Bush Signs Bill to Promote E-Commerce in Contact Lens Sales

12/5. President Bush signed HR 3140, the "Fairness to Contact Lens Consumers Act". See, White House release. It does not reference the internet. However, it removes some barriers to the sale of replacement contact lenses over the internet.

It provides that "When a prescriber completes a contact lens fitting, the prescriber -- (1) whether or not requested by the patient, shall provide to the patient a copy of the contact lens prescription; and (2) shall, as directed by any person designated to act on behalf of the patient, provide or verify the contact lens prescription by electronic or other means."

Furthermore, it provides that "A prescriber may not -- (1) require purchase of contact lenses from the prescriber or from another person as a condition of providing a copy of a prescription ... or verification of a prescription ... ; (2) require payment in addition to, or as part of, the fee for an eye examination, fitting, and evaluation as a condition of providing a copy of a prescription ... or verification of a prescription ... ; or (3) require the patient to sign a waiver or release as a condition of verifying or releasing a prescription."

That is, currently there are eye doctors who both perform eye examinations, and sell contact lenses. In addition, there are eye doctors who restrict their customers' ability to purchase their contact lenses from other suppliers. This results in higher prices for consumers, and leads many consumers to replace the contact lenses less frequently. This bill provides that a consumer may obtain a eye examination from one source, and purchase lenses and replacement lenses from another source, including internet based retailers.

This bill passed the House on November 19, 2003 by a vote of 406-12. See, Roll Call No. 644. The Senate passed the bill by unanimous consent on November 20. See, story titled "House Passes Contact Lens Bill" in TLJ Daily E-Mail Alert No. 783, November 20, 2003.

HR 3140 follows HR 2221, also titled the "Fairness to Contact Lens Consumers Act". It was introduced on May 22, 2003 by Rep. Richard Burr (R-NC), Rep. Billy Tauzin (R-LA), Rep. James Sensenbrenner (R-WI), and Rep. Jim Matheson (D-UT). See, story titled "Bill Would Facilitate Internet Sale of Replacement Contact Lenses" in TLJ Daily E-Mail Alert No. 669, May 29, 2003.

The Federal Trade Commission (FTC) has studied internet sales of contact lenses. Ed Cruz, the then Director of the FTC's Office of Policy Planning, testified before a House Commerce Committee subcommittee on state impediments to e-commerce last year. He presented the FTC's prepared statement, which reviewed the FTC's March 27, 2002, comment submitted to the State of Connecticut regarding the sale of disposable replacement contact lenses over the internet. The FTC wrote that "requiring stand alone sellers of replacement contact lenses to obtain Connecticut optician and optical establishment licenses would likely increase consumer costs while producing no offsetting health benefits" and "serve as a barrier to the expansion of Internet commerce". See also, story titled "FTC Backs Internet Sales of Contact Lenses" in TLJ Daily E-Mail Alert No. 399, March 29, 2002.

HR 3140 also gives the FTC rule making authority, civil enforcement authority, and instructions to write a report to the Congress on "competition in the sale of prescription contact lenses".

GAO Recommends That DOD Delay Start of Transformational Satellite Acquisition Program

12/5. The General Accounting Office (GAO) released a letter [21 pages in PDF], dated December 4, 2003, to Secretary of Defense Donald Rumsfeld, regarding "Space Acquisitions: Committing Prematurely to the Transformational Satellite Program Elevates Risks for Poor Cost, Schedule, and Performance Outcomes".

This letter states that "In a multibillion-dollar effort, the Department of Defense (DOD) plans to build a space-based communications system that leverages technologies never before used in space. Such a system would enable DOD to transform how information is collected on potential U.S. adversaries and how military forces are warned of hostile action. The backbone of this system will be the Transformational Satellite (TSAT), which is expected to play a pivotal role in connecting communications networks on the ground, in the air, on ships, and in space. TSAT represents a potential leap forward in communications speed, security, and availability. The Air Force, which heads up DOD’s space programs, intends for TSAT to be interoperable with similar systems being acquired for the National Aeronautics and Space Administration (NASA) and the intelligence agencies."

It concludes that "the DOD has embarked on a new transformational communications architecture to take advantage of emerging technologies and to remove communications constraints from combat. The department has told the warfighter and Congress that TSAT is a key system that is necessary to achieve this architecture. Responding quickly, the Air Force has set an imminent deadline of December 2003 to start the TSAT program. By starting the program so soon, the Air Force is moving ahead without mature technologies and early design studies -- two pillars of knowledge that would help program officials to reliably establish cost, schedule, and performance goals. This knowledge is not expected to be available until 2006. Our work over the years has found that when programs have been started without the requisite knowledge, program managers and contractors are later burdened by unreasonable expectations about cost, schedule, and performance. Problems usually arise later that lead to cost increases, delays in delivering needed capability to the warfighters, and performance shortfalls."

The letter recommends that the DOD "delay the start of the TSAT acquisition program until technologies have been demonstrated to be at an acceptable level of maturity (at least TRL 6) and until the developing contractor has determined through systems engineering that the design is feasible and producible."

The letter is signed by Robert Levin, Director, Acquisition and Sourcing Management, GAO.

NCTA Files Petition for Rehearing En Banc in Brand X v. FCC

12/5. The National Cable Telecommunications Association (NCTA) and several cable companies filed a petition for rehearing en banc [PDF] with the U.S. Court of Appeals (9thCir) in the case Brand X v. FCC.

The FCC filed its petition for rehearing en banc on December 4. See, story titled "FCC Files Petition for Rehearing En Banc in Brand X Case" in TLJ Daily E-Mail Alert No. 793, December 5, 2003.

The NCTA's petition, like the FCC's, argues that the three judge panel erred by not applying the Chevron standard. However, the NCTA petition also argues the likely consequences for broadband deployment if the October 6, 2003 opinion [39 pages in PDF] of the three judge panel is not reversed.

The NCTA petition argues that "en banc review is warranted because the subject matter at hand is unusually important. At issue in this case is the regulatory blueprint not just of cable modem service, but of all broadband Internet access -- whether provided over coaxial cable, telephone wire, radio spectrum, or some other medium. Accelerating the proliferation of broadband Internet access is a national economic priority: it is widely accepted that broadband, if available to sufficient numbers of Americans, will reignite the national economy." (Footnotes omitted.)

The NCTA petition continues that "Classifying cable broadband service as a telecommunications service threatens to stifle that deployment. While an "information service" can develop relatively free from burdensome regulation, and the Commission can tailor a regulatory scheme designed to promote its widespread development and deployment, a ``telecommunications service´´ -- the classification in which the panel placed what it characterized as the "transport component" of cable modem service -- is subject to heavy regulation of nearly every aspect of the business unless the Commission specifically forbears from such regulation."

The three judge panel vacated the FCC's declaratory ruling that cable modem service is an information service, and that there is no separate offering as a telecommunications service. The FCC adopted this Declaratory Ruling and Notice of Proposed Rulemaking [75 pages in PDF] at its March 14, 2002 meeting. This is FCC 02-77 in Docket No. 00-185 and Docket No. 02-52.

This case is Brand X Internet Services v. Federal Communications Commission, and other consolidated petitions for review of a final order of the FCC, Nos. 02-70518, 02-70684, 02-70685, 02-70686, 02-70879, 02-71425, and 02-72251. The opinion of the three judge panel is also published at 345 F.3d 1120. The present petition for rehearing en banc was submitted by the National Cable Telecommunications Association (NCTA), Time Warner, Time Warner Cable, Charter Communications, and Cox Communications, who are intervenors in this case.

Verizon Not Liable for Employee's Forged and Fraudulent E-Mail to Complaining Customer

12/5. The U.S. Court of Appeals (6thCir) issued its opinion in Booker v. GTE.net, affirming the District Court's dismissal of a civil complaint. A Verizon employee sent a forged and fraudulent e-mail message to a customer who had repeatedly complained about Verizon internet access service. The forged e-mail, which impersonated an employee a state Attorney General, instructed the customer to stop complaining. The impersonated employee sued GET.net/Verizon alleging libel, failure to supervise an employee, and other claims.

The plaintiff, Jarmilia Booker, is a long-time employee of the Office of the Attorney General (OAG) of the state of Kentucky.

An employee of Verizon (which acquired GTE) wrote an e-mail message to a Verizon customer who had complained about Verizon service. The customer had also forwarded copies of the complaints to the Kentucky OAG. The Verizon employee deceptively represented that the e-mail was sent by, not Verizon, but by Jarmilia Booker. The Verizon employee further asserted in the forged e-mail message that the customer's complaint was a waste of time and "pathetic". The forged message instructed the customer to stop complaining.

Booker filed a complaint in U.S. District Court (EDKent) against GTE.net, doing business as Verizon Internet Solutions, alleging violation of the Racketeering Influenced and Corrupt Organizations Act (RICO), and state law claims, including failure to supervise employee, intentional infliction of emotional distress, civil conspiracy and libel.

The District Court dismissed the complaint for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.

The Appeals Court affirmed. First, Booker did not argue the RICO claim on appeal. Second, the Appeals Court affirmed the dismissal of the negligent supervision claim on the grounds that the complaint did not allege "knowledge" on the part of Verizon. Third, the Appeals Court affirmed the dismissal of the intentional infliction of emotional distress, civil conspiracy and libel claims on the grounds that employee was not acting within the scope of his or her employment.

