VeriSign Paper Rebuts ICANN Paper on Redirection in the Com and Net Domains

8/5. VeriSign released a paper [95 pages in PDF] titled "VeriSign's Response to the Report from the ICANN Security and Stability Committee Re ``Redirection in the Com and Net Domains´´". This responds to the Internet Corporation for Assigned Names and Numbers' (ICANN) Security and Stability Advisory Committee's (SSAC) paper [85 pages in PDF] of July 9, 2004 titled "Redirection in the Com and Net Domains".

These papers pertain to VeriSign's service named SiteFinder, which it launched in September of 2003, but soon after suspended. VeriSign temporarily changed the way that the .net and .com top level domain registries responded to nonexistent or uninstantiated domain names. Such requests for lookups had produced an error message. VeriSign changed this to redirection to the domain for the SiteFinder website on VeriSign servers. For example, if a person mistyped a domain name in a browser, instead of getting an error page, he would have been redirected to the SiteFinder website. However, VeriSign's change also had consequences for applications other than browers.

The SSAC found that "VeriSign introduced changes to the NET and COM registries that disturbed a set of existing services that had been functioning satisfactorily. Names that were mistyped, had lapsed, had been registered but not delegated, or had never been registered in DNS were resolved as if they existed. As a consequence, certain e-mail systems, spam filters and other services failed resulting in direct and indirect costs to third parties, either in the form of increased network charges for some classes of users, a reduction in performance, or the creation of work required to compensate for the consequent failure."

The SSAC also found that "The changes violated fundamental Internet engineering principles by blurring the well-defined boundary between architectural layers. VeriSign targeted the Site Finder service at Web browsers, using the HTTP protocol, whereas the DNS protocol, in fact, makes no assumptions – and is neutral – regarding the protocols of the queries to it. As a consequence, VeriSign directed traffic operating under many protocols to the Site Finder service for further action, and thus, more control was moved toward the center and away from the periphery, violating the long-held end-to-end design principle."

VeriSign argued in rebuttal that the ICANN's paper is "fundamentally flawed in its process, analysis and recommendations. It wrote that "SSAC had a single, limited mandate with respect to Site Finder -- to assess quantitatively the technical effect of Site Finder on the stability and security of the DNS and the Internet. SSAC mustered no evidence that Site Finder adversely impacted the security of the DNS or Internet. SSAC found no evidence that Site Finder adversely impacted the stability of the DNS or Internet. SSAC was forced to acknowledge that Site Finder did not cause DNS or Internet failures or outages. These facts should have ended SSAC's Site Finder process."

More News

8/5. The Federal Trade Commission (FTC) released a report [170 pages in PDF] titled "Consumer Fraud in the United States: An FTC Survey". See also, FTC release.

8/5. President Bush gave a campaign speech in Columbus, Ohio in which he discussed education and training. He stated that "We must make sure that the Internet is in classrooms so that the free flow of information is vibrant and well. The broadbrand technology initiative of mine is essential to making sure information flows into our schools. We want to make sure the high school diploma means something. There's more work to do. We want to make sure the community colleges are vibrant."

8/5. The U.S. Patent and Trademark Office (USPTO) issued a notice [PDF] titled "All Electronic Copies of Patent Application Records Will Now Be Provided as Certified Copies in Electronic Form". This notice states that "Effective July 30, 2004, all copies of patent documents purchased under 37 CFR 1.19 and produced from IFW will be provided only as electronic files, with an imaged certification statement included as part of a digitally signed PDF (portable document format) file containing TIFF (tag image file format) images of the document pages. These electronic files may be downloaded from the USPTO website or provided by the USPTO on compact disc. The electronic files are digitally signed by the USPTO for authenticity and integrity, and cannot be undetectably modified. As mentioned above, all copies purchased pursuant to 37 CFR 1.19 and produced from IFW will be produced only as certified copies. Uncertified copies may be downloaded under the USPTO’s Public PAIR system."

8/5. Hewlett Packard and Philips announced that they will offer their Video Content Protection System (VCPS) to manufacturers through a license program. See, HP release. The Federal Communications Commission (FCC) adopted a Report and Order (R&O) approving 13 applications for certification of digital output protection technologies and recording methods under the FCC's broadcast flag rule. The FCC approved the application of Hewlett Packard Company and Philips Electronics North America. See, FCC release. See also, story titled "FCC Adopts R&O Approving Digital Protection Technologies and Recording Methods" in TLJ Daily E-Mail Alert No. 954, August 6, 2004. See also, Real Networks' release on the FCC's approval of its application for its Helix DRM Trusted Recorder.

8/5. The Copyright Office (CO) published a notice in the Federal Register announcing, describing and setting the comment deadline for it notice of proposed rule making regarding amendments to the CO's regulations to permit the Library of Congress to record unpublished radio and other audio and audiovisual transmission programs. The notice states that the CO regulations "already provide for the Library of Congress to obtain copies of unpublished television transmission programs, either by recording fixations or by demanding copies in the form of a transfer, loan or sale at cost. This revised regulation makes similar provisions for audio transmission programs and includes transmission programs made available by radio broadcasts and by digital communications networks such as the Internet." Comments are due by September 7, 2004. See, Federal Register, August 5, 2004, Vol. 69, No. 150, at Pages 47396 - 47399.

8/5. Federal Communications Commission (FCC) Commissioner Michael Copps gave yet another speech [PDF] on the topic of media consolidation. He asserted that it causes a "decline in news quality, ... and increasing corporate bias in news reporting".

FCC Adopts Order on Reconsideration Re Unbundling Requirements of ILECs for FTTH to MDUs

8/4. The Federal Communications Commission (FCC) adopted, but did not release, an Order on Reconsideration regarding multiple dwelling units (MDUs) and the Section 251 unbundling obligations of incumbent local exchange carriers (ILECs).

The FCC issued a short release describing this item, and four Commissioners wrote brief separate statements. The FCC's release states that this order "concludes that the fiber-to-the-home (FTTH) rules, which relieve the incumbent LECs from certain unbundling obligations, will apply to MDUs that are predominantly residential."

The FCC release further states that "concludes that determining what constitutes a predominantly residential MDU will be based on the dwelling's predominant use. For example, a multi-level apartment building that houses retail stores such as a drycleaner or a mini-mart would be predominantly residential, while an office building that contains a floor of residential suites would not. The Order further clarifies that a loop will be considered a FTTH loop if it is deployed to the minimum point of entry of a predominantly residential MDU, regardless of the ownership of the inside wiring."

The FCC released its triennial review order [576 pages in PDF] on August 21, 2003. However, it held meeting on February 20, 2003 at which it announced that it had adopted the yet to be written TRO. See, story titled "Summary of FCC Triennial Review Order" in TLJ Daily E-Mail Alert No. 725, August 25, 2003. See also, stories titled "FCC Announces UNE Report and Order", "FCC Order Offers Broadband Regulatory Relief", "FCC Announces Decision on Switching", "Commentary: Republicans Split On FCC UNE Order", and "Congressional Reaction To FCC UNE Order" in TLJ Daily E-Mail Alert No. 609, February 21, 2003.

The TRO addresses the Section 251 unbundling obligations of ILECs. Unbundled network elements (UNEs) are those portions of telephone networks that the ILECs, such as Verizon, must make available to competing carriers, such as AT&T and MCI WorldCom, seeking to provide telecommunications services. The Telecommunications Act of 1996 provides that ILECs must provide access to certain of their network elements at regulated rates.

47 U.S.C. § 251(c)(3) provides that ILECs have "The duty to provide, to any requesting telecommunications carrier for the provision of a telecommunications service, nondiscriminatory access to network elements on an unbundled basis at any technically feasible point on rates, terms, and conditions that are just, reasonable, and nondiscriminatory in accordance with the terms and conditions of the agreement and the requirements of this section and section 252 of this title. An incumbent local exchange carrier shall provide such unbundled network elements in a manner that allows requesting carriers to combine such elements in order to provide such telecommunications service."

Section 251(d)(2) requires the FCC, in establishing unbundling requirements, to "consider, at a minimum, whether ... the failure to provide access to such network elements would impair the ability of the telecommunications carrier seeking access to provide the services that it seeks to offer." The interpretation of the word "impair" has been central to the FCC's unbundling orders, and the Court opinions overturning them.

The TRO provided that for new builds, "An incumbent LEC is not required to provide nondiscriminatory access to a fiber-to-the-home loop on an unbundled basis when the incumbent LEC deploys such a loop to a residential unit that previously has not been served by any loop facility."

