United PowerLine Council (UPLC), the group to which Commissioner Abernathy spoke, submitted a comment [PDF] in which it stated that "utilities have engaged in several significant trials producing encouraging results. Speeds are competitive with DSL and cable modem. The service is relatively inexpensive to deploy and easy for customers to use. Many of the technical hurdles to BPL deployment in the U.S. have been overcome, but the range of BPL is limited to substantially less than a mile. As a result, utilities are interested in commercial deployment of BPL systems, which will be determined in large part by the technical rules that the FCC ultimately adopts."

The UPLC also argued that "the existing Part 15 rules for carrier current systems adequately protect against interference, and that the existing measurement methods and Verification process for equipment authorization should be retained at this time."

Many comments also focused, like Commissioner Abernathy, on the regulatory framework for broadband technologies.

For example, Verizon, which provides broadband service by DSL, submitted a comment [PDF] in which it argued that "The emergence of BPL, along with the many other largely deregulated alternative broadband platforms ranging from cable to satellite to fixed wireless to WiFi and others, reinforces the urgent need for the Commission to classify all broadband services under Title I and to treat all broadband providers equally. Local wireline companies face a host of burdensome regulatory obligations when they provide broadband, while their competitors operate largely free from regulation."

Alliance for Public Technology (APT) submitted a comment [APT] in which it argued that "All broadband providers must operate under the same rules. ... An important component of this regulatory parity is the continued existence of consumer protections that have governed the telecommunications world."

There is also the argument that the FCC ought to prevent electric utility companies from exerting monopoly control over their essential facilities. That is, they may provide broadband internet services, while at the same time restricting access to their poles by competitors.

Ashcroft Addresses Roving Wiretaps and Access to Business Records

9/22. Attorney General John Ashcroft gave another speech in which he addressed the expansion of law enforcement powers under the USA PATRIOT Act. He covered roving wiretaps, and access to business records under Section 215 of the Act.

He stated that "for years we have been able to use roving wiretaps in organized crime and drug cases. If a drug trafficker is working on a big haul of contraband and moves from his home phone to his office phone and then to his cell phone, the FBI can use the same wiretap to listen to all his conversations, instead of having to get a warrant for each phone the trafficker is using. If tools like this have worked against gangsters, drug king pins and murderers, then why shouldn't we use them against terrorists?"

"We should. And that's why Congress ... led by Chairman Sensenbrenner ... passed the PATRIOT Act by a wide, bipartisan margin ... to give law enforcement the same tools and capabilities to prevent terrorism that we have used to combat other forms of crime", said Ashcroft

Ashcroft spoke in Milwaukee, Wisconsin. Rep. James Sensenbrenner (R-WI), the Chairman of the House Judiciary Committee, represents a Milwaukee area district.

He continued that "Recently, some in Washington have created an hysteria that local libraries are ``under siege by the FBI,´´ that we are rifling through the reading records of everyday Americans. The fact is, with just 11,000 FBI agents and over a billion visitors to America's libraries each year, the Department of Justice has neither the staffing, the time the inclination, nor the authority to monitor the reading habits of Americans."

"I asked the FBI and the Department of Justice to declassify the report on how many times we have used the Patriot Act business record authority to check library records. And what did the report reveal? No one's reading habits have been reviewed. Not a single American's library records have been reviewed under the Patriot Act", said Ashcroft.

Federal Circuit Reverses in Computer Based Inventions Case

9/22. The U.S. Court of Appeals (FedCir) issued its divided opinion [MS Word] in MIDCO v. Elekta, a patent infringement case involving a computer based inventions. The Appeals Court reversed the District Court.

MIDCO is the holder of the U.S. Patent No. 5,099,846 titled "Method and apparatus for video presentation from a variety of scanner imaging sources" and U.S. Patent No. 5,398,684 titled "Method and apparatus for video presentation from scanner imaging sources". The inventions disclosed in these patents involve a computer implemented system for use in brain surgery. Specifically, the Court wrote that they attempt to "to enhance the surgeon's ability to conceptualize the structures inside the brain by combining stereotactic surgical techniques with various imaging technologies, including computerized axial tomography (``CT´´) and nuclear magnetic resonance (``NMR´´) scanning."