Hence, a Verizon employee who writes an e-mail to a Verizon customer about that customer's contract for services with Verizon, may not be acting within the scope of his or her employment with Verizon -- in the Sixth Circuit.

This case is Jarmilia Booker v. GTE.NET, LLC, U.S. Court of Appeals for the 6th Circuit, No. 02-6190, an appeal from the U.S. District Court for the Eastern District of Kentucky, at Frankfort, D.C. No. 02-00009, Judge Joseph Hood presiding.

FBI Publishes CALEA Final Notice of Capacity

12/5. The Federal Bureau of Investigation (FBI) published a notice in the Federal Register that it titles "Final notice of capacity". This pertains to the FBI's implementation of  the Communications Assistance for Law Enforcement Act (CALEA), which is codified at 47 U.S.C. § 1001, et seq.

The FBI also requests comments on this "Final notice of capacity". The deadline to submit comments to the FBI is February 3, 2004. This notice states that "at the end of the comment period, the FBI will review any such comments it receives and publish a finalized notice in the Federal Register." See, Federal Register, December 5, 2003, Vol. 68, No. 234, at Pages 68112 - 68121.

Background. The just published notice discusses at length the meaning of the term "simultaneously", which is used in 47 U.S.C. § 1003. Section 1003 addresses the required capacity of telecommunications carriers to conduct electronic surveillance. That is, it goes to the "actual number of communication interceptions, pen registers, and trap and trace devices ..." and the "maximum capacity required to accommodate all of the communication interceptions, pen registers, and trap and trace devices ..." It requires the Attorney General to publish a notice in the Federal Register of the actual number and maximum capacity that he estimates that government agencies authorized to conduct electronic surveillance may conduct and use "simultaneously".

The FBI previously issued a final notice [94 pages in PDF], on March 12, 1998. However, the U.S. Telecom Association (USTA) and others challenged that final notice. See, original complaint filed in the U.S. District Court (DC) on August 19, 1998 by the USTA. The District Court granted summary judgment in favor of the FBI on all issues.

On appeal, the U.S. Court of Appeals (DCCir) reversed in part, with instruction that the matter be remanded to the FBI. The Court of Appeals issued its opinion on January 18, 2002. The Appeals Court affirmed the District Court's grant of summary judgment on the USTA's cost recovery claim, but reversed on the notice of capacity claim.

The District Court case is USTA v. FBI, D.C. No. 98cv02010, Judge Hogan presiding. The Appeals Court case is USTA v. FBI, A.C. No. 00-5386, Judges Williams, Ginsburg and Henderson presiding.

The main gist of the some of the disputes between service providers and the FBI, on the subject of capacity, as well as on some other matters, has been economic. It goes to who bears the burden and expense of complying with the FBI's demands.

Making networks, systems and services capable of being tapped, intercepted and monitored requires considerable expense and effort. And the more intercepts there are, the greater the cost. Normally, when law enforcement entities acquire things, like cars, computers or employees, they purchase or hire these in the marketplace. And, these law enforcement entities need to go to their legislatures to obtain funds to make these acquisitions. CALEA imposes an entirely different regime for the acquisition of interception of communications. It requires that the service providers must give intercepts to the law enforcement entities for free. Whenever something is free, consumption tends to go up.

Since the FBI does not bear the cost of interception, it has aggressively sought expansive interpretations of its authority under the CALEA, knowing that the costs of meeting its demands will be borne by taxpayers, consumers of communications services, and service providers.

Service providers have not been thrilled with this regime, and the demands of the FBI. Moreover, service providers tend not to like to snoop on their customers. And, they certainly do not want their customers to be left with the impression that widespread surveillance is going on.

Summary of December 5 Notice. The just published notice addressed several subjects. First, the FBI reasserted its position that the interception of multiple communications in a single day should be counted as a single item for the purposes of Section 1003.

The Appeals Court wrote that the 1998 notice "treated interceptions as ``simultaneous´´ if they occur on the same day, even though they may each only take moments and do not overlap in the least. ... USTA objects to both these decisions. And rightly so." However, the Appeals Court did not vacate. Rather, it wrote that "we reverse the judgment of the district court, with instructions to remand the case to the agency for a more adequate explanation".

Now, on remand, the FBI continues to assert that "we believe that capacity requirements are most appropriately based on a number of surveillances being conducted on the same day, not on a number of overlapping interceptions." That is, the FBI still wants to count the interception of two phone calls (or two numbers dialed, two e-mail addresses, and etc.) in one day as a single item. This is the very interpretation that the Appeals Court condemned in its 2002 opinion.

Second, the just published notice addresses the breakdown of capacity requirements by type of surveillance. That is, the 1998 notice did not differentiate between the interception of content and the use of pen register or trap and trace devices.

The Appeals Court wrote that the 1998 notice "insisted that these statements of ``actual number´´ and ``capacity´´ were properly in terms that drew no distinction between different types of interceptions (e.g., communications content versus mere pen registers), even though they differ heavily in their actual demands on capacity." (Parentheses in original.)

The Court added that "content interceptions might require up to five delivery channels because of multiple participants on a call, while others, such as pen registers and trap and trace devices, typically use only a single channel." The Court criticized this approach, reversed, and instructed the District Court to remand to the FBI for a more adequate explanation.

And now, the just published notice states that "The FBI has considered this issue and continues to find that it is appropriate, given the statutory requirements, to state the capacity  requirements for each geographic region as a single actual and single maximum number."

FBI Interpretation of CALEA. Congress passed the CALEA in 1994 to enable law enforcement authorities to maintain their existing wiretap capabilities in new telecommunications devices. The Congress had cell phones in mind. The CALEA provides that wireline, cellular, and broadband PCS carriers must make their equipment capable of certain surveillance functions.

This notice of capacity contains an FBI interpretation of the CALEA. It also contains an FBI interpretation of some of the statutes authorizing electronic surveillance by government entities, including the Omnibus Crime Control and Safe Streets Act of 1968 (and especially, its Title III), the Electronic Communications Privacy Act (ECPA), and the PATRIOT Act,  but not the Foreign Intelligence Surveillance Act (FISA). Finally, the notice contains an FBI interpretation of the relationship between the CALEA and various statutes authorizing electronic surveillance.

Readers may wish to assess whether or not the FBI's interpretations of these statutes are consistent with the language of these statutes.

For example, the FBI asserts that "Congress enacted the CALEA in 1994 to require telecommunications carriers to ensure that their networks have the capability to enable local police, Federal officers and all other law enforcement agencies to conduct lawfully authorized electronic surveillance."

However, the language of the CALEA provides that not all lawfully authorized electronic surveillance is covered by the CALEA. Specifically, the CALEA provides that its requirements "do not apply to (A) information services; or (B) equipment, facilities, or services that support the transport or switching of communications for private networks or for the sole purpose of interconnecting telecommunications carriers."

Moreover, when the Congress passed the PATRIOT Act in 2001, it amended 18 U.S.C. § 3127 to provide that the old phone industry concepts of pen registers and trap and trace devices apply to electronic communications, including internet communications. (See, Section 216.) However, the PATRIOT did not expand FBI authority, or expand service provider obligations, under the CALEA.

To the contrary, the PATRIOT Act provided (at Section 222) that "nothing in this Act shall impose any additional technical obligation or requirement on a provider of wire or electronic communication service or other person to furnish facilities or technical assistance". Moreover, the legislative history of this language is that it was offered by Representatives who were concerned about the FBI's history of expansive implementation of the CALEA. See, story titled "No Technology Mandates", and other stories about the markup of the PATRIOT Act, in TLJ Daily E-Mail Alert No. 279, October 4, 2001.

The point is that the FBI's December 5 notice asserts that "lawfully authorized electronic surveillance" is subject to CALEA. Yet, surveillance of certain information services is lawful, but not covered by CALEA.

The FBI notice does not explain its reasoning. However, the FBI's ex parte communications and closed meetings with the Federal Communications Commission (FCC) Commissioners and staff regarding the application of the CALEA to voice over internet protocol (VOIP) services may provide the basis of its assertion.

It simply asserts that services like VOIP should be classified as telecommunications services, and hence, is subject to CALEA. See, story titled "FBI Wants Broadband Internet Access Classified As A Telecommunications Service So That CALEA Will Apply" in TLJ Daily E-Mail Alert No. 707, July 30, 2003.

California Court of Appeal Rules in Case Regarding Echostar Advertising

12/5. The California Court of Appeal (2/5) issued its opinion [MS Word] in CA v. Echostar, a case involving state law claims alleging false advertising of digital broadcast satellite service. The trial court granted summary judgment to Echostar. The Court of Appeal affirmed in part and reversed in part.

The plaintiffs are Consumer Advocates (CA) and David Pritikin. The Defendants are Echostar Satellite Corporation, Dish Network, Echostar Communications Corporation and Echosphere Corporation.

The plaintiffs filed a complaint in Superior Court in Los Angeles County alleging violation of the California Consumer Legal Remedies Act (CLRA), the False Advertising Act, and the Unfair Competition Law (UCL). They alleged that Echostar made misleading statements about its satellite television service in a brochure. They complain about the following statements: "crystal clear digital video," "CD-quality" audio, and an on-screen program guide which would allow a consumer to view the schedule "up to 7 days in advance," and that 50 channels would be provided.