For overbuilds, the TRO provided that "An incumbent LEC is not required to provide nondiscriminatory access to a fiber-to-the-home loop on an unbundled basis when the incumbent LEC has deployed such a loop parallel to, or in replacement of, an existing copper loop facility," with certain exceptions.

FCC Commissioner Kathleen Abernathy wrote in a separate statement [PDF] that "When the Commission adopted the Triennial Review Order last year, we provided significant relief from unbundling obligations for next-generation fiber networks. In particular, the Order provided complete relief for the broadband capabilities of fiber-to-the-home (FTTH) deployments. This deregulatory action is already achieving its desired impact as carriers are accelerating plans to deploy fiber deeper in the network -- in many cases all the way to the customer. The Triennial Review Order inadvertently created a barrier to investment in some areas, however, by stating that multiple dwelling units (MDUs) were flatly ineligible for this unbundling relief. This Reconsideration Order corrects that anomaly and assures that mass market consumers will benefit from increased broadband deployment irrespective of whether they live in single family homes or in apartment buildings."

FCC Chairman Michael Powell wrote in a separate statement [PDF] that this order "clarifies unbundling rules as they apply to broadband services provided to these structures. It draws an administratively workable distinction between primarily residential multi-unit dwellings, and other, more commercial locations. By clarifying our unbundling rules as they apply to these situations, we restore the incentives of incumbent LECs to deploy broadband technology, particularly in our nation's cities."

FCC Commissioner Michael Copps, who opposed the FTTH provisions of the TRO last year, also dissented from this Order on Reconsideration. He wrote in a separate statement [PDF] that this order "means that small businesses located in buildings that also have residential apartments will henceforth be unable to enjoy the full panoply of competitive voice and data services. In most cases, small businesses in multi-tenant units that are ``primarily residential´´ will be left with one service option -- the incumbent carrier. By sweeping into today’s decision law offices, doctor’s offices, copy shops, stock brokers, real estate offices, dry cleaners, coffee shops, dentists' offices, grocery stores and other small retail and service businesses located on the ground floor of so many apartment buildings, the majority denies them the opportunities for cost savings and innovative services that come with having a competitive array of carriers to choose from. In cities like New York and Chicago and Washington, where residential buildings routinely include ground floor commercial tenants, whole swaths of downtown small businesses will find themselves ineligible for competitive wireline services."

FCC Commissioner Jonathan Adelstein concurred in part and dissented in part. He wrote in a separate statement [PDF] that this order is "vague and overbroad". He concurred "to the extent that it injects more symmetry to our treatment of residential consumers, whether they reside in single family homes or multi-tenant buildings (referred to as MDUs). Much as I supported unbundling relief for the deployment of fiber loops to single family homes in greenfield developments, I support similar relief for residential consumers in multi-tenant buildings."

However, he added that he dissents "in part because the Order fails to consider potential distinctions in the analysis of greenfield developments as compared with so-called brownfield developments, where providers are overbuilding their existing networks."

Michael Gallagher, head of the National Telecommunications and Information Administration (NTIA), issued a statement. "The President has called on the government to clear the regulatory hurdles that stand in the way of broadband deployment.  The Commission's action today creates the regulatory certainty necessary to speed the deployment of broadband to millions of Americans living in apartment buildings, and brings us closer to meeting the President's goal of universal and affordable broadband access by 2007."

This order is FCC 04-191 in CC Docket Nos. 01-338, CC 96-98, and CC 98-147.

FCC Adopts R&O Approving Digital Protection Technologies and Recording Methods

8/4. The Federal Communications Commission (FCC) adopted, but did not release, a Report and Order (R&O) approving 13 applications for certification of digital output protection technologies and recording methods, including TiVo's application, under the FCC's broadcast flag rule. The FCC issued a short release describing this item.

On November 4, 2003, the FCC adopted and released a Report and Order and Further Notice of Proposed Rulemaking [72 pages in PDF]. It is also known as the broadcast flag order. That item is FCC 03-273 in MB Docket No. 02-230.

The broadcast flag order promulgated rules that include a broadcast flag mandate. 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. See, story titled "FCC Releases Broadcast Flag Rule" in TLJ Daily E-Mail Alert No. 772, November 5, 2003.

Subsequently, equipment and software makers submitted applications to the FCC, pursuant to the interim approval process for digital output protection technologies and recording methods established by the broadcast flag order, for certification of their technologies. See, for example, application [45 pages in PDF] of TiVo in MB Docket No. 04-63.

The Motion Picture Association of America (MPAA) submitted an opposition [PDF] to TiVo's application for its TiVoGuard technology on the grounds that it "fails to sufficiently protect against unauthorized redistribution ... because it does not include any distance-based limitations on transmissions of the content".

The FCC's release states that the present R&O "reiterates that the Commission's goal in the Broadcast Flag Order was to prevent the indiscriminate redistribution of digital broadcast television content. As such, the Order does not require proximity controls as an additional obligation where other reasonable constraints sufficiently limit the redistribution of content. Therefore, the Order does not require the use of localization constraints in connection with the SmartRight and TiVoGuard technologies since they employ different combinations of device limits, interactive device authentication, and affinity-based mechanisms to restrict redistribution."

FCC Commissioner Kevin Martin (at right) concurred in part and dissented in part. He wrote in a separate statement [PDF] to express concerns about two issues.

He wrote that "I am concerned that Tivo's technology does not include sufficient constraints. All of the other technologies requesting approval from us have adopted proximity controls or similar mechanisms to limit content redistribution outside the home at this time. I ultimately want to enable a person's digital networking environment to extend beyond the home. I fear, however, that we may be acting prematurely in concluding that Tivo's affinity controls are sufficient to protect against widespread redistribution. I therefore would have conditioned approval of Tivo's technology on adoption of proximity controls at this time, and continued to study whether its device limits and affinity controls provide adequate protection."

The FCC R&O also states that "sufficient evidence has been presented demonstrating that each digital output protection technology and recording method, except for DTCP over Bluetooth, is technically sufficient to adequately protect digital broadcast television content from indiscriminate redistribution."

The Digital Transmission Content Protection (DTCP) system was developed by five companies -- Intel, Hitachi, Matsushita, Sony and Toshiba. It is also know as 5C. It provides secure transmission of compressed content over electrical connections, such as to a computers and DVD players. See also, DTCP web site.

Martin also wrote that "I fear that the ``non-assert´´ clause in the DTCP adopter agreement could hinder competition and suppress innovation. We acknowledge in the Order that DTCP is the only publicly-offered output protection technology we approve that permits copying, and is ``therefore likely to become the primary´´ standard for the foreseeable future. As a result, anyone who wants to build products for this market must sign the DTCP license. Yet, the license requires that companies give up any intellectual property rights they have in the DTCP technology before signing. Therefore a party may have to choose between the lesser of two evils: either don’t participate in the relevant product market, or compete, but give up your intellectual property rights. I am concerned this result may be anti-competitive, may discourage future investment in intellectual property, and may generally be counter to good public policy."

Harris Miller, President of the Information Technology Association of America (ITAA), stated in a release that "This is an important clarification of the standards established in the broadcast flag proceeding. We applaud the agency's willingness to move beyond proximity as the basis for determining acceptable use of copyrighted digital broadcasts, and to recognize that content can be protected from copying in the Internet environment, in this case using authentication and encryption technologies. We expect this approach to yield more products and choices for consumers and larger markets for copyright owners."

This proceeding is titled "Digital Output Protection Technologies and Recording Method Certifications". This R&O is FCC-04-193 in MB Docket No. 04-55, 04-56, 04-57, 04-58, 04-59, 04-60, 04-61, 04-62, 04-63, 04-64, 04-65, 04-66, and 04-68. Susan Mort presented this item at the Commission meeting. She can be reached at 202 418-1043 or susan.mort@fcc.gov.

Powell Discusses Brand X Case

8/4. The Federal Communications Commission (FCC) Chairman Michael Powell discussed the Brand X case with reporters after the FCC's meeting on August 4, 2004. He said that he did not yet have a decision from the Office of the Solicitor General regarding petitioning the Supreme Court for writ of certiorari.

Powell also rebutted the arguments of Commissioner Michael Copps and Commissioner Jonathan Adelstein regarding the application of the Brand X case to the FCC's CALEA NPRM, which the FCC announced at the August 4 meeting.