MIDCO filed a complaint in U.S. District Court (SDCal) against Elekta alleging that Elekta's products infringe the 846 and 684 patents. Elekta asserted noninfringement and invalidity.

The District Court granted MIDCO's motion for partial summary judgment that its patents are not invalid. The jury found that the patents were infringed and awarded $16 Million in damages. The District Court denied Elekta's motions for judgment as a matter of law (JMOL) following the verdict. This appeal followed.

The Appeals Court reversed the District Court's denial of Elekta's motion for JMOL. The Appeals Court also reversed the grant of summary judgment of noninvalidity to MIDCO. Judge Newman wrote a strenuous dissent.

On the issue of infringement, the Appeals Court's opinion, and the dissenting opinion, focus on the clause in the patent claims that states "means for converting said plurality of images into a selected format." The majority held that the District Court erred in its construction of the converting means limitation. It held that digital-to-digital conversion by software routines is not within the scope of the disclosed conversion.

Judge Clevenger, writing for the majority, stated that "The correct inquiry is to look at the disclosure of the patent and determine if one of skill in the art would have understood that disclosure to teach software for digital-to-digital conversion and been able to implement such a program, not simply whether one of skill in the art would have been able to write such a software program."

Judge Newman wrote in dissent that "The patent specification need not ``teach software´´ and the writing of routine programs in order to teach how to practice the described method.  It suffices if one of skill in the art ``would have been able to write´´ a standard program of digital-to-digital conversion.  If one of skill in the programming art would have been able to write such a program without undue experimentation, the statutory requirements are met." She added, "Now requiring that more must be recited than that the computerized conversion is run by software, it is far from clear what my colleagues are requiring. Is this court now requiring a five-foot-shelf of zeros and ones?"

She concluded that "The majority has created inappropriate conditions for computer-based inventions".

This case is Medical Instrumentation and Diagnostics Corporation v. Elekta AB, et al., No. 03-1032, an appeal from the U.S. District Court for the Southern District of California, Judge Robert Whaley presiding. Judge Raymond Clevenger wrote the opinion, in which Judge Alvin Schall joined. Judge Pauline Newman dissented.

Court Denies Class Certification in Freelance Photographers' Copyright Infringement Case

9/22. The U.S. District Court (DMass) issued an order [3 pages in PDF] in Resnick v. Copyright Clearance Center denying Resnick's motion for class certification.

The Copyright Clearance Center (CCC) acts as an agent for publishers by granting licenses to businesses, academic institutions, libraries, and other entities for the photocopying of magazine articles. It sells licenses, and pays a portion of the licensing revenues to the magazine publishers.

Seth Resnick, Paula Lerner and Michael Grecco are freelance photographers. They sell limited licenses to magazines for the use of their works, and retain all rights beyond the one-time publication.

They filed a complaint in U.S. District Court (DMass) against the CCC alleging copyright infringement arising out of the unauthorized licensing of photocopying of their images. They also sought class action status. The present order addresses only their motion for class certification, pursuant to Rule 23 of the Federal Rules of Civil Procedure.

The District Court denied the motion for failure to satisfy the numerosity requirement. That is, Rule 23(a) provides that class certification is proper only if, among other requirements, "the class is so numerous that joinder of all members is impracticable".

The Court wrote that "In order to satisfy the numerosity requirement, plaintiffs must show that it is impracticable to join all photographers who have sold their copyright-registered images to CCC-affiliated publications under limited licenses, thereby retaining the exclusive right to reproduce their own work. Citing deposition testimony by the former executive director of the American Society of Magazine Photographers (``ASMP´´), plaintiffs estimate that there are ``roughly 20,000´´ freelancers working in the United States. Additionally, plaintiffs state that freelancers ``typically only license limited use of their product.´´"

The Court continued that "The primary evidence for this proposition is plaintiff Seth Resnick’s declaration that ``[t]he standard practice in the industry is for freelance photographers to own the copyright in their photographic images´´ and excerpts from two ASMP manuals that suggest the same. Such bare assertions do not begin to address the question of how many photographers grant limited licenses to publishers that do not include photocopying rights. The record provides little basis for this Court to determine whether joinder of all class members is impracticable or, for that matter, whether the limited licenses granted by plaintiffs are typical of the class."