The Superior Court granted summary judgment to Echostar. The Court of Appeal affirmed as to breach of warranty, but reversed as to other claims. It held that there are triable issued on whether the statements were untrue or misleading.

This case is Consumer Advocates, et al. v. Echostar Satellite Communications, et al., Court of Appeal of the State of California, Second Appellate District, Division Five, Case No. B16149, an appeal from the Superior Court for Los Angeles County, Super. Ct. No. BC21110.

More News

12/5. The Federal Communications Commission (FCC) adopted an Order [3 pages in PDF] on December 4, 2003, which it released on December 5, 2003, that amends Part 15 (regarding radio frequency devices) and Part 76 (regarding multichannel video and cable television services) of the FCC's rules.

Bush Signs Fair and Accurate Credit Transactions Act

12/4. President Bush signed HR 2622, the "Fair and Accurate Credit Transactions Act of 2003". See, White House release and bill summary.

This is a large bill that includes provisions pertaining to prevention of identity theft and restoration of identity theft victim credit history, use of and consumer access to credit information, accuracy of consumer report information, use and sharing of medical information in the financial system, and financial literacy.

Bush stated at a White House signing ceremony that "This bill also confronts the problem of identity theft. A growing number of Americans are victimized by criminals who assume their identities and cause havoc in their financial affairs. With this legislation, the federal government is protecting our citizens by taking the offensive against identity theft." See, transcript.

He continued that "this law will create a national system of fraud detection so that identity theft can be traced and dealt with earlier. Up to now, victims of identity theft have been left to manage the problem themselves -- ask Michael -- by calling all their credit card companies to shut down each of their accounts. And then the victims must call each of the three major credit rating agencies to report the crime and to protect their credit rating. Under this legislation, victims will only have to make one phone call to receive advice and to set off a nationwide fraud alert. It's an important reform. I appreciate you all for putting this into law. Credit bureaus will then take immediate measures to protect the consumer's credit standing."

Rep. Mike Oxley (R-OH), the Chairman of the House Financial Services Committee, stated in a release that "This is the most significant consumer protection and financial literacy legislation passed by Congress in decades ... With a free credit report and powerful new tools to fight fraud, consumers have the ability make identity theft a crime of the past."

See also, story titled "House and Senate Pass Conference Report on Credit Reporting Bill" in TLJ Daily E-Mail Alert No. 785, November 24, 2003.

Appeals Court Denies Stay of Number Portability Order

12/4. The U.S. Court of Appeals (DCCir) denied the U.S. Telecom Association's (USTA) request for a stay of the Federal Communication Commission's (FCC) order requiring wireline to wireless number portability.

The USTA and CenturyTel sought a stay of the FCC's November 10, 2003 Memorandum Opinion and Order and Further Notice of Proposed Rulemaking [35 pages in PDF] regarding number portability. The November 10 order requires that wireline carriers must port numbers to wireless carriers in certain circumstances. The November 10 order is FCC 03-284 in CC Docket No. 95-116.

Said USTA P/CEO Walter McCormick, "we are disappointed". See, USTA release. However, Cellular Telecommunications & Internet Association (CTIA) P/CEO Steve Largent called it "the right decision". See, CTIA release.

See, stories titled "FCC Releases LNP Order That Addresses Wireline to Wireless" in TLJ Daily E-Mail Alert No. 776, November 11, 2003; "Powell Addresses Number Portability" in TLJ Daily E-Mail Alert No. 784, November 20, 2003; "FCC Denies Petition for Stay of Number Portability Order" in TLJ Daily E-Mail Alert No. 784, November 21, 2003; and "Appeals Court Sets Expedited Briefing Schedule in Number Portability Case" in TLJ Daily E-Mail Alert No. 785, November 24, 2003.

FCC Writes AT&T Re Number Porting Delays

12/4. John Muleta, Chief of the Federal Communications Commission's (FCC) Wireless Telecommunications Bureau (WTB) wrote a letter [PDF] to AT&T Wireless regarding the extent of AT&T's compliance with the FCC's new number portability rules that went into effect on November 24, 2003.

Muleta (at right) wrote that "Over the past few days, we have received a number of complaints from consumers and carriers, and have noted recent press accounts, indicating that a porting backlog exists for ports from AT&T Wireless to other carriers. We are committed to working with carriers to ensure that the porting process is as smooth as possible for consumers. To that end, I ask that you provide me information detailing the nature of the difficulties that AT&T Wireless appears to be facing with regard to porting numbers to other carriers, and the steps your company is taking to address this issue. Please provide me with this information by next Wednesday, December 10, 2003."

Bush Ends Steel Tariffs

12/4. President Bush signed a proclamation ending the temporary tariffs on imported steel that he imposed in March of 2002.

Bush also stated that "we will continue our steel import licensing and monitoring program so that my Administration can quickly respond to future import surges that could unfairly damage the industry. We will continue negotiations with our trading partners through the Organization of Economic Cooperation and Development to establish new and stronger disciplines on subsidies that governments grant to their steel producers." See, Bush statement.

Sen. Charles Grassley (R-IA) responded that "This is good news. The tariffs on imported steel may have helped some sectors of the economy, but they certainly hurt others. Too many Iowa manufacturers faced increased production costs because of these tariffs. The President's decision to lift tariffs will bring welcome relief to struggling American factories. Today's decision will help American manufacturers compete against their foreign counterparts.

Sen. Grassley added that "Just as important, the President's bold decision means we can avoid retaliatory tariffs that were being proposed by some of our largest trading partners. Those tariffs would have hurt a lot of innocent companies and workers in the United States and contributed to slower economic recovery. Lifting the steel tariffs to avoid harm to many American workers and farmers across the United States was the right thing to do."

Rep. Bill Thomas (R-CA), Chairman of the House Ways and Means Committee, stated that "While last year's decision was helpful to the steel industry, it did not come without costs to other sectors of the U.S. economy.  Many manufacturers in steel consuming industries have experienced increased costs as a result of the tariffs."

EU Trade Commissioner Pascal Lamy stated in a release that "I am pleased to see that after nearly two years of litigation, the US has decided to abide by their international obligations by lifting the illegal safeguards. EU steel producers and workers will be relieved, as will those in the seven other countries which stood together with the EU in contesting these measures. But more importantly, this is a test case of how important is a rules-based international trading system for all of us. ... We should now concentrate our efforts in the OECD steel talks to cut down trade distorting subsidies and global excess steel capacity, which is at the root of the problems by the US steel industry." 

Grand Jury Returns Indictment for Illegal Distribution of Prescription Drugs

12/4. The Department of Justice (DOJ) announced the unsealing of a 108 count indictment [61 page PDF scan] that was returned by a grand jury of the U.S. District Court (EDVa) on October 30, 2003. The indictment charges ten people and three companies with various offenses related to the sale of prescription drugs through web sites.

The indictment charges Vineet K. Chhabra (also known as Vincent K. Chhabra), Daniel L. Thompson, Sabina S. Faruqui (also known as Sabina K. Chhabra), Sunil K. Sethi, James A. Trovato, Daniel M. Varalli, William D. Thompson, Laurence L. Cockerille, Arturo L. Portales, Russell A. Johnson, USA Prescription, Inc., Chhabra Group, LLC, and VKC Consulting, LLC.

The indictment includes 40 counts of unlawful distribution and dispensing of controlled substances in violation of 21 U.S.C. §§ 841(a)(1), (b)(1)(D), and (b)(2). The indictment also charges conspiracy, continuing criminal enterprise, conspiracy to launder money, promotional money laundering, transactional money laundering, introduction of misbranded drugs into interstate commerce, and criminal forfeiture.

The U.S. Attorneys Office stated in a release [PDF] that "The indictment charges that the defendants used an ``online ordering process´´ to allow customers to order prescription controlled substance drugs over the Internet, through such websites as ``www.get-it-on.com.´´ When customers ordered drugs online, the indictment charges that the customers chose the type, quantity, and dose of controlled substances they wanted, and answered some questions on a medical form. However, no one checked the accuracy of the information that customers provided, as the Controlled Substances Act requires; and customers obtained the drugs without ever meeting a doctor face-to-face, as required by law."

USPTO Notices

12/4. The U.S. Patent and Trademark Office (USPTO) published a notice in the Federal Register of proposed rule changes regarding revision of patent term extension and patent term adjustment provisions related to decisions by the Board of Patent Appeals and Interferences. The notice states that "The patent term extension provisions of the Uruguay Round Agreements Act (URAA) and the patent term adjustment provisions of the American Inventors Protection Act of 1999 (AIPA) each provide for the possibility of patent term extension or adjustment if the issuance of the patent was delayed due to review by the Board of Patent Appeals and Interferences (BPAI) or by a Federal court and the patent was issued pursuant to or under a decision in the review reversing an adverse determination of patentability." The USPTO "is proposing to revise the rules of practice in patent cases to indicate that under certain circumstances a remand by the Board of Patent Appeals and Interferences shall be considered a decision in the review reversing an adverse determination of patentability for purposes of patent term extension or patent term adjustment." The deadline for public comments is January 5, 2004. See, Federal Register, December 4, 2003, Vol. 68, No. 233, at Pages 67818 - 67821.