Both Copps and Adelstein criticized the FCC's Notice of Proposed Rulemaking and Declaratory Ruling (NPRM & DR) in its Communications Assistance for Law Enforcement Act (CALEA) proceeding for failing to follow and address the October 6, 2003 opinion [39 pages in PDF] of the U.S. Court of Appeals (9thCir) issued in Brand X Internet Services v. FCC.

The FCC adopted a NPRM & DR regarding imposing CALEA obligations upon broadband internet access services, including voice over internet protocol (VOIP), and other information services. The FCC tentatively concluded that broadband internet access services are subject to CALEA requirements, and that managed or mediated VOIP services are also subject to CALEA requirements.

The CALEA imposes obligations upon telecommunications carriers, but not providers of information services, to design and modify their networks and equipment to make it easier for law enforcement entities to conduct wiretaps and other surveillance. The FCC based its tentative conclusions upon its interpretation of the CALEA's definition of "telecommunications services". This definition provides that telecommunications carrier includes "a person or entity engaged in providing wire or electronic communication switching or transmission service to the extent that the Commission finds that such service is a replacement for a substantial portion of the local telephone exchange service ...". That is, the FCC did not conclude that broadband internet access services fall within the regulatory category of telecommunications services, as the Department of Justice (DOJ) had argued in its petition for rulemaking [83 pages in PDF] to the FCC. Rather, the FCC concluded that broadband services are a replacement for a substantial portion of local telephone exchange service, and therefore, for the purpose of the CALEA only, broadband services are telecommunications services, and hence, subject to CALEA obligations.

See story titled "FCC Adopts NPRM and Declaratory Ruling Regarding CALEA Obligations" in TLJ Daily E-Mail Alert No. 953, August 5, 2004, and story titled "FCC Legislates Expansion of CALEA Obligations" in the same issue.

Adelstein wrote in his separate statement [PDF] that "Rather than seeking comment on the most stable footing for law enforcement’s request, the item seizes upon notable but thin distinctions between definitions in CALEA and the Communications Act. Moreover, the item does not acknowledge fully and seek comment on existing precedent that is in tension with the tentative conclusions here. For example, whether or not the Commission ultimately appeals the decision in the Ninth Circuit’s Brand X case, which concluded that broadband access via cable modem includes a ``telecommunications service,´´ this Notice’s failure to seek comment on a legal analysis that would comport with the Circuit’s holding is an unnecessary failing. For these reasons, I concur in the result, if not the full legal analysis behind the Commission’s tentative conclusions."

Copps wrote in his separate statement [PDF] "it strains credibility to suggest that Congress intended ``a replacement for a substantial portion of the local telephone exchange´´ to mean the replacement of any portion of any individual subscriber’s functionality. Capturing VoIP under the rubric of substantial replacement, ignoring the Ninth Circuit's decision in Brand X, and trying to slice and dice managed and non-managed services is not the way to proceed here."

After the August 4 meeting, Drew Clark of National Journal's Tech Daily asked Chairman Powell, "Have you gotten any indication from the Solicitor General's office that they are going to appeal the Brand X decision. And, what is your reaction to Commission Copps' statement that the CALEA order dances around the Brand X decision?"

Powell responded, "Well, no. I haven't got an indication from the Solicitor General. I mean, he makes that decision independently. And, we haven't yet received his decision on that."

On December 3, 2004, the FCC filed a Petition for Rehearing En Banc [19 pages in PDF] with the Court of Appeals in the Brand X case. See also, story titled "FCC Files Petition for Rehearing En Banc in Brand X Case" in TLJ Daily E-Mail Alert No. 793, December 5, 2003. On April 1, 2004 the Court of Appeals denied petitions for rehearing en banc. See, story titled "9th Circuit Denies Rehearing in BrandX v. FCC" in TLJ Daily E-Mail Alert No. 868, April 2, 2004. On April 5, 2004 cable companies filed a motion for a stay pending the filing of a petition for writ of certiorari in the Supreme Court. See story titled "Cable Companies Seek Stay of Brand X Mandate" in TLJ Daily E-Mail Alert No. 871, April 7, 2004. And, on April 7, 2004, the FCC filed a motion for stay pending its filing a petition for writ of certiorari with the Supreme Court.

Powell also discussed the Brand X case. He said, "I think the thing about the Brand X decision is mistaken. I mean, the criticality of the CALEA item that was of greatest concern with the FBI was that the Brand X decision only goes to internet services providers who are facilities based offerers. That is, if you are a cable company and you offer infrastructure, it said that a portion of that is telecom and a portion is information service. But something like Vonage, for example, which is a managed VOIP service, has no such infrastructure whatsoever. So, the real question isn't what -- for those things that are telecom services -- what will be held to be telecom services by the Commission. There is no issue whatsoever that CALEA applies. It is sort of a false argument. Nobody has any doubt that if something is a telecom service, it will be subject to CALEA."

Powell continued that "The concerning question is whether there will be services like information services, or other, that wouldn't meet that portion of the statute, but would they otherwise be subject to CALEA. And, that is what the substitutability argument in the CALEA order is about. It is about principally carriers who might not, either don't now, or might not, based on our future proceedings, be telecom carriers. And so, the question is can things that are not telecom carriers be subject to CALEA anyway, and that is what the term [inaudible phrase]."

Powell concluded, "So, Brand X doesn't, you know, we have an open VOIP NPRM, and those questions have not been prejudged yet. So, clearly, services could be classified in a way that wouldn't be satisfied by just that simply application of CALEA in that way."

More on Brand X. On March 14, 2002, the FCC adopted a Declaratory Ruling and Notice of Proposed Rulemaking [75 pages in PDF]. The Declaratory Ruling (DR) component of this item states that "we conclude that cable modem service, as it is currently offered, is properly classified as an interstate information service, not as a cable service, and that there is no separate offering of telecommunications service." This item is FCC 02-77 in Docket No. 00-185 and Docket No. 02-52. See also, March 14, 2002 FCC release.

Brand X, EarthLink, the State of California, and the Consumer Federation of America filed petitions for review of the FCC DR with the Court of Appeals in which they argued that cable modem service is both an information service and a telecommunications service, and is therefore subject to regulation on a common carriage basis. That is, they argue that cable broadband providers must be required to let other internet service providers (ISPs) use their facilities.

On October 6, 2003, a three judge panel of the Court of Appeals issued its opinion [39 pages in PDF] (which is also published at 345 F.3d 1120) 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 Court of Appeals wrote that its opinion was solely a matter of stare decisis. That is, it wrote that it was bound by its previous opinion in AT&T v. City of Portland, 216 F.3d 871 (2000).

See, story titled "9th Circuit Vacates FCC Declaratory Ruling That Cable Modem Service is an Information Service Without a Separate Offering of a Telecommunications Service" in TLJ Daily E-Mail Alert No. 754, October 7, 2003; and story titled "Reaction to 9th Circuit Opinion in Brand X Internet Services v. FCC" in TLJ Daily E-Mail Alert No. 756, October 9, 2003.

FCC Adopts R&O Regarding DTV Conversion

8/4. The Federal Communications Commission (FCC) adopted, but did not release, a Report and Order regarding conversion of the television broadcast system from analog technology to digital television. The FCC issued a short release [PDF] describing this item, and four Commissioners wrote brief separate statements.

FCC Chairman Michael Powell wrote in a separate statement [PDF] that the FCC adopts this item "most notably to set channel election and replication and maximization deadlines not only to bring consumers more over-the-air digital services, but to help usher in the beginning of the end of the DTV transition." He also restated the importance of completing the DTV transition: "the transition will recoup a significant amount of spectrum for first responder, public safety use and for innovative wireless broadband services".

The FCC release also states that the R&O eliminates, "for now, the simulcasting requirement to permit the transmission of additional innovative programming on broadcast digital channels".

FCC Commissioner Michael Copps wrote in a separate statement [PDF] that "what is missing here" is consideration of DTV broadcasters' public interest obligations.

FCC Commissioner Jonathan Adelstein also wrote in a separate statement [PDF] that the FCC should address public interest obligations. He wrote that "Parents are eager to know what opportunities the transition will bring to their children. Candidates should be able to use the Internet to quickly determine the political advertising landscape of a given station. Broadcasters should welcome the opportunity to showcase their local civic and public affairs coverage on their websites. The digital age offers tremendous opportunities for both broadcasters and the public. Multicasting and other new horizons in digital broadcasting should correspond to new horizons in serving the public interest."

FCC Commissioner Kevin Martin wrote in a separate statement [PDF] that "I look forward to taking what appears now to be last critical step: resolving the pending petitions for reconsideration regarding the extent of broadcasters’ ``must carry´´ rights in the digital world. I hope we address this issue soon."