FRB Governor Addresses Info Tech and Consumer Financial Services

9/22. Federal Reserve Board (FRB) Governor Mark Olson gave a speech in San Antonio, Texas titled "Increased Availability of Financial Products and the Need for Improved Financial Literacy" in which he addressed the role of information technology in the financial services industry.

Olson began by noting that "Many of the changes in the delivery and production of financial services are directly attributable to advances in technology and telecommunications. Just as it has in nearly every other area of the economy, technological progress has dramatically increased organizational efficiency and enhanced consumer convenience in the financial services industry."

He stated that "consumer use of computers to conduct financial activities continues to grow in popularity". For example, the Federal Reserve's 2001 Survey of Consumer Finances (SCF) "revealed that 19 percent of families accessed at least one of their accounts via the Internet, which is five times more than the number of families responding to this question on the 1995 SCF."

He also stated that "the development of credit scoring technology has had the most significant effect on the evolution of the financial services industry. The widespread use of computer models to evaluate and predict credit risk has had a tremendous impact on institutions' ability to reduce underwriting costs and has increased opportunities for identifying new customers."

He concluded that the "culmination of improvements in information processing technology, product innovation, the relaxation of regulatory restrictions, and enhanced competition has helped lower costs and increase accessibility to credit" and contributed to the "democratization of credit".

EPIC Submits Privacy Complaint To FTC Regarding JetBlue

9/22. The Electronic Privacy Information Center (EPIC) submitted a complaint to the Federal Trade Commission (FTC) in which it alleged that JetBlue Airways Corporation and Acxiom Corporation violated Section 5 of the Federal Trade Commission Act (FTCA), codified at 15 U.S.C. § 45(a)(1), in connection with the disclosure of consumer personal information to Torch Concepts Inc.

The EPIC alleges that JetBlue collected personal information from its customers through its web site, and promised customers in its privacy policy that it would not share this information, but did in fact provide the information to an information mining company at the request of the Department of Defense (DOD). The EPIC alleges that this constitutes a deceptive trade practice that violates the FTCA. See, full story.

Echostar Files Petition for Review of FCC's Northpoint Orders

9/22. Echostar filed a petition for review with the U.S. Court of Appeals (DC) of the Federal Communications Commission's (FCC) orders regarding subsidiary terrestrial use of the 12.2 - 12.7 GHz band.

Echostar wants the Appeals Court to vacate two orders of the FCC that provide for the sharing of spectrum by satellite users, such as Echostar, and terrestrial users that employ the technology developed by Northpoint Technologies. This technology is intended to provide a wireless alternative to cable, as well as high speed wireless internet access.

Echostar states in its petition that "the FCC rulings have unlawfully and arbitrarily authorized a new service to operate in a portion of the electromagnetic spectrum currently used to provide Digital Broadcast Service ("DBS") television service to many millions of households, thereby exposing DBS providers (including Echostar) and their customers to the threat of harmful interference from the new service." (Parentheses in original.)

The FCC announced the first of the two orders under review -- its Memorandum Opinion and Order and Second Report and Order -- on April 23, 2002. The FCC released the text of this order on May 23, 2002. It published its notice in the Federal Register on June 26, 2002, at Vol. 67, Page 43031. This is FC 02-116. See also, story titled "FCC Acts on Northpoint Application" in TLJ Daily E-Mail Alert No. 417, April 24, 2002.

The FCC announced the second of the two orders under review -- its Fourth Memorandum Opinion and Order -- on April 22, 2003. The FCC released the text of this order on April 29, 2003. It published its notice in the Federal Register, on July 25, 2003, at Vol. 68, No. 143, at Pages 43942 - 43946. This is FCC 03-97.

This case is Echostar Satellite Corporation v. FCC and USA, Appeals Court No. 03-1286. Echostar is represented by Pantelis Michalopoulos and Steven Reed of the law firm of Steptoe & Johnson.

FCC Approves Merger of HBC and Univision

9/22. The Federal Communications Commission (FCC) announced that it approved the merger of Hispanic Broadcasting Corporation (HBC) and Univision Communications. It also released its Memorandum Opinion and Order [52 pages in PDF].