12/4. The U.S. Patent and Trademark Office (USPTO) published a notice in the Federal Register that lists, summarizes, and sets the effective date for several corrections to a final rule revising the rules of practice in patent cases to conform them to amendments made to the Regulations under the Patent Cooperation Treaty (PCT). The effective date is January 1, 2004. See, Federal Register, December 4, 2003, Vol. 68, No. 233, at Page 67805. The original rule changes were published in a notice in the Federal Register, October 20, 2003, Vol. 68, No. 202, at Pages 59881 - 59889. The December 4, 2003 notice also contains one correction to an error in the rules of practice in patent cases relating to PCT procedure.

People and Appointments

12/4. Christie Whitman was elected to the Board of Directors of Texas Instruments. She was previously the Administrator of the Environmental Protection Agency (EPA). Before that, she was the Governor of the state of New Jersey from 1994 through 2000. See, TI release.

More News

12/4. Michael Dawson, the Deputy Assistant Secretary for Critical Infrastructure Protection and Compliance Policy at the Department of the Treasury, gave a speech in Charlotte, North Carolina. He spoke at the Conference on Critical Financial Infrastructure Protection organized by the Federal Deposit Insurance Corporation (FDIC). This speech was very similar to his speech at the Fourth E-Gov Homeland Security Conference in Washington DC on December 3. See, story titled "Treasury Department Official Addresses Critical Infrastructure Protection" in TLJ Daily E-Mail Alert No. 792, December 4, 2003.

12/4. A trial jury of the U.S. District Court (CDCal) returned guilty verdicts against William Sutcliffe on thee counts of making interstate threats to injure or kill and five counts of transferring Social Security Numbers (SSNs) with the intent to aid and abet another felony . The U.S. Attorneys Office stated in a release that Sutcliffe was a computer technician employed by Global Crossing until he was fired in September 2001. Sutcliffe created a web site and published in it personal information, including SSNs, dates of birth, and home addresses, of Global Crossing employees. He also provided hyperlinks to other web sites that contained information on identity theft.

FCC Files Petition for Rehearing En Banc in Brand X Case

12/3. The Federal Communications Commission (FCC) filed a Petition for Rehearing En Banc [19 pages in PDF] with the U.S. Court of Appeals (9thCir) in Brand X Internet Services v. FCC.

On October 6, 2003 a three judge panel of the Court of Appeals issued its opinion [39 pages in PDF] vacating the FCC's declaratory ruling that cable modem service is an information service, and that there is no separate offering as a telecommunications service. The FCC adopted this Declaratory Ruling and Notice of Proposed Rulemaking [75 pages in PDF] at its March 14, 2002 meeting. This is FCC 02-77 in Docket No. 00-185 and Docket No. 02-52.

See, full story.

Bush Signs Nanotech R&D Funding Bill

12/3. President Bush signed S 189, the "21st Century Nanotechnology Research and Development Act". See, White House release and Technology Administration release.

S 189 authorizes appropriations ($3.7 Billion) over four years (FY 2005-2008) for nanotechnology R&D programs at the National Science Foundation (NSF), Department of Energy (DOE), Department of Commerce's (DOC) National Institute of Standards and Technology (NIST), National Aeronautics and Space Administration (NASA), and Environmental Protection Agency (EPA). The NSF would be receive the largest portion of the funding.

President Bush also wrote a signing statement. He stated that "Several provisions of the Act, including sections 2(d)(2), 3(c)(1), 4(d), and 5(d), purport to call for executive branch officials to submit to the Congress proposals for legislation, including funding legislation. The executive branch shall implement these provisions in a manner consistent with the President's constitutional authority to supervise the unitary executive branch and to recommend for the consideration of the Congress such measures as the President judges necessary and expedient."

He also stated that "The executive branch shall construe section 2(b)(4)(E) of the Act in a manner consistent with the Government's obligation under the Due Process Clause of the Fifth Amendment to the Constitution to ensure equal protection of the laws."

This subsection provides that the "National Nanotechnology Program" created by the statute shall "to the greatest extent possible, be established in geographically diverse locations, encourage the participation of Historically Black Colleges and Universities ... and minority institutions ... and include institutions located in States participating in the Experimental Program to Stimulate Competitive Research (EPSCoR)".

See also, statement by Secretary of Energy Spencer Abraham.

See also, stories titled "House and Senate Pass Nanotech R&D Bill" in TLJ Daily E-Mail Alert No. 784, November 21, 2003; "Senate Commerce Committee Approves Nanotech R&D Bill" in TLJ Daily E-Mail Alert No. 685, June 20, 2003; "Senate Commerce Committee Holds Hearing on Nanotechnology" in TLJ Daily E-Mail Alert No. 654, May 2, 2003; "House Science Committee Holds Hearing on Nanotechnology" in TLJ Daily E-Mail Alert No. 641, April 10, 2003; and "Representatives Introduce Bill To Authorize Nanotech R&D Funding" in TLJ Daily E-Mail Alert No. 606, February 18, 2003.

Ridge Addresses Cyber Security

12/3. Secretary of Homeland Security Tom Ridge gave a speech in Santa Clara, California to the National Cyber Security Summit in which he stated cyber networks present attractive targets for terrorists.

He stated that "A vast electronic nervous system operates much of our nation’s physical infrastructure. Everything from electricity grids to banking transactions to telecommunications depends on secure, reliable cyber networks. These networks and the infrastructures they support present an attractive target for terrorists. They know, as do we, that a few lines of code could ultimately wreak as much havoc as a handful of bombs."

Ridge (at right) continued that "the unfortunate truth is that the number of cyber-security incidents is on the rise. More than 76,000 occurred in just the first six months of this year. Many of these are the work of  ``hackers.´´ Yet we know the enemies of freedom use the same technology that hackers do, that we do. And we know that they are looking to strike in any manner that will cripple our society. So we must be as diligent and determined at finding ways to strengthen our cyberspace, as the terrorists are in trying to find ways to attack it."

He discussed the President's National Strategy to Secure Cyberspace, and the National Cyber Security Division (NCSD). The NCSD, which is headed by Amit Yoran, is a part of Information Analysis and Infrastructure Protection Directorate (IAIP) at the Department of Homeland Security (DHS). Bob Liscouski is the Assistant Secretary for Infrastructure Protection in the IAIP.

Ridge also discussed the NCSD's partnership with Carnegie Mellon University's CERT Coordination Center in creating the U.S. Computer Emergency Response Team (U.S. CERT). He stated that "In October, Homeland Security staged a ``Livewire´´ exercise to simulate a cyber attack on computers, banks, and utilities. While, on the whole, the government response was successful, we found communication was not as smooth as it needs to be between the various sectors."

Ridge added, "That's where the U.S. CERT comes in. Its charge is to ensure that the necessary information to repel an attack is distributed across all critical infrastructure sectors during a time of attack or heightened level of alert. Additionally, the US CERT will work closely with the private sector and technology experts to enhance our warning and response time to a cyber attack -- speed action when action is critical."

Ridge also stressed the role of the private sector. He said that "Eighty-five percent of our nation’s critical infrastructure, including the cyber network that controls it, is owned and operated by the private sector. As such, we not only need businesses to be active partners with us in securing these vital assets, we need businesses ... we need those of you here today to lead the way."

"So, it should go without saying", said Ridge, that "the continued success of protecting our cyberspace depends on the investment and commitment of each of you and the businesses you represent."

Treasury Department Official Addresses Critical Infrastructure Protection

12/3. Michael Dawson, the Deputy Assistant Secretary for Critical Infrastructure Protection and Compliance Policy at the Department of the Treasury, gave a speech at the Fourth E-Gov Homeland Security Conference in Washington DC.

He stated that "we are still exposed to significant risks of economic disruption from terrorist attacks. Four principles guide our efforts to manage these risks."

"The first principle is to remember that the financial system is really about people.  People, not buildings or computers, produce financial services. And it is people who benefit from financial services", said Dawson. "The second principle is the importance of maintaining confidence."

"The third principle is to ensure that the financial system remains accessible and open for business when the safety of the employees permits." And fourth, "we want to promote responsible decision-making and problem-solving within the private sector. Financial institutions should make the appropriate decisions without waiting for guidance from Washington."

Dawson next addressed the development of a next generation Financial Services Information Sharing and Analysis Center (FS/ISAC). He stated that "Since 1999, the FS/ISAC has been a leader in information sharing for the financial sector, allowing members to receive and submit anonymous reports on security threats and solutions. The FS/ISAC, however, has been limited in scope. It focused primarily on cyber threats. And it served only 56 financial institutions, albeit 56 of the biggest ones. In addition, Congress has expressed concern over the technological capabilities of the FS/ISAC."

He continued that "Shortly, Treasury will help launch a new and improved FS/ISAC. This next generation FS/ISAC will include both cyber and physical threat information; serve the entire sector, not just 56 large institutions; and deploy a secure, confidential technology platform where companies can exchange information in real time as they identify vulnerabilities, address the vulnerabilities, and respond to attempts to exploit the vulnerabilities."

He also stated that the Treasury Department has detailed an expert in financial services issues to the Information Analysis and Infrastructure Protection Directorate (IAIP) at the Department of Homeland Security (DHS).