This item is FCC-04-192. The FCC meeting agenda states that this is Docket No. 03-15. The FCC release states that this is Docket No. 03-14.

FCC Adopts R&O and FNPRM Regarding Reporting of Network Outages

8/4. The Federal Communications Commission (FCC) adopted, but did not release, a Report and Order and Further Notice of Proposed Rulemaking (R&O and FNPRM) regarding reporting of network outages. The FCC issued a short release describing this item, and all five Commissioners wrote brief separate statements.

The FCC release states that "Under the new rules, both wireless and satellite providers will be subject, for the first time, to the Commission’s reporting requirements. Currently, only wireline and cable telephony communications providers are required to report."

The release also states that "the information collected as a result of these new rules is likely to be sensitive information that would cause substantial competitive harm and/or seriously undermine national defense and public safety if publicly disclosed. Thus, the Commission found that the information in outage reports will need to be protected from public disclosure to the full extent of the law."

FCC Commissioner Kathleen Abernathy wrote in a statement [PDF] that this includes "presumptively affording filed data confidentiality under Exception 4 of the Freedom of Information Act". However, FCC Commissioner Kevin Martin noted in a statement [PDF] that while the FCC is now mandating disclosure, "a voluntary reporting scheme could provide greater protection for the information we obtain, as the Critical Infrastructure Information Act of 2002 protects only information voluntarily submitted to the Department of Homeland Security (DHS)."

Steve Largent, P/CEO of the Cellular Telecommunications & Internet Association (CTIA) stated in a release "it is discouraging that the FCC would adopt a mandatory requirement to report network outages when a fully compliant voluntary effort is already under way and producing significant results ... The voluntary effort is a perfect example of the private-public partnership that the Administration has called for to protect our Nation’s critical infrastructure, over 80% of which is privately held. Voluntary wireless reporting is the most effective means of continually improving the reliability and security of wireless networks and also would have ensured protection of this data, as Congress intended when it passed the Critical Infrastructure Information Act. As the Department of Homeland Security and the wireless industry stated unequivocally in this proceeding, these reports can contain highly sensitive network data that in the wrong hands could leave systems vulnerable to attack and jeopardize homeland security."

The Homeland Security Act (HSA), which was enacted in 2002 to create the DHS, created an exemption to the Freedom of Information Act (FOIA), which is codified at 5 U.S.C. § 552, for certain information about critical infrastructures that is voluntarily provided. The relevant statutory provisions are found at §§ 211-215 of HR 5005 (107th Congress). These sections are collectively named that "Critical Infrastructure Information Act of 2002". President Bush signed the HSA on November 25, 2002. It became Public Law No. 107-296.

The critical infrastructure information (CII) exemption to the FOIA was enacted to incent companies to share information with the government that they would not otherwise share because of fears that their competitors or critics could obtain it under the FOIA. The rationale for the CII exemption is that the government needs information from the private sector to be able to combat cyber terrorism and other threats to critical infrastructures. Technology companies and some of the groups that represent them in Washington DC strongly supported creating this exemption.

FOIA exemption 4 (5 U.S.C. § 552(b)(4)) provides that the duty of the government to produce records under the FOIA "does not apply to matters that are ... trade secrets and commercial or financial information obtained from a person and privileged or confidential".

See also, statement [PDF] of Chairman Michael Powell, statement [PDF] of Commissioner Michael Copps, and statement [PDF] of Commissioner Jonathan Adelstein.

The Department of Homeland Security (DHS) issued a release in which it stated that "reporting of non-wireline service disruption information will promote National Security and Emergency Preparedness (NS/EP) telecommunications and will significantly enhance critical infrastructure protection efforts."

This item is FCC 04-188 in ET Docket No. 04-35.

FCC Adopts NPRM Regarding Emergency Alert System

8/4. The Federal Communications Commission (FCC) adopted, but did not release, a Notice of Proposed Rulemaking (NPRM) regarding the Emergency Alert System (EAS). The FCC issued a short release [PDF] describing this item, and all five Commissioners wrote brief separate statements.

The FCC release states that this NPRM seeks public comment "on how EAS can be improved to be a more effective mechanism for warning the American public of an emergency." However, neither the release, nor the Commissioners' statements reveal the issues on which the FCC seeks comments, including whether any information services should be subject to any EAS requirements.

FCC Commissioner Kathleen Abernathy wrote in a separate statement [PDF] that "As new communications technologies develop and become integrated into our society, it is important that we adapt our rules to ensure that the purposes of the EAS are being fulfilled."

FCC Commissioner Kevin Martin wrote in a separate statement [PDF] that the EAS "applies only to analog broadcast and cable television and its use is, in many instances, merely voluntary. We need either to update this system or to replace it with a more comprehensive and effective digital warning mechanism."

See also, statement [PDF] of FCC Chairman Michael Powell, statement [PDF] of Commissioner Michael Copps, and statement [PDF] of Commissioner Jonathan Adelstein.

This item is FCC 04-189 in EB Docket No. 04-296.

FCC Adopts Order Regarding Wireless SPAM

8/4. The Federal Communications Commission (FCC) adopted, but did not release, an order regarding wireless spam at its August 4 meeting. The FCC issued a short release describing this item, and two Commissioners wrote brief separate statements.

This order implements the recently enacted CAN-SPAM Act (Controlling the Assault of Non-Solicited Pormography and Marketing Act of 2003) which was S 877. President Bush signed the bill on December 16, 2003. It is now Public Law No. 108-187.

The CAN-SPAM Act gives primary rulemaking authority to the Federal Trade Commission (FTC), but also gives the FCC authority with respect to "unwanted mobile service commercial messages". It directs the FCC to write rules that "provide subscribers to commercial mobile services the ability to avoid receiving mobile service commercial messages unless the subscriber has provided express prior authorization to the sender", and "allow recipients of mobile service commercial messages to indicate electronically a desire not to receive future mobile service commercial messages from the sender".

The FCC release describing this order states that the FCC has "Interpreted the scope of material covered under the definition of mobile service commercial messages (MSCMs) in the CAN-SPAM Act to include any commercial message sent to an electronic mail address provided by a CMRS provider specifically for delivery to the subscriber's wireless device. The Commission found that Short Message Service messages transmitted solely to phone numbers (as opposed to those sent to addresses with references to Internet domains) are not covered by these protections, but all autodialed calls are already covered by the TCPA." (Parentheses in original.)

This release states that the order prohibits the sending of MSCMs unless the individual addressee has given the sender express prior authorization. This is an opt-in requirement. However, there is no requirement that the authorization be in writing.

The FCC release also states that the FCC "will create a publicly available FCC wireless domain names list containing the domain names used for mobile service messaging. This will enable senders of commercial mail to determine which addresses, containing those domain names, are directed at mobile services." The order also requires all CMRS providers to supply the FCC with names of all the internet domains on which they offer mobile service messaging service. It then prohibits the sending of commercial (but not transactional or relationship) messages to these domains.

See, statement [PDF] of FCC Chairman Michael Powell and statement [PDF] of FCC Commissioner Michael Copps. See also, story titled "FCC Announces Rulemaking on Wireless Provisions of CAN-SPAM Act" TLJ Daily E-Mail Alert No. 855, March 15, 2004.

Steve Largent, P/CEO of the Cellular Telecommunications & Internet Association (CTIA) stated in a release that "The wireless industry has made every effort to protect our consumers' privacy from unsolicited communications. We fought hard to limit telemarketing calls to wireless phones and more recently, have taken proactive steps to eliminate text messaging spam, including installing blocking features, monitoring email and directly targeting spammers ... Implementation of the CAN-SPAM Act will provide consumers additional protections from unwanted e-mails sent to mobile wireless devices".

This item is FCC 04-194 in CG Docket No. 04-53 and No. 02-278

FCC Adopts NPRM and Declaratory Ruling Regarding CALEA Obligations

8/4. The Federal Communications Commission (FCC) adopted, but did not release, a Notice of Proposed Rulemaking and Declaratory Ruling (NPRM & DR) regarding imposing CALEA obligations upon broadband internet access services, including voice over internet protocol (VOIP), and other information services. The FCC gave the Department of Justice (DOJ) much of what it had requested. The FCC tentatively concluded that broadband internet access services are subject to CALEA requirements, and that managed or mediated VOIP services are also subject to CALEA requirements.

The FCC issued a short press release [PDF] describing this item, and four Commissioners wrote brief separate statements, which they read, in whole or in part, at the FCC's meeting on August 4, 2004. See, full story.