The FCC adopted this Memorandum Opinion and Order (MOO) on September 8, but did not announce or release it until September 22. This order is FCC 03-218. This proceeding is MB Docket No. 02-235. See also, FCC release [2 pages in PDF].

Univision is the largest broadcaster of Spanish language television programming in the U.S. It also has one cable channel, internet web sites, and music recording, distribution, and publishing operations. HBC operates over 60 mostly Spanish language radio stations.

This proceeding is a license transfer proceeding. The MOO approves the transfer of licenses to accomplish the merger. It is also a merger review involving antitrust analysis. The FCC MOO states that "we also conclude that the merger will not be anticompetitive".

Univision has an attributable interest in Entravision Communications, which owns and controls 18 full-service television stations and 52 full-service radio stations. This was previously addressed by the Department of Justice's (DOJ) Antitrust Division. On March 26, 2003, the DOJ filed a complaint in U.S. District Court (DC) against Univision and HBC seeking injunctive relief to block Univision's proposed acquisition of HBC. However, the DOJ also simultaneously settled the case.

The DOJ filed a proposed consent decree to settle the lawsuit. The settlement required Univision to sell a significant portion of its partial ownership in Entravision, relinquish its right to two seats on Entravision's Board of Directors, and give up give up the right to vote its shares or veto certain Entravision business decisions. See, Stipulation and Order proposed Final Judgment.

See also, story titled "DOJ Requires Univision to Divest Interests in Entravision Before Acquiring Hispanic Broadcasting" in TLJ Daily E-Mail Alert No. 632, March 27, 2003.

The FCC reviewed the DOJ Consent Decree in its MOO. It wrote that "the DOJ stated that it would not oppose the merger of Univision and HBC, if (a) Univision’s interest in Entravision is converted to a new class of Entravision nonvoting stock with no rights to designate members or otherwise influence the Entravision Board of Directors; (b) Univision's total equity interest in Entravision is reduced to 15% of total equity (both voting and nonvoting) in 3 years, and 10% of total equity (both voting and nonvoting) in 6 years; and (c) certain proposed nonvoting shareholder approval rights associated with the new class of nonvoting stock are removed. The DOJ has also set forth specific provisions meant to further ensure that Univision is insulated from participating in Entravision’s radio business."

The MOO states that "We conclude that the absence of the contractual approval right over the sale of Entravision’s radio stations and the Consent Decree’s provisions reasonably prevent Univision from exercising a cognizable level of influence over the core operating functions of Entravision's radio stations while those provisions remain in effect. We conclude, moreover, that attribution of Univision's interest in Entravision’s television stations alone will not result in violation of the Commission's radio/television cross-ownership rule."

The MOO also states that "we have generally assumed, in our competition analyses of radio transactions, that radio and television stations do not compete in the same product market, an approach the DOJ has generally followed. The record in this proceeding offers no basis to disturb this conclusion. We also note that our conclusions are consistent with the actions of the Department of Justice, Antitrust Division in this case, which, after performing its own investigation, did not pursue possible market power allegations with regard to a purported Spanish-language television-radio market."

This was a divided decision. Chairman Michael Powell and Commissioners Kathleen Abernathy and Kevin Martin supported the decision. They wrote in a joint statement [PDF] that "The argument has been made that the FCC should have found a Spanish language media market. Both the FCC and the DOJ have long maintained that television and radio are separate markets. In this transaction, a pure television company is buying a pure radio company and thus there is no reduction in competition."

They also wrote that this merger "will give Hispanic media a better opportunity to compete against big media companies, capturing more advertising revenue to allow it to expand unique language and cultural offerings to its audiences."

Commissioner Michael Copps wrote in a statement [3 pages in PDF] that "Just three months ago, this Commission walked away from most of its media concentration protections, surrendering to a handful of corporations far too much power to determine what news, information, and entertainment every American will receive. Today’s Order allows one of the Big Media conglomerates, Univision, to assume something close to monopoly power in the fast-growing Spanish-language media."