Finally, he addressed the development of procedures for secure communications between federal and state financial regulators.

BSA & ISSA Release Results of Survey on Information Security

12/3. The Business Software Alliance (BSA) and the Information Security Systems Association (ISSA) released a report titled "BSA-ISSA Information Security Study: Online Survey of ISSA Members". This study was based upon online interviews with 1,716 members of the ISSA.

When asked, "Would you say the risk of a major cyber attack on your organization during the next 12 months is extremely likely, very likely, somewhat likely, not very likely, or not at all likely?", 24% responded "very likely", 41% responded "somewhat likely", and 27% responded "not very likely".

When asked "How prepared do you think your organization is to defend against a major cyber attack?", 20% responded "very prepared", 58% responded "somewhat prepared", and 16% responded "not very prepared".

When asked "Has the ability of your organization to defend itself against a major cyber attack gotten much better, a little better, remained the same, gotten a little worse or much worse over the past 12 months?", 15% responded "remained the same", 46% responded "a little better", and 32% responded "much better", while only 3% responded either "a little worse" or "much worse".

The report also presents survey results on security technologies currently employed by respondents: anti-virus software (99%), firewalls (97%), e-mail filtering (74%), intrusion detection systems -- network (62%), e-mail attachment blocking (62%), internet web site blocking (59%), vulnerability scanners -- network systems (43%), and encrypted e-mail (31%).

The report states that 19% of security professionals say their company has reported a cyber incident or intrusion to law enforcement or other government agency during the past year.

The ISSA is holding its annual convention from December 8 through December 11, at the Jacob Javits Center in New York, NY. See, convention web site.

FCC Publishes Notices Regarding Broadcast Flag Proceeding

12/3. The Federal Communications Commission (FCC) published a notice in the Federal Register summarizing, and setting deadlines for comments on, its further notice of proposed rulemaking (NPRM) in its proceeding titled "In the Matter of Digital Broadcast Content Protection". This item is FCC 03-273 in MB Docket 02-230. This FNPRM seeks comment regarding a permanent approval mechanism for content protection and recording technologies to be used in conjunction with device outputs.

Although, the FCC announced the comments deadlines when it released this Report and Order Further Notice of Proposed Rulemaking [72 pages in PDF] on November 4, 2003. Comments are due by January 14, 2004. Reply comments are due by February 13, 2004. See, Federal Register, December 3, 2003, Vol. 68, No. 232, at Pages 67624 - 67629.

The FCC also published a separate notice in the Federal Register summarizing and stating the effective date of the rules changes included in this item -- particularly, a broadcast flag mandate. The effective date is January 2, 2004. See, Federal Register, December 3, 2003, Vol. 68, No. 232, at Pages 67599 - 67607.

A broadcast flag is digital code embedded into a digital broadcasting stream. It signals digital television (DTV) reception equipment to limit redistribution. For it to be effective, DTV equipment must give effect to a broadcast flag. Hence, this report and order contains technology mandates for equipment manufacturers.

For more information, contact Rick Chessen rchessen@fcc.gov or Susan Mort at smort@fcc.gov or 202-418-7200. See also, story titled "FCC Releases Broadcast Flag Rule" in TLJ Daily E-Mail Alert No. 772, November 5, 2003.

9th Circuit Denies Petition for Rehearing En Banc in Section 230 Immunity Case

12/3. The U.S. Court of Appeals (9thCir) issued an order [16 pages in PDF] in Batzel v. Smith, a case involving the application of California's Anti-SLAPP statute to a suit alleging defamation on an internet listserv. The District Court denied a defendant's motion to dismiss under the Anti-SLAPP statute. A divided three judge panel of the Appeals Court, relying upon the federal interactive computer service immunity provision of 47 U.S.C. § 230(c)(1), vacated and remanded. And now, the Court has denied the petition for rehearing, and the petition for rehearing en banc. Three judges dissented from the denial of the petition for rehearing en banc.

Section 230 provides, in part, that "No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider."

On June 24, 2003, a three judge panel comprised of Judges Canby, Berzon and Gould issued its opinion [41 pages in PDF]. Judge Gould dissented. See, story titled "9th Circuit Construes Section 230 Immunity in Suit Against Listserv Operator" in TLJ Daily E-Mail Alert No. 687, June 25, 2003.

On December 3, 2003, the Court wrote that "The majority of the panel has voted to deny appellee’s petition for rehearing. Judge Berzon has voted to deny the petition for rehearing en banc and Judge Canby so recommends. Judge Gould has voted to grant the petition for rehearing and petition for rehearing en banc."

"The full court has been advised of the petition for rehearing en banc. A judge of the court requested a vote on en banc rehearing. The majority of the active judges have voted to deny rehearing the matter en banc. Fed. R. App. P. 35(f)."

"The petition for rehearing and the petition for rehearing en banc are DENIED. Judge Gould’s dissent from denial of en banc rehearing is filed concurrently herewith", wrote the Court.

Judge Gould again wrote a lengthy dissent. Judges Tallman and Callahan joined. Gould wrote that "I remain convinced that the panel majority’s interpretation of the statutory immunity found in 47 U.S.C. § 230(c) is wrong in light of Congress's intent, and will needlessly harm persons defamed on the Internet."

He argued that "Human reputations, built on good conduct over decades, should be not so easily tarnished and lost in a second of global Internet defamation. Under the panel majority’s rule, there might be a remedy against the initial sender, but there is no remedy against the person who willingly chooses, with no exercise of care, to amplify a malicious defamation by lodging it on the Internet for all persons and for all time. Unless this result were commanded by Congress, we should not create such a system."

Indeed, going back to the majority opinion of the three judge panel, there was skepticism about allowing Section 230 immunity in this case. The majority wrote that "There is no reason inherent in the technological features of cyberspace why First Amendment and defamation law should apply differently in cyberspace than in the brick and mortar world. Congress, however, has chosen for policy reasons to immunize from liability for defamatory or obscene speech ``providers and users of interactive computer services´´ when the defamatory or obscene material is ``provided´´ by someone else."

This case is Ellen Batzel v. Robert Smith, Netherlands Museum Association, Mosler Inc., and Tom Cremers, U.S. Court of Appeals for the Ninth Circuit, No. 01-56380, an appeal from the U.S. District Court for the Central District of California, D.C. No. CV-00-09590-SVW, Judge Stephen Wilson presiding.

FCC Approves Final 271 Application

12/3. The Federal Communications Commission (FCC) adopted and released its Memorandum Opinion and Order [98 pages in PDF] approving Qwest Communications' application to provide in region interLATA services in the state of Arizona. The FCC concluded that Qwest has "has taken the statutorily required steps to open its local exchange market in Arizona to competition."

This completes the process of authorizing the Bell Operating Companies (BOCs) to provide long distance services, pursuant to 47 U.S.C. § 271. Section 271, which was enacted as part of the Telecommunications Act of 1996, provides that the BOCs may not provide in region, interLATA services until they have demonstrated compliance with certain market-opening requirements enumerated in the statute. The FCC issued its first Section 271 approval on December 22, 1999. That was Bell Atlantic's (now Verizon) application regarding the state of New York.

FCC Chairman Michael Powell wrote in a media statement [PDF] that "The barrier between local and long distance service has finally been removed. The 271 process has contributed to the creation of true facilities-based competition that promises significant longterm benefits for individuals and the economy. Consumers throughout the country will continue to enjoy innovative new choices that make the concept of separate local and long distance markets a thing of the past."

However, he added that "The FCC will be vigilant in ensuring that Bell companies continue to meet the competitive checklist through various enforcement tools at the FCC’s disposal including section 271(d)(6)".

Similarly, Commissioner Kathleen Abernathy wrote in a separate statement [PDF] that "While we have authorized Bell entry into the long distance market in every state, our work is plainly not done. We must intensify our focus on enforcement, pursuant to section 271(d)(6), to ensure that the local markets remain open to competition. The Commission also must complete its examination of the regulatory framework that applies to the Bell companies’ provision of long distance service."

Abernathy (at right) asked, "If a BOC integrates its operations after the sunset of the section 272 requirements, to what extent should dominant carrier regulations be retained? I look forward to working with my colleagues on an answer to that important question. I also hope that the Commission promptly completes the pending rulemaking concerning possible elimination of the ban on sharing operation, installation, and maintenance functions. Dominant carrier regulations, the OI&M rule, and other legacy regulations may not be necessary in today’s increasingly competitive marketplace. I do not know at this point precisely what level of regulatory oversight we do need, but I urge the Commission to complete its review so that we can ensure that our rules are tailored to the current environment."

Commissioners Michael Copps and Jonathan Adelstein jointly wrote a separate statement [PDF]. The stated that "We need to take our enforcement duty more seriously. We have taken a step in the right direction by establishing a formal Section 271 Compliance Review Program. Yet our practice has been little more than requiring Bell Operating Companies to provide the Commission with performance data for the first year following long-distance authorization. This strikes us as a lax way to go about ensuring continued compliance."

They continued that "A more credible process would include this kind of oversight beyond just the first year following approval. Instead, we have stuck our head in the sand, willfully blind to the possibility that problems may arise after the first year of long-distance entry. Competitors always are free to file complaints, but we believe the statute compels us to do more here at the Commission. Without effective monitoring, we may find that the old monopoly forces that led to the breakup of Ma Bell will just piece themselves back together again."