FCC Legislates Expansion of CALEA Obligations

8/4. The Federal Communications Commission (FCC) adopted a Notice of Proposed Rulemaking and Declaratory Ruling (NPRM & DR) regarding imposing CALEA like obligations upon broadband internet access services, including voice over internet protocol (VOIP), and other information services, at the August 4, 2004 meeting of the FCC. There are strong policy arguments for extending certain CALEA like obligations to some information services. The DOJ and the FBI seek to more easily monitor the communications of terrorists and criminals.

At the August 4 meeting the Commissioners and FCC staff relied heavily on policy grounds. FCC Chairman Michael Powell wrote in a separate statement [PDF], which he read at the meeting, that "law enforcement access to IP-enabled communications is essential" and "Our support for law enforcement is unwavering".

FCC Commissioner Kathleen Abernathy wrote in a separate statement [PDF], from which she quoted at the meeting, that the FCC "has no higher priority than promoting public safety and the national defense."

Ed Thomas, Chief of the FCC's Office of Engineering and Technology (OET), stated, in introducing this item at the meeting, that "in these times of heightened threats to our homeland security, it is more important than ever to ensure that law enforcement agencies have the tools they need to combat terrorism and crime".

There is also the matter of the legal basis for the NPRM & DR, and the process being employed by the DOJ and FCC to expand the scope of the CALEA.

The FCC is an administrative agency, created by Congressional statute. Its authority is conferred by, and limited to, Congressional statutes. The Congress from time to time enacts laws that instruct the FCC to take certain administrative actions to implement those statutes. The FCC, however, has no general federal legislative authority. Only the Congress does.

The FCC's release describing this item, and the Commissioners' written statements, and oral remarks, all use the language of "implementing the CALEA". Yet, this is not descriptive of the action taken by the FCC. The FCC's action is more legislative in nature.

CALEA Regime. The CALEA imposes requirements upon telecommunications carriers, but not providers of information services. The DOJ petition, and now the FCC NPRM and DR, at bottom, seek to place certain providers of information services within the category of telecommunications carriers. This treatment is inconsistent with clear statutory language.

The CALEA provides, in part, that "a telecommunications carrier shall ensure that its equipment, facilities, or services that provide a customer or subscriber with the ability to originate, terminate, or direct communications are capable of expeditiously isolating and enabling the government ... intercept, to the exclusion of any other communications, all wire and electronic communications ...". It applies only to "a telecommunications carrier".

The CALEA further provides definitions. It defines "telecommunication carrier" as "a person or entity engaged in the transmission or switching of wire or electronic communications as a common carrier for hire".

However, this CALEA definition of "telecommunications carrier" also provides that its "does not include ... persons or entities insofar as they are engaged in providing information services".

The CALEA provides that "The term ``information services'' --
  (A) means the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications; and
  (B) includes -- (i) a service that permits a customer to retrieve stored information from, or file information for storage in, information storage facilities; (ii) electronic publishing; and (iii) electronic messaging services; but
  (C) does not include any capability for a telecommunications carrier's internal management, control, or operation of its telecommunications network."

Moreover, it provides that the basic requirements of the CALEA to modify networks and equipment to facilitate surveillance "do not apply to ... information services".

The Congress enacted the CALEA. It could amend the CALEA to provide that certain providers of information services are subject to CALEA obligations. But, it has not. The FCC would now work legislative changes by administrative fiat.

Replacement for a Substantial Portion. The FCC's release states that the FCC "tentatively concludes that CALEA applies to facilities-based providers of any type of broadband Internet access service", and that this tentative conclusion is "based on a Commission proposal that these services fall under CALEA as ``a replacement for a substantial portion of the local telephone exchange service.´´"

There is merit to the argument that IP based push to talk services are a replacement for a substantial portion of LEC service. There is also an argument to be made that VOIP services are a replacement for a substantial portion. However, various VOIP services also include other services and features not provided by LECs.

Moreover, VOIP is just one of many applications that broadband internet access service facilitates. Broadband also enables users to visit web pages, publish web pages, search the web, make purchases and sales, use interactive computer services, enter chat rooms, and send and receive e-mail, instant messages, video messages, and text messages. Moreover, law enforcement surveillance extends to these activities.

However, the FCC's tentative conclusion that broadband internet access service is a "replacement for a substantial portion of the local telephone exchange service" necessary implies that activities such as web surfing, online shopping, and the use of interactive computer services replaces a substantial portion of old fashioned phone service.

At some point, the FCC and DOJ may be hard pressed justify such a conclusion to a three judge panel of the Court of Appeals.

FCC Commissioner Michael Copps wrote in a separate statement [PDF] about the weakness of this approach. He wrote that "there are better ways to build a system that will guarantee judicial approval". He added that this NRPM and DR "is flush with tentative conclusions that stretch the statutory fabric to the point of tear. If these proposals become the rules and reasons we have to defend in court, we may find ourselves making a stand on very shaky ground. It would be a shame if our reliance on thin legal arguments results in the CALEA rules being thrown out."

Copps (at right) elaborated that "it strains credibility to suggest that Congress intended ``a replacement for a substantial portion of the local telephone exchange´´ to mean the replacement of any portion of any individual subscriber’s functionality. Capturing VoIP under the rubric of substantial replacement, ignoring the Ninth Circuit's decision in Brand X, and trying to slice and dice managed and non-managed services is not the way to proceed here."

On October 6, 2003, the U.S. Court of Appeals (9thCir) issued its opinion [39 pages in PDF] in Brand X Internet Services v. FCC, vacating the Federal Communications Commission's (FCC) declaratory ruling that cable modem service is an information service, and that there is no separate offering as a telecommunications service. See, story titled "9th Circuit Vacates FCC Declaratory Ruling That Cable Modem Service is an Information Service Without a Separate Offering of a Telecommunications Service" in TLJ Daily E-Mail Alert No. 754, October 7, 2003.

Information Services and Communications Services. The FCC did not grant the request in the DOJ's petition regarding redefining information services as communications services. Rather, the FCC based is tentative conclusions on the "replacement for a substantial portion" language in the CALEA. However, this basis necessarily implies that certain information services providers are telecommunications carriers.

Subsection 102(8)(B)(ii) provides that "telecommunications carrier" includes "a person or entity engaged in providing wire or electronic communication switching or transmission service to the extent that the Commission finds that such service is a replacement for a substantial portion of the local telephone exchange service and that it is in the public interest to deem such a person or entity to be a telecommunications carrier for purposes of this chapter". That is, a find of "replacement for a substantial portion" places a service provider within the definition of "telecommunications carrier".

This is significant because the majority of the Commissioners does not plan to extend the entire panoply of the regulatory regime that applies to telecommunications carriers and communications services to information services. This would entail unbundling requirements, price regulation, service quality regulation, and other types of regulation that were created long ago to regulate a single monopoly telecommunications company. In contrast, these regulatory burdens are not applied to services that are defined as information services.

FCC Chairman Michael Powell asserted in a separate statement [PDF] that the FCC can simultaneously place the same service in two different regulatory regimes. He wrote that "CALEA requirements can and should apply to VoIP and other IP enabled service providers, even if these services are ``information services´´ for purposes of the Communications Act."

Powell (at left) continued that "our tentative conclusion is expressly limited to the requirements of the CALEA statute and does not indicate a willingness on my part to regulate VoIP services as telecommunications services. We have before us a pending rulemaking and several petitions for declaratory ruling that address themselves to the classification of VoIP services and nothing in this item prejudices the outcome of those proceedings."

In contrast, FCC Commissioner Kathleen Abernathy questioned the entire notion of extending broadband internet access services and VOIP to CALEA obligations. She wrote in a separate statement [PDF] that "it would be a mistake to gloss over the possibility that the existing statutory framework does not apply to broadband Internet access services or other IP-enabled services that are classified as information services."

Abernathy (at right) continued that "The NPRM we are issuing proposes a plausible interpretation of the ``substantial replacement´´ provision in CALEA that would extend the assistance-capability requirements to broadband access services and IP telephony. But such an extension clearly would be fraught with legal risk. The Commission thus would benefit greatly from further congressional guidance in this area. While the text and legislative history of CALEA make clear that the march of technological progress should not hamper law enforcement’s ability to conduct lawful wiretaps, the statute also explicitly exempts information services from its reach. The Commission has proposed a means of resolving this tension, but it remains to be seen whether our attempts to do so would pass judicial muster."