Commissioners Jonathan Adelstein and Copps wrote in their dissenting statement [at pages 32-52 of the MOO] that "The degree of concentration in Spanish-language broadcasting resulting from this transaction threatens to endanger competition, diversity and localism for millions of Americans who speak only or principally Spanish. Whether they watch broadcast or cable TV, listen to the radio, buy CDs, or surf the Internet, they will face the monolithic Univision".

While the majority focuses on television and radio, the dissent also discusses the internet. Adelstein and Copps noted that "In addition, Univision owns the nation's leading Spanish-language Internet site, with an 80% market share" and that HBC "maintains a network of community-focused bilingual websites".

They conclude that "No other media company has anywhere near the combined influence of Univision’s leading television, cable, music, Internet and radio properties over its respective audience."

Keep Good Time Records

9/22. The U.S. District Court (DC) issued an Order [PDF] and Memorandum Opinion [63 pages in PDF] in New York v. Microsoft granting the state of Massachusetts' motion for attorneys fees, in part. The Court awarded Massachusetts $967,014.52 in attorneys fees, and nothing in costs. Massachusetts had requested $1,992,075.00 in attorneys fees.

The Court wrote that "it is clear that the documentation is in many ways deficient and for that reason Plaintiff’s request must be reduced." It concluded that "Given the deficient documentation and lack of explanation provided by Plaintiff, the Court considers this to be a generous award."

People and Appointments

9/22. The Senate confirmed Glen Conrad to be a Judge of the U.S. District Court for the Western District of Virginia by a vote of 89-0. See, Roll Call No. 354.

9/22. The Senate confirmed Henry Floyd to be a Judge of the U.S. District Court for the District of South Carolina by a vote of 89-0. See, Roll Call No. 355.

9/22. The Federal Communications Commission (FCC) announced the membership of its Advisory Committee on Diversity for Communications in the Digital Age. See, FCC release [PDF]. The committee will hold its first meeting, which will be open to the public, on Monday, September 29, 2003, in the FCC's Commission Meeting Room, TW-C305.

More News

9/22. The Competitive Telecommunications Association (CompTel) and the Association for Communications Enterprises (ASCENT) announced that their members approved the merger of the two groups. The new entity will be named the CompTel/ASCENT Alliance. The merger will become effective on October 1, 2003. See, release.

9/22. Paxson Communications filed a petition for review of the Federal Communications Commission's (FCC) media ownership order with the U.S. Court of Appeals (DCCir). It previously filed a petition for review with the Third Circuit. It stated in the present petition that it wanted to assure its participation in any DC Circuit proceeding in the event that the consolidation order "does not render venue proper in the Third Circuit". This is Appeals Court No. 03-1287.

VeriSign Refuses to Suspend Deployment of Wildcard Service

9/21. VeriSign wrote a letter to the Internet Corporation for Assigned Names and Numbers (ICANN) in which it declined the ICANN's September 19 request that it voluntarily suspend the deployment of wildcard service into the .com and .net top level domain zones. On September 20 the Internet Architecture Board (IAB) released a report that reviews the nature of the service, and the problems that it has created. The IAB found that the service "broke several simple spam filters", and creates "significant privacy concerns".

Also, on September 22, the ICANN's Security and Stability Advisory Committee released a report titled "Recommendations Regarding VeriSign's Introduction of Wild Card Response to Uninstantiated Domains within COM and NET".

It found that "VeriSign's change appears to have considerably weakened the stability of the Internet, introduced ambiguous and inaccurate responses in the DNS, and has caused an escalating chain reaction of measures and countermeasures that contribute to further instability."

It reiterated the request that VeriSign "voluntarily suspend the service". The committee also stated that "We call on the IAB, the IETF, and the operational community to examine the specifications for the domain name system and consider whether additional specifications could improve the stability of the overall system. Most urgently, we ask for definitive recommendations regarding the use and operation of wildcard DNS names in TLDs and the root domain, so that actions and expectations can become universal. With respect to the broader architectural issues, we call on the technical community to clarify the role of error responses and on the separation of architectural layers, particularly and their interaction with security and stability."

See also, story titled "ICANN Asks VeriSign to Suspend Wildcard Service" in TLJ Daily E-Mail Alert No. 743, September 22, 2003.

Go to News from September 16-20, 2003.