See also, FCC release and Qwest release. This is FCC 03-309 in WC Docket No. 03-194.

Bond Urges Holistic Approach to Dealing With Nanotechnology's Ethical and Societal Issues

12/3. Phil Bond, Undersecretary of Commerce for Technology, gave a speech titled "Preparing the Path for Nanotechnology: Addressing Legitimate Societal and Ethical Issues".

He first summarized S 189, the "21st Century Nanotechnology Research and Development Act", which President Bush signed on December 3. See, story titled "Bush Signs Nanotech R&D Funding Bill" in TLJ Daily E-Mail Alert No. 792, December 4, 2003. See also, story titled "House and Senate Pass Nanotech R&D Bill" in TLJ Daily E-Mail Alert No. 784, Nov. 21, 2003.

Bond, at right, then stated that "nanotechnology -- with its myriad evolutionary and revolutionary applications -- is coming, and it can't be stopped. Some voices around the world are calling for a slow down or even an outright moratorium on nanotechnology research and development. To those calling for a slow down or halt on the nano front, I say instead: Prepare for the inevitability of a world blessed with nano and nano-enabled products and services. The economic promise, the societal potential, and the human desire for rolling back the frontiers of knowledge -- to go where no one has gone before -- are forces that cannot be held back."

He argued that "a halt, or even a slowdown, would be the most unethical of choices" because of the possibilities that nanotechnology offers, such as "to eradicate diseases", "to extend the length and the quality of life", "to feed the world's hungry", "to repair existing environmental damage" and to provide "clean production technologies".

He then stated that "the United States is unquestionably the global leader in nano research, development and commercialization. If you look at the numbers, whether in patents or publications, the U.S. is far ahead."

"But", he added, "we are also the world leader in addressing the prospective societal and ethical issues associated with the development and commercialization of nanotechnology."

He continued that "Revolutionary technologies can create public apprehension and fear, resulting in efforts to stop their advance." Hence, said Bond, "We must identify legitimate ethical and societal issues and address them as soon as possible."

He suggested that "we need a holistic approach that embraces ethicists, philosophers, theologians, historians, consumer advocates, business leaders, public officials, and others, with scientists and engineers playing a unique and critical role."

Sachs Addresses DTV Must Carry Requirements and Cable Prices

12/3. Robert Sachs, P/CEO of the National Cable & Telecommunications Association (NCTA), gave a speech [9 pages in PDF] at a convention in Anaheim, California. He discussed, among other topics, must carry and multicasting requirements, and the General Accounting Office's (GAO) study [94 pages in PDF] titled "Telecommunications: Issues Related to Competition and Subscriber Rates in the Cable Television Industry".

The GAO released its cable report on October 24, 2003. This report found that competition, whether from other wire based cable operators, or from direct broadcast satellite (DBS), leads to lower prices and better quality service. See, story titled "GAO Releases Study on Cable Industry" in TLJ Daily E-Mail Alert No. 766, October 27, 2003.

Sachs stated that "The report found what we already knew -- that DBS is ``an important competitor to cable´´ and that cable prices reflect cable costs as well as increased benefits to consumers. Yet, cable competitors do not cease to use advertising and the media to exploit the fact that cable prices have risen faster than inflation. Of course, they leave out that the number of channels operators offer has greatly expanded, that consumers are watching cable channels a lot more, and are getting even better value for their dollar."

Sachs also addressed must carry and multicasting requirements. That is, cable operators must carry broadcasters analog signals. And, the Federal Communications Commission (FCC) has stated that if a broadcaster replaces an analog signal with a digital signal, that is subject to must carry rules. However, since digital TV technology utilizes spectrum more efficiently, broadcasters can multicast multiple digital signals. Broadcasters have argued that all of these multicast signals should be subject to must carry rules. Cable operators have argued the contrary.

The FCC has not acted recently on this issue. However, there are a number of old and open proceeding in which the FCC could act. See, for example, FCC Docket Numbers 00-96 and 98-120.

FCC Commissioners and staff have recently held ex parte meetings with, and received communications from, representatives of broadcasters and others. See, for example, November 25, 2003 letter [4 pages in PDF] from National Association of Broadcasters (NAB) P/CEO Edward Fritts to FCC Chairman Michael Powell; November 20, 2003 letter [PDF] from ABC to FCC; November 7, 2003 filing [9 pages in PDF] with the FCC by NBC; and September 24 letter [27 pages in PDF] from Paxson Communications to the FCC.

(For a contrary viewpoint, see December 5, 2003 essay titled "DTV Mandate Tally Could Grow Again With Upcoming Multicasting Decision" by Adam Thierer of the Cato Institute.)

Sachs stated in his December 3 speech that "Also on cable's plate in Washington is the push by broadcasters to get the FCC to require cable operators to carry digital duplicates of every analog broadcast signal plus multiple new channels for every broadcast station. Rather than compete in the market on the basis of quality and value as other programmers do every day, broadcasters want the government to guarantee cable and satellite distribution of every new service they launch.

"We believe that the FCC got it right three years ago when it preliminarily found that dual must carry would be unconstitutional and that the statutory term ``primary video signal´´ conclusively means one and not multiple video signals. These, of course, are questions of law, not policy", said Sachs.

He concluded that "policy reasons also argue against dual must carry and multicasting requirements. Consumers want more choices and greater programming diversity, not multiple channels from the same broadcast entities forced on them by the federal government."

More News

12/3. The U.S. District Court (DC) issued a Memorandum Opinion and Order [PDF] in Bethea v. Comcast regarding pre-trial discovery of electronic records. The plaintiff in this employment discrimination lawsuit moved for a court order compelling the defendants to allow her to enter upon their premises, inspect their computer systems and related programs, and copy any information relevant to her claims. The Court denied the motion. It wrote that "In the context of computer systems and computer records, inspection or seizure is not permitted unless the moving party can ``demonstrate that the documents they seek to compel do, in fact, exist and are being unlawfully withheld´´", citing Alexander v. FBI, 194 F.R.D. 305 (D.D.C. 2000).

12/3. President Bush signed S 1720, which establishes Plano, Texas, as an additional place for holding federal court in the Sherman Division of the Eastern District of Texas. See, White House release.

12/3. Microsoft announced changes to its intellectual property licensing practices. See, Microsoft release.

12/3. The Department of Justice (DOJ) filed a motion to exclude testimony of an expert witness with the U.S. District Court (DC) in USA v. First Data. On October 23, 2003, the DOJ, seven states, and the District of Columbia filed a complaint [28 pages in PDF] against First Data Corporation and Concord EFS, Inc., alleging that First Data's planned acquisition of Concord would combine two of the largest point of sale (POS) personal identification number (PIN) debit networks, in violation of Section 7 of the Clayton Act. See, story titled "DOJ Sues to Stop Merger of PIN Debit Networks" in TLJ Daily E-Mail Alert No. 765, October 24, 2003. This case is United States of American, et al., v. First Data Corporation and Concord EFS, Inc., D.C. No. 1:03CV02169, Judge Rosemary Collyer presiding.

FBI Employee Pleads Guilty to Cyber Crime

12/2. Narissa Smalls entered a plea of guilty in U.S. District Court (DC) to accessing a computer system without authorization. What is notable about this case is that at the relevant time Smalls was an employee of the Department of Justice's (DOJ) Federal Bureau of Investigation (FBI), the computer system that she accessed was the FBI's Automated Case Support (ACS) computer system, the information that she obtained pertained to ongoing drug investigations, and that, in the words of the DOJ, "she then shared the results of her ACS searches with individuals who were associated with the subjects of the FBI's drug investigations".

Small was a legal technician in the FBI headquarters in Washington DC. The DOJ stated that she resigned as part of a plea agreement. She has not yet been sentenced. See, DOJ release.

This is not the first incident involving lack of computer security at the FBI. For example, on August 5, 2002, the DOJ's Office of the Inspector General (OIG) released a series of reports on the control of laptop computers and weapons at five DOJ components. It found a total of 400 missing laptops, and 775 missing weapons. For the FBI, it reported 317 missing laptops and 212 missing weapons. Moreover, the OIG found that the FBI does not know if sensitive data was lost. See, story titled "FBI Loses 317 Laptops" in TLJ Daily E-Mail Alert No. 485, August 6, 2002.

Similarly, on December 19, 2002, the DOJ's OIG released a report titled "Federal Bureau of Investigation's Management of Information Technology Investments". The report concludes that the "FBI has not effectively managed its IT investments because it has not fully implemented the management processes associated with successful IT investments." The report adds that "the FBI continues to spend hundreds of millions of dollars on IT projects without adequate assurance that these projects will meet their intended goals." See, story titled "DOJ OIG Report Criticizes FBI Management of IT Resources" in TLJ Daily E-Mail Alert No. 572, December 20, 2002.

Markle Foundation Releases Report on Homeland Security and Information Technology

12/2. The Markle Foundation's Task Force on National Security in the Information Age released a report titled "Creating a Trusted Information Network for Homeland Security".