Enforcement Authority. Section 108 of the CALEA provides that "A court shall issue an order enforcing this title ... only if the court finds that ... alternative technologies or capabilities or the facilities of another carrier are not reasonably available ..." In contrast, the CALEA gives the FCC no enforcement authority -- only limited rule making authority. That is, the CALEA gives enforcement authority only to the courts, and the scope of enforcement authority only applies to a "carrier".

The FCC release states that the FCC "considers whether, in addition to the enforcement remedies through the courts available to LEAs under CALEA section 108, it may take separate enforcement action against carriers that fail to comply with CALEA and tentatively finds that it has general authority under the Communications Act to promulgate and enforce CALEA rules against carriers and non-common carriers."

Thus, the NPRM considers whether the FCC may exercise enforcement authority, which is not conferred upon it by statute, and whether it can exercise this authority against "non-carriers", who are not covered by the enforcement section of the CALEA.

Commissioner Abernathy wrote that the issue of enforcement also warrants "congressional attention". She explained that "Section 108 of CALEA establishes an enforcement mechanism that requires the Attorney General to bring a civil action in the appropriate federal district court. While law enforcement agencies have noted the shortcomings of this regime, it is unclear whether Congress intended the Commission to assume a central role over enforcement of the statute’s requirements."

Cato Releases Paper on Threats to Privacy

8/4. The Cato Institute released a paper [20 pages in PDF] titled "Understanding Privacy -- and the Real Threats to It".  See also, executive summary.

The paper begins with an unconventional definition of privacy. The paper states that privacy "is the subjective condition people experience when they have power to control information about themselves. Because privacy is subjective, government regulation in the name of privacy can only create confidentiality or secrecy rules based on politicians' and bureaucrats' guesses about what ``privacy´´ should look like. The most important, but elusive, part of true privacy protection is consumers' exercise of power over information about themselves. Ultimately, privacy is a product of personal responsibility and autonomy."

Hence, the paper argues that "The best way to protect true privacy is to leave decisions about how personal information is used to the people affected. Political approaches take privacy decisionmaking power away from the people."

The paper argues that "Although privacy threats from business and new technology are real, the clearest menace to privacy comes from governments. Unlike other social institutions, governments extract information using the force of law. Governments alone can change the rules under which they hold information -- without recourse to those aggrieved. And governments routinely frustrate opportunities for individuals to protect privacy as they see fit."

The paper elaborates that "Governments threaten privacy in three principal ways" -- surveillance, collecting and sharing information for administrative purposes, and laws that degrade people's ability to protect their privacy.

With respect to surveillance, the paper addresses some of the major threats, including passage and amendment of the electronic surveillance provisions of the PATRIOT Act, the Department of Justice's (DOJ) ongoing attempt to persuade the Federal Communications Commission (FCC) to expand the application of the Communications Assistance for Law Enforcement Act (CALEA) from telecommunications carriers to internet services and applications, the DOJ's carnivore program, and the Transportation Security Agency's (TSA) proposed next generation Computer Assisted Passenger Pre-Screening program (CAPPS II).

With respect to administrative databases, the CATO paper states that "to provide benefits and entitlements -- and, of course, to tax -- governments take personal information from citizens by the bushel. Nearly every new policy or program justifies new or expanded databases of information -- and a shrunken sphere of personal privacy. The helping hand of government routinely strips away privacy before it goes to work." The paper also notes examples of how government agencies exchange and merge personal information from their databases.

With respect to laws that degrade people's ability to protect privacy, the paper states that "Myriad laws and rules deprive people of autonomy, preventing them in various ways from taking steps to protect privacy as they see fit. Anti-privacy law and regulation may prevent people from using privacy-protecting technologies, it may prohibit privacy-protecting contracts, or, by distorting markets, it may push people to give up privacy in ways they ordinarily would not."

The paper offers examples, including the federal government's efforts to prevent people from using strong encryption, banking laws that prevent financial institutions from assuring their customers of privacy in financial information, and the FCC's mandate that location tracking technology be incorporated onto mobile phones.

The paper concludes that "Claims by regulators and politicians that they are going to deliver privacy usually involve some kind of regulation placed on the private sector. The most productive approach, however, would be for our representatives in Congress and the state legislatures to reduce the privacy-eroding features of the laws and programs they themselves pass and oversee."

The paper was written by Jim Harper, the incoming Director of Information Policy Studies at the Cato Institute, and Editor of Privacilla.org.

People and Appointments

8/4. Bill Maher, the current Chief of the Federal Communications Commission's (FCC) Wireline Competition Bureau (WCB), stated at the August 4 meeting of the FCC that he will leave the FCC. The Commissioners praised his work at the FCC. At a press conference afterwards, he was asked where he will go next. He responded, "I am going on vacation. And, I will think about what to do after that."

8/4. Federal Communications Commission (FCC) Chairman Michael Powell announced his intent to name Jeffrey Carlisle acting Chief of the FCC's Wireline Competition Bureau (WCB). He is currently the Senior Deputy Bureau Chief of the WCB. He is also the Co-Director of the FCC's Internet Policy Working Group. See, FCC release.

8/4. Federal Communications Commission (FCC) Commissioner Jonathan Adelstein announced several changes in his personal staff at the August 4 meeting of the FCC. Sharon Stewart has moved from Adelstein's office to the FCC's Office of Communications Business Opportunities. Anne Perkins, his Special Assistant, will leave to become Director of Regulatory Affairs at the Satellite Broadcasting and Communications Association (SBCA). Before joining Adelstein's office, she worked at the National Telecommunications Cooperative Association (NTCA). Her last day at the FCC is August 10. Perkins will be replaced by Dionne McNeff who was previously an intern in Adelstein's office. She has one year remaining in her course of study at the Catholic University School of Law.

More News

8/4. The Federal Communications Commission's (FCC) Homeland Security Policy Council presented a report [20 pages of PDF slides] at the FCC's meeting of August 4, 2004 regarding the FCC's regulatory, outreach, and partnership initiatives in support of homeland security. See also, FCC release [PDF], statement [PDF] of FCC Chairman Michael Powell, and statement [PDF] of Commissioner Michael Copps.

Bush Signs US Australia FTA Implementation Act

8/3. President Bush signed HR 4759, the "United States-Australia Free Trade Agreement Implementation Act" at a White House signing ceremony. See also, final text of the agreement.

Bush stated that "Free and fair trade means more than eliminating tariffs on existing trade. We must also work to open up new sectors of our economy to competition and trade. This agreement opens important sectors of Australia's economy, such as telecommunications, government procurement, express delivery, computers, tourism, energy, construction, financial services and entertainment. And the agreement strengthens protections for intellectual property and promotes electronic commerce." See, transcript.

He also spoke about the other trade agreements, and the benefits of free trade generally. He said that "I support free and fair trade, because it has the power to create new wealth for whole nations and new opportunities for millions of people. Sound policy can help unleash the initiative and talent of free people. Open trade is sound policy. It has a record for creating jobs and raising living standards and lowering consumer prices."

The Senate passed the bill on July 15, 2004. See, story titled "Senate Passes US Australia FTA" in TLJ Daily E-Mail Alert No. 940, July 19, 2004. The House passed the bill on July 14, 2004. See, story titled "House Passes US Australia FTA" in TLJ Daily E-Mail Alert No. 938, July 15, 2004.

See also, stories titled "U.S. and Australia Sign FTA" in TLJ Daily E-Mail Alert No. 901, May 19, 2004, and "US and Australia Conclude FTA with Extensive Info Tech Provisions" in TLJ Daily E-Mail Alert No. 833, February 10, 2004.

Class Action Lawyers Sue Yahoo, Google and Others for Serving Targeted Ads of Gambling Web Sites

8/3. Two individuals filed a complaint [62 pages in PDF] in state court in California against Yahoo, Google, and other companies that operate web sites with search capabilities that advertise illegal internet gambling in the state of California. The plaintiffs, who are represented by law firms that specialize in plaintiff's class action litigation against technology companies, seek class action status. The plaintiffs seek restitution, forefeiture, and disgorgement pursuant to the California Unfair Business Practices Statute, Cal. Bus. & Prof. Code §§17200, et seq., and Cal. Civ. Code §§17500, et seq.

The complaint also names as defendants Overture, Ask Jeeves, Looksmart, Alta Vista, Lycos, Juniper Networks, and other companies that "are Internet content providers who create, co-create, target, position, format, publish, distribute and give premium placement of paid advertisements to other websites in conjunction with Internet search engine results requested by persons in California".

The complaint alleges that "Each of the defendants actively and knowingly accepts payment to produce advertisements and paid links for websites of unlicensed Internet gambling businesses. This advertising revenue is determined by the search term input by the user." It further alleges that "each of the defendants either expressly uses, or has access to, geo-tracking software which permits defendants to be able to target illegal gambling advertisements to particular locations such as California."

The complaint anticipates the defendants will raise the defense of interactive computer service liability, pursuant to 47 U.S.C. § 230. It argues that the defendants are not entitled to Section 230 immunity.

The case is Michael Cisneros and Michael Voight v. Yahoo, Inc., et al., Superior Court for the State of California, San Francisco County. The plaintiffs are represented by, among others, Bill Lerach.

GAO Testifies on Information Technology and Terrorism

8/3. David Walker, head of the General Accounting Office (GAO), submitted prepared testimony [28 pages in PDF] for the House Government Reform Committee hearing titled "Moving from `Need to Know’ to `Need to Share´: A Review of the 9-11 Commission’s Recommendations".

He reviewed the 9-11 Commission report's recommendations to create a National Counterterrorism Center (NCTC) for joint operational planning and joint intelligence and to replace the current Director of Central Intelligence with a National Intelligence Director (NID) to oversee national intelligence centers across the federal government. He also reviewed President's Bush's proposal.

He also discussed the use of information technology. He wrote that "With regard to the process and technology dimensions, steps need to be taken to streamline and expedite the processes used to analyze and disseminate the tremendous amount of intelligence and other information available to the intelligence community. This will require extensive use of technology to sort and distribute information both within agencies and between agencies and other key players in various sectors both domestically and internationally, as appropriate. The 9/11 Commission and others have noted various deficiencies in this area, such as the FBI’s information technology development and implementation challenges. At the same time, some successes have occurred during the past 2 years that address process and technology concerns."

More News

8/3. The Internal Revenue Service (IRS) issued a release regarding phishing for taxpayer information with fraudulent IRS correspondence, for the purpose of engaging in identity theft and theft of financial assets. The IRS wrote that "The scheme uses fictitious IRS correspondence and an altered IRS form in an attempt to trick the foreign persons into disclosing their personal and financial data." It elaborates that "In this particular scam, an altered IRS Form W-8BEN, ``Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding,´´ is sent with correspondence purportedly from the IRS to non-resident aliens who have invested in U.S. property, such as securities or bonds, and therefore have U.S.-sourced income. The correspondence claims that the recipient will be taxed at the maximum rate unless the requested personal and financial data is entered onto the form and the form is faxed to the phone number contained in the correspondence." IRS Commissioner Mark Everson said that "Taxpayers should be wary of strangers trying to obtain sensitive personal information, whether it's in person, over the phone, through the mail or over the Internet."

8/3. The U.S. Court of Appeals (4thCir) issued its opinion [PDF] in Esposito v. VeriSign and AOL, an appeal from the U.S. District Court (EDVa) in a domain name dispute. The Court of Appeals did not address the merits of the appeal, because Esposito failed to file his notice of appeal within thirty days of entry of final judgment by the District Court. It dismissed the appeal. The District Court enjoined the plaintiff, Mark Anthony Esposito, from using a domain name likely to cause confusion. This case is Mark Anthony Esposito and America Online Latino v. VeriSign, Inc., America Online, Inc. et al., No. 04-1248, an appeal from the U.S. District Court for the Eastern District of Virginia, at Alexandria, D.C. No. CA-03-362-A.

8/3. The U.S. Court of Appeals (2ndCir) issued its opinion [PDF] in Lucent v. Tatung, an appeal from a District Court judgment confirming an arbitration award in a dispute regarding the payment of royalties pursuant to a patent licensing agreement. Lucent, the patent holder, and licensor, initiated an arbitration to collect unpaid royalties from Tatung. The arbitration panel awarded Lucent over $12 Million. The District Court confirmed the award. On appeal, Tatung argued arbitrator bias. The Appeals Court held for Lucent. This case is Lucent Technologies, Inc., et al. v. Tatung Co., No. 03-7741, an appeal from the U.S. District Court for the Southern District of New York.

8/3. Microsoft announced that it has reached a settlement of a class action lawsuit filed in state court in New Mexico alleging that Microsoft violated New Mexico's antitrust and unfair competition laws. See, release.

8/3. The International Intellectual Property Alliance (IIPA) submitted a comment [33 pages in PDF] to the U.S. International Trade Commission (USITC) for its proceeding on the economic effects of the U.S.-Bahrain Free Trade Agreement, which is currently being negotiated. The IIPA stated that this FTA "holds the promise of significantly raising the standards of copyright protection and enforcement in Bahrain and then, hopefully, the rest of the Gulf region."

4th Circuit Rules in Reciprocal Compensation Case

8/2. The U.S. Court of Appeals (4thCir) issued its divided opinion [61 pages in PDF] in Verizon Maryland v. Global Naps, a case regarding interconnection agreements, reciprocal compensation, state public utilities commissions, and federal jurisdiction.

Back in 1999, Verizon's Maryland subsidiary (then Bell Atlantic Maryland) filed a complaint in U.S. District Court (DMd) against the Maryland Public Service Commission (Maryland PSC) seeking review of the Maryland PSC's order that required Verizon to pay reciprocal compensation to competing local carriers for delivering ISP-bound traffic.

The present opinion is the second opinion of this Appeals Court in this case. The Supreme Court issued its opinion [22 pages in PDF] on May 20, 2002 reversing the previous opinion of the Court of Appeals (240 F. 3d 279), and remanding. See, story titled "Supreme Court Rules on Federal Jurisdiction In Suits Against State PUCs" in TLJ Daily E-Mail Alert No. 435, May 21, 2002. This was Verizon Maryland v. Public Service Commission of Maryland.

On remand, the District Court held that there is no federal question jurisdiction over a local exchange carrier's (in this case Verizon) claim that a state public utility commission (in this case the Maryland PSC) misinterpreted the provisions of an interconnection agreement that are based on federal law. The Court of Appeals reversed this holding, concluding that there is federal question jurisdiction.

The Appeals Court wrote that "because (1) Verizon’s complaint alleges that the PSC misinterpreted interconnection agreement provisions that incorporate federal law, (2) the agreement interpreted is federally mandated, (3) the contractual duty at issue is imposed by federal law, and (4) the purpose of the 1996 Act is best served by allowing review of the PSC 's order in the district court, we hold that Verizon’s contract claim in Count I raises a substantial question of federal law."

The District Court also held that the Maryland PSC had authority under federal law to impose reciprocal compensation terms in arbitration proceedings. The Court of Appeals affirmed this holding.

The Court of Appeals also rejected the Maryland Commissioners' argument on appeal that the regulatory scheme of the Telecommunications Act of 1996 violates the 10th Amendment of the Constitution, which provides that "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the Sates respectively, or to the people."

The Appeals Court remanded the case to the District Court for further proceedings on Verizon's contract misinterpretation claim.

Judge Michael wrote the opinion of the Court, in which Judge Gregory joined. Judge Niemeyer wrote a lengthy opinion dissenting in part.

This case is Verizon Maryland, Inc. v. Global Naps, Inc. et al., Nos. 03-1448 and 03-1449, appeals from the U.S. District Court for the District of Maryland, D.C. No. CA-99-2061-S, Judge Frederic Smalkin presiding.

District Court Issues Opinion in FOIA Action Seeking Draft of CAPPS II Privacy Impact Assessment

8/2. The U.S. District Court (DC) issued an opinion [22 pages in PDF] in EPIC v. TSA, a FOIA case regarding access to records regarding the CAPPS II program. The District Court granted in part, and denied in part, the TSA's motion for summary judgment.

CAPPS is an acronym for "Computer Assisted Passenger Prescreening System". It involves using computer database technology to increase the security on passenger airlines. At issue in the case is whether the government must produce drafts of a privacy impact assessment of the next generation CAPPS. The District Court held that the documents are covered by a FOIA exemption for predecisional and deliberative materials.

However, the Court also held that it remains possible that the documents contain some factual material that is not exempt and may be segregable, and hence, produced under the FOIA. The Court wrote that it needs more information on this issue. The EPIC may yet obtain parts of the privacy impact assessment that it seeks.

Background. On August 22, 2003, the Electronic Privacy Information Center (EPIC) submitted a request for records to the Transportation Security Administration (TSA) pursuant to the Freedom of Information Act (FOIA). The EPIC requested any "Capital Asset Plan and Business Case" materials submitted to the Office of Management and Budget (OMB), and any "Privacy Impact Assessments" prepared for the CAPPS II project.