See, release [HTML], Overview [2 pages in PDF], Part I - Task Force Report [42 pages in PDF], Part II - Working Group Analysis [PDF], and Part III - Appendices [PDF].

This report states that "the government should create networks for information collection, sharing, analysis, and use across federal, state, and local agencies and the private sector, while preserving -- and even enhancing -- privacy and other civil liberties. The network we envision consists not just of the technological architecture, but also of the people, processes, and information that must go hand-in-hand with the technology, and the rules that should govern how all of these elements interact."

It recommends that the President "issue guidelines for government collection and use of information." It also recommends that executive branch and Congress "implement the measures necessary to create the proposed Systemwide Homeland Analysis and Response Exchange Network (SHARE)".

The report states that "The handling of information should be decentralized, and should take place directly among users, according to a network model rather than a mainframe or hub-and-spoke model." Also, "The network should be guided by policy principles that simultaneously empower and constrain government officials by making it clear what is permissible and what is prohibited." Moreover, "Our government’s strategy should focus on prevention."

The report states that "The distinguishing line between domestic and foreign threats is increasingly difficult to sustain. Thus, in its approach, our government should avoid creating blind spots, or gaps between agencies, that arise from this distinction. At the same time, though, our government needs urgently to define new rules -- rules to replace the old "line at the border" between domestic and foreign authorities for information-collection and use -- to ensure that agencies do not infringe on our traditional civil liberties."

It further states that "The network should reflect the fact that many key participants are not in the federal government, but rather in state or local government and the private sector." In addition, "The network should make it possible for the government to effectively utilize not only information gathered through clandestine intelligence activities and law enforcement investigations, but also appropriate information held by private companies. This should happen only after clear articulation by the government of the need for this information and the issuance of guidelines for its collection and use."

Finally, the report states that "Combating terrorism is a long-term effort that is designed to protect our way of life and our values along with our security. Therefore, the policies and actions undertaken need to have the support -- and trust -- of the American people. Privacy and other civil liberties must be protected."

The Executive Director of the Markle Foundation's Task Force on National Security in the Information Age is Michael Vatis. The Task Force is chaired by Zoe Baird and James Barksdale.

The Task Force members include representatives from technology companies (including Microsoft, Sun Microsystems, 3Com, and Mitretek), numerous academics, representatives of Markle and other groups and think tanks (including the Center for Democracy and Technology, Progressive Policy Institute, Brookings Institute, and Center for Strategic and International Studies), numerous lawyers, lobbyists, and former legislators (including Slade Gordon and Rick White), and representatives of government (including Utah Governor Michael Levitt and In-Q-Tel's President). See, list of members [PDF].

USTR Zoellick Addresses Trade in Services

12/2. U.S. Trade Representative (USTR) Robert Zoellick gave a speech [PDF] titled "Freeing the Intangible Economy: Services in International Trade" in Washington DC. He advocated free trade in services, addressed e-commerce and telecommunications specifically, and reviewed ongoing negotiations.

Zoellick (at right) defined services as "ideas and effort, expressed in electrons, on paper, film, or in the actions of people. They are knowledge, communications, and planning -- the glue that holds economies together. Services add value to goods and raw materials, and more than trade in physical products, they require interaction between buyers and sellers."

He stated that "The U.S. service industry's share of GDP is about 65 percent" and that "U.S. services account for approximately 30 percent of the value of America's exports".

"Many Americans are unaware that services comprise the largest sector of the U.S. economy. It is no surprise, then, that the prominent role of services in international trade is not widely appreciated", said Zoellick. "Yet billions of dollars worth of services are traded every day. At this very moment, trillions of bits of information -- news reports, computer software, legal opinions, tax forms, medical advice, and movies, just to name a few -- are being exchanged across private computer networks and the Internet."

Zoellick argued that "The services sector also offers innovative opportunities for developing countries to jumpstart growth and development". He reviewed the progress of several nations, and stated that they "scrapped burdensome regulatory and licensing requirements in order to create these opportunities. Further liberalization would also expand avenues for developing countries to trade services among themselves."

E-Commerce. Zoellick stated that "To have e-commerce, countries need low-cost, accessible, and effective telecommunications and Internet systems, unburdened by taxes and fees. They need reliable sources of electricity to operate online. Goods need to be packaged, shipped, and distributed in a timely fashion, with the cooperation, not corruption or costly circumventions, of customs officials. Purchasing requires reliable payment and credit. Goods trademarks need protection from counterfeiters; agricultural products must meet health standards."

"In brief," said Zoellick, "we need efficient services businesses -- in both developed and developing economies. And, I guess I have to add, we still need trade negotiators, however disagreeable, and free trade agreements to open markets and secure transparent, reliable, low-cost rules to enable the most efficient services providers, and producers of goods and farm products, to flourish."

Telecommunications. He stated that "reliable, rapid, affordable communications are a basic necessity for international commerce. In many developing economies, however, even basic telephone service is unobtainable. Without good communication, businesses are largely limited to supplies that can be obtained locally, severely restraining productivity. The customer base is diminished, too."

"Even when basic telecom services exist, the high cost and poor service provided by monopoly suppliers can hamstring local businesses. In Vietnam, one brave company that produces software for firms in the U.K. and Canada is forced to fly its product to clients on CDs because the telecom system is too antiquated for Internet access."

He continued that "When countries have opened their communications markets to trade, they have reaped tangible rewards. The opening of Chile's telecommunication industry in 1994 led to rapid infrastructure modernization and the introduction of new services. Rates for local, long-distance, and international calls dropped by up to 50 percent -- a key factor in the decision by foreign investors like Delta Airlines to open call centers there. Liberalization of El Salvador's telecommunications industry has led to quality and infrastructure improvements, the expansion of cellular service to the entire country, and a reduction in the waiting period for a fixed line from as long as 6 years to a few days. Intel recently stated it would like to expand its operations in Costa Rica -- if the country opens up its telecom monopoly service -- one of our objectives in the CAFTA negotiations."

Trade Negotiations. He stated that "To replicate such success stories, U.S. services proposals seek to build on the Uruguay Round commitments and the landmark 1997 Basic Telecom Services Agreement by opening markets to competition for supplying both basic services, like telephone connections, and value-added services, such as information and Internet businesses. And as our recent telecommunications victory in the WTO against Mexico's Telmex shows, we intend to enforce these new obligations."

Zoellick commented that "free traders have our work cut out for us. You know the resistance we face from people who fear change or dislike competition. There are plenty of protectionists around the world, too."

"We have been pressing for freer trade -- especially in emerging services markets -- globally, hemispherically, and through subregional or bilateral free trade agreements. The strategy of advancing on multiple fronts is paying off, especially in our drive through FTAs to achieve state-of-the-art provisions to assist sectors like those represented here tonight."

Zoellick added that "this month we are moving into the closing stages of our FTA negotiations with Morocco, the five Central American economies, and Australia. These FTAs will have the highest quality services provisions, based on the Chile and Singapore FTAs you helped us enact this year. Next year we will seek to add the Dominican Republic to CAFTA and launch FTA negotiations with Thailand, Panama, Bahrain, Colombia, Peru, and -- when ready -- Ecuador and Bolivia. We will strive to complete our FTA with the five countries of the Southern Africa Customs Union."

He concluded that "we also want to broaden and deepen the coverage of the General Agreement on Trade in Services, or GATS, through the WTO negotiations launched at Doha. To help spur these negotiations, the United States offered to eliminate all tariffs on goods and to make very deep cuts in agricultural tariffs and subsidies. Others passed up this opportunity at Cancun. As their disappointment sank in, we were the first to propose resuming work off the Cancun draft text. Many others have joined us, including all the APEC economies. My sense is that most WTO members will want to resume negotiations early next year; we will look for a serious commitment to move from hand wringing to hands-on work, cooperation, and compromise."

Reps. Tauzin & Greenwood Request GAO Report on E-Rate Waste, Fraud & Abuse As Prelude to Oversight Hearing

12/2. Rep. Billy Tauzin (R-LA), the Chairman of the House Commerce Committee, and Rep. James Greenwood (R-PA), the Chairman of the Subcommittee on Oversight and Investigations, wrote a letter to David Walker, the head of the General Accounting Office (GAO), asking that the GAO "review the E-rate program's structure and operations to determine whether federal funds are being used in accordance with program rules, whether the funds are being used effectively to achieve program goals, and whether the program needs fundamental changes to ensure program goals are met.

Rep. Tauzin and Rep. Greenwood (at right) wrote that although the Federal Communications Commission's (FCC) Universal Service Administration Company (USAC) has taken corrective actions previously recommended by the GAO, "such as strengthening its application review process, allegations of waste, fraud, and abuse continue to be raised since GAO last reviewed the program."

They added that "Questions have also been raised about the basic effectiveness of the program's structure in meeting the goal of connecting schools and libraries to the Internet."

They also stated the the Committee anticipates holding a hearing in "early 2004".

FTC Comments on Internet Advertising of Prescription Drug Products

12/2. The Federal Trade Commission (FTC) submitted comments [38 pages in PDF] to the Food and Drug Administration (FDA) in response to its request for comments regarding the advertising of prescription drug products directly to consumers (DTC advertising). These comments address, among other topics, internet advertising.

The FTC comment concluded that "Internet advertising should be treated consistently with DTC ads in other media, and it would be beneficial if the FDA were to issue guidance addressing DTC ads available on the Internet."