On September 4, the EPIC filed a complaint in the District Court against the TSA and DHS under the FOIA, which is codified at 5 U.S.C. § 552, seeking the expedited processing and release of records. (On October 9, 2003, the EPIC filed an amended complaint, stating that it seeks on the privacy impact assessment of the CAPPS II.) The EPIC also filed a motion for a temporary restraining order seeking immediate release of documents. See, the EPIC's Memorandum in Support of Plaintiff's Motion for Temporary Restraining Order and Preliminary Injunction [16 pages in PDF].

See, stories titled "EPIC Files FOIA Suit For CAPPS II Records" in TLJ Daily E-Mail Alert No. 733, September 5, 2003, and "TSA and EPIC Reach Agreement Regarding Production of Documents Regarding CAPPS II" in TLJ Daily E-Mail Alert No. 734, September 8, 2003.

Before the terrorist attacks of September 11, 2001, the airlines conducted passenger screening, and administered the Computer Assisted Passenger Prescreening System (CAPPS I), subject to federal guidelines. In late 2001, the Congress passed the Aviation and Transportation Security Act, which created the TSA as a unit of the Department of Transportation (DOT). This Act gave the TSA responsibility for airport passenger screening. In late 2002, the Congress passed the Homeland Security Act, which, among other things, created the Department of Homeland Security (DHS), and transferred the TSA from the DOT to the new DHS. The new CAPPS II, the next generation passenger screening system, will be a government (TSA) run system that replaces CAPPS I. Although, the DHS may or may not still title the system "CAPPS".

The TSA states that it has drafts of the privacy impact assessment that the EPIC requests, but asserts that it does not have to produce them under the FOIA.

It refused to produce these, asserting that they are predecisional and part of an agency's deliberative process, and hence, exempt under exemption 5 of the FOIA. The TSA further argued that it cannot segregate non-exempt portions, and produce those. The EPIC disputes these assertions.

5 U.S.C. § 552(b)(5) provides that the disclosure requirements of the FOIA do not apply to "inter-agency or intra-agency memorandums or letters which would not be available by law to a party other than an agency in litigation with the agency".

District Court Holding. The District Court wrote that this exemption has been construed to incorporate the deliberative process privilege, and that it exists to facilitate a frank exchange of ideas and opinions within agencies.

The Court held that "For material to be protected from disclosure by the deliberative process privilege, it must be both predecisional and deliberative." First, the Court held the drafts to be deliberative.

Second, the Court addressed whether the drafts are predecisional. The EPIC argued that since the TSA published a Privacy Act notice in the Federal Register that indicates that some of the privacy related details of CAPPS II had been decided, portions of some of the drafts are not predecisional.

The TSA published a Privacy Act notice and request for comments in the Federal Register on January 15, 2003 in which it proposed to establish a new system of records to support the development of the new version of the CAPPS. See, Federal Register, January 15, 2003, January 15, 2003, Vol. 68, No. 10, at Pages 2101 - 2103.

The TSA later published a second Privacy Act notice and request for comments in the Federal Register on August 1, 2003, in which it announced that it received "substantial comments ... in response to the prior notice", and that "significant changes have been made to date to the proposed CAPPS II system and to the CAPPS II Privacy Act notice in light of these comments". This second Privacy Act notice contains perhaps the most detailed description of the CAPPS II that the DHS and TSA have published.

The Court held that the "drafts themselves, as documents, are predecisional". And hence, since the documents are both deliberative and predecisional, they are therefore protected from disclosure by Exemption 5.

However, the Court continued that the focus of the FOIA in information, and not documents. It wrote that the TSA's "claim that the documents in question contain some non-exempt material does not preclude the agency from withholding the documents under FOIA Exemption 5; rather, it would require the agency to release the non-exempt information, if reasonably segregable, from the exempt material."

The Court concluded that "Defendants are required to provide Plaintiff with any reasonably segregable information that does not meet the dual Exemption 5 requirements of being deliberative in nature and predecisional. Accordingly, Defendants, in their affidavits and/or Vaughn index, must address segregability of any non-exempt information both in terms of “factual” information and also “settled” decisions that were not “predecisional” as of the date of the draft. Defendants have not met this burden as set established by the law of this Circuit, detailed supra. The Court shall therefore order Defendants to conduct another segregability review and release the reasonably segregable, non-exempt material to Plaintiff, or file another motion with the Court addressing the segregability issue, supported by affidavits and a Vaughn index."

More Information. On February 12, 2004 the General Accounting Office (GAO) released a report [53 pages in PDF] titled "Aviation Security: Computer-Assisted Passenger Prescreening System Faces Significant Implementation Challenges". The appropriations bill for the DHS for FY 2004 established criteria for CAPPS II, and required that the GAO report on the program's compliance with these criteria. The report finds that most of the criteria have not been met. See, story titled "GAO Report Finds CAPPS II Fails to Meet Congressional Criteria" in TLJ Daily E-Mail Alert No. 836, February 13, 2004.

See also, stories titled "Democratic Representatives Write Bush Re CAPPS II" in TLJ Daily E-Mail Alert No. 836, February 13, 2003; "Bush Signs Homeland Security Appropriations Bill", "TSA Receives Comments In CAPPS II Privacy Proceeding", and "Homeland Security Appropriations Bill Purports to Restrict Use of Funds for CAPPS II" in TLJ Daily E-Mail Alert No. 751, October 2, 2003; and "Senate Commerce Committee Holds Hearing on Transportation Security" in TLJ Daily E-Mail Alert No. 736, September 10, 2003.

The report of the National Commission on Terrorist Attacks Upon the United States, which is also known as the 9-11 Commission, discusses and makes recommendations regarding the next generation CAPPS, and a broader network of screening. See, story titled "President Bush Responds to 9-11 Report" in TLJ Daily E-Mail Alert No. 951, August 3, 2004.

The case is numbered 03-1846.

President Bush Responds to 9-11 Report

8/2. The National Commission on Terrorist Attacks Upon the United States, which is also known as the 9-11 Commission, released its report on July 28.

National Intelligence Director. One of the recommendations of this report is the creation of a National Intelligence Director.

On August 2, 2002, President Bush announced in a speech that "Today I'm asking Congress to create the position of a National Intelligence Director. That person -- the person in that office will be appointed by the President with the advice and consent of the Senate, and will serve at the pleasure of the President. The National Intelligence Director will serve as the President's principal intelligence advisor and will oversee and coordinate the foreign and domestic activities of the intelligence committee. Under this reorganization, the CIA will be managed by a separate Director. The National Intelligence Director will assume the broader responsibility of leading the intelligence community across our government. "

Bush also stated that "Today, I also announce that we will establish a National Counter-Terrorism Center. This new center will build on the analytical work, the really good analytical work of the Terrorist Threat Integration Center, and will become our government's knowledge bank for information about known and suspected terrorists. The new center will coordinate and monitor counter-terrorism plans and activities of all government agencies and departments to ensure effective joint action, and that our efforts are unified in priority and purpose. The center will also be responsible for preparing the daily terrorism threat report for the President and senior officials."

He added that "The Director of the National Counterterrorism Center will report to the National Intelligence Director, once that position is created. Until then, the center will report to the Director of the CIA."

Recommendations Related to Information Technologies. Several of the recommendations of the 9-11 Commission involve use of information technologies, as for example, in the use of computer databases in the Computer Assisted Passenger Profiling System (CAPPS).

The report recommends that "Improved use of ``no-fly´´ and ``automatic selectee´´ lists should not be delayed while the argument about a successor to CAPPS continues. This screening function should be performed by the TSA, and it should utilize the larger set of watchlists maintained by the federal government. Air carriers should be required to supply the information needed to test and implement this new system."

The report also recommends a broader network of screening. It states that "The U.S. border security system should be integrated into a larger network of screening points that includes our transportation system and access to vital facilities, such as nuclear reactors." It also recommends "Extending those standards among other governments".

The report also recommends that the DHS complete "a biometric entry-exit screening system, including a single system for speeding qualified travelers. It should be integrated with the system that provides benefits to foreigners seeking to stay in the United States. Linking biometric passports to good data systems and decisionmaking is a fundamental goal. No one can hide his or her debt by acquiring a credit card with a slightly different name. Yet today, a terrorist can defeat the link to electronic records by tossing away an old passport and slightly altering the name in the new one."

The report also recommends that "The federal government should set standards for the issuance of birth certificates and sources of identification, such as drivers licenses."

Finally, the report recommends