The FTC comment noted that "A consistent finding among the surveys is the significant degree to which DTC advertising provides consumers with useful information concerning their health. Ads achieve much of this informative role indirectly, by encouraging consumers to seek out more information from other sources about the advertised drug and the condition it ameliorates. ... In what will no doubt be an increasingly important source, the percentage of consumers seeking information on the Internet as a result of viewing a DTC ad increased from 18% in 1999 to 38% in 2002."

The FTC comment elaborated that "The Internet is a valuable resource for consumers looking for information about prescription drugs. According to a Pew Internet Project survey conducted in March 2002, 73 million American adults (62% of Internet users surveyed) use the Internet to look for health information. About two out of three of these users (64%) searched for information about prescription drugs, and more than half checked the Internet before visiting a doctor. According to the FDA's 2002 DTC advertising survey, as noted above, 38% of those surveyed cited the Internet as a source of information, up from 18% in the previous survey in 1999." (Parentheses in original. Footnotes are omitted from all quotes in this article.)

The FTC comment states that "Internet websites should be treated as DTC advertising, unless the site is also used to sell products or contains other indicia of labeling. We believe that the FDA may be able to provide consumers with additional protection – and manufacturers with greater certainty -- by spelling out basic guidelines for websites in a guidance document. We recommend that these websites include the same brief summary information that all other DTC advertising would include under our recommendations above. If the FDA decides to retain its distinction between the brief summary requirements for DTC print and broadcast ads, then we recommend that the standards for print ads apply to websites: both media allow the communication of more information in text in a manner that broadcast advertisements do not."

The FTC also wrote that "The FDA may wish to consider developing an approach to the Internet that would require or encourage manufacturers to ensure that websites have certain minimum elements. For example, if a company website provides information about the benefits of a drug, the major statement of risks should be on the first web page that discusses its benefits, accompanied by an appropriate link to a source of more complete risk information that may be located elsewhere on the website. Consumers thus would receive the most important risk information about the advertised drug, with easy and ready access to more complete risk information, if they are interested in such information."

Finally, the FTC wrote that "For other Internet advertisements, such as banner ads or pop-up ads, many ads in these formats will be reminder ads or help-seeking ads. These ads need not include a brief summary, consistent with the current treatment of similar ads in other media. Other ads in these formats should be required to disclose the brief summary information to the same extent as ads in other media. Here, however, advertisers should be able to satisfy this requirement by sending consumers who click on the banner ad or pop-up ad to the first web page on the company’s website that discusses the benefits of the drug, that is, the web page that will have the major statement of risks and an appropriate link to more complete risk information. Sending consumers who receive DTC ads online -- who, by definition, have Internet access -- to a web page with a major statement of risks and an appropriate link to more complete risk information should satisfy the brief summary requirement. Similarly, advertisers should be able to meet the brief summary requirement for commercial email by including an appropriate disclosure that additional information is available on a specific page of a website."

More News

12/2. The House Commerce Committee's Subcommittee on Oversight announced that it will hold a hearing titled "Identity Theft: Assessing the Problem and Efforts to Combat It". See, notice. The hearing will be held in Langhorne, Pennsylvania, and will not be webcast. Langhorne is located in the Congressional District of Rep. James Greenwood (R-PA), the Chairman of the Subcommittee.

FCC Holds VOIP Forum

12/1. The Federal Communications Commission (FCC) held a forum on Voice over Internet Protocol (VOIP) issues. All five Commissioners sat through both the morning and afternoon sessions.

Chairman Michael Powell again stated that the FCC will issue a Notice of Proposed Rulemaking (NPRM) "to inquire about the migration of voice services to IP-based networks and gather public comment on the appropriate regulatory environment for these services". See, FCC release of November 6, 2003. However, at the VOIP forum, he declined to offer a prediction about when the FCC will release this NPRM.

The Commissioners generally called for a light regulatory touch, and focused on five regulatory issues: E-911 mandates, wiretapping and surveillance under the CALEA, access by disabled people, universal service subsidies, and access charges. No Commissioners spoke in support of price regulation of VOIP services.

The FCC often hosts forums, roundtables and other gatherings. Frequently, one or more Commissioners attend the beginning of the program, make brief remarks, and then leave. This forum was atypical in that all five Commissioners attended, remained for the entire program, and participated in questioning the other participants.

The FCC also announced the formation of Internet Policy Working Group. See, following story.

The FCC will keep the record open for two weeks. Written comments must be 1,000 words or less.

See, full story.

FCC Forms Internet Policy Working Group

12/1. The Federal Communications Commission (FCC) announced the formation of an Internet Policy Working Group (IPWG).

The FCC issued a release [PDF] that states that the IPWG will "will assist the Commission in identifying, evaluating and addressing policy issues that will arise as telecommunications services move to Internet-based platforms. The cross-bureau and multi-disciplinary working group will be directed by a steering committee comprised of senior management and staff from several Commission Bureaus and Offices, and will be staffed as needed by attorneys, engineers and economists from across the Commission. This Working Group will also reach out to key constituencies including state regulators, consumer groups and public safety organizations."

The Co-Directors of the IPWG will be Robert Pepper (Chief of Policy Development) and Jeff Carlisle (Senior Deputy Chief, Wireline Competition Bureau).

The other members of the IPWG will be June Taylor (Chief of Staff, Consumer and Governmental Affairs Bureau), Anna Gomez (Deputy Chief, International Bureau), Kyle Dixon (Deputy Chief, Media Bureau), Jeffery Goldthorp (Chief of the Network Technology Division, Office of Engineering, and Technology), Mary McManus (Special Counsel, Office of the General Counsel), and David Furth (Associate Bureau Chief/Counsel, Wireless Telecommunications Bureau).

FCC Releases E911 Report and Order and 2nd Further NPRM

12/1. The Federal Communications Commission (FCC) released a document [73 pages in PDF] titled "Report and Order and Second Further Notice of Proposed Rulemaking (R&O and 2nd FNPRM) that pertains to enhanced 911 (E911) rules.

The FCC announced, but did not release, this item at its November 13 meeting. See, story titled "FCC Announces Report and Order Regarding E911 Rules" in TLJ Daily E-Mail Alert No. 779, November 14, 2003. This is FCC 03-290 in CC Docket No. 94-102 and IB Docket No. 99-67.

The R&O revises the scope of the FCC's E911 rules to clarify which technologies and services are required to be capable of transmitting E911 information to public safety answering points (PSAP).

This R&O concludes that "Mobile satellite service (MSS) carriers that provide interconnected two-way voice service must establish call centers for the purpose of answering 911 emergency calls and forwarding these calls to an appropriate PSAP."

It further states that "Telematics providers that offer a commercial wireless service may have E911 obligations and need to work with the underlying licensees to ensure that E911 requirements are met. Those providers that do not offer such services, while they do not have an obligation, should continue their efforts with industry and public safety stakeholders to implement advanced telematics safety capabilities."

It further states that "Resold and pre-paid mobile wireless service providers have an independent obligation to comply with our 911 rules to the extent that the underlying licensee has deployed the technology necessary to deliver enhanced 911 service."

It further states that "We find it is unnecessary to place a separate obligation on manufacturers of disposable phones or personal data assistant that contain a voice service component because the obligation for ensuring access to enhanced 911 service is with the wireless service provider, and they are responsible for ensuring that the devices used with their service satisfy their 911 obligations."

And, it states that "Automated maritime telecommunications systems (AMTS) are not required to comply with our rules because their service fails to meet the four criteria."

This item also contains a NPRM. It states that "Although we will not adopt federal rules at this time requiring multi-line telephone systems (MLTS) operators to implement E911, the Commission expects that states will act expeditiously on this topic, and references the Model Legislation as a valuable guide. We also issue a Second Further Notice of Proposed Rulemaking to continue our consideration of this issue, and to ensure that we are in a position to take appropriate action should states fail to do so or should it otherwise be warranted. Additionally, the Commission will issue a public notice in a year to examine states' progress on implementing E911 in this area."

The deadline to submit comments in response to the NPRM will be 45 days from publication of a notice in the Federal Register. Reply comments will be due within 75 days of publication in the Federal Register. The FCC has not yet published this notice.

People and Appointments

12/1. Claudine Malone and Kathy White were elected to the Board of Directors of Novell. See, Novell release.

More News

12/1. The National Institute of Standards and Technology's (NIST) Computer Security Division (CSD) released a Change Notice [2 pages in PDF] regarding Federal Information Processing Standard (FIPS) 180-2, the Secure Hash Standard. The NIST requests public comments on the proposed change by January 16, 2004. Comments should be addressed to ebarker@nist.gov. See also, FIPS 180-2 [75 pages in PDF], released on August 1, 2002.

12/1. The Copyright Office published a notice in the Federal Register summarizing its final rule its cost of living adjustment of 2% in the royalty rates paid by colleges, universities, or other nonprofit educational institutions that are not affiliated with National Public Radio for the use of copyrighted published nondramatic musical compositions in the BMI, ASCAP and SESAC repertoires. The rule takes effect on January 1, 2004. See, Federal Register, December 1, 2003, Vol. 68, No. 230, at Page 67045.

Go to News from November 26-30, 2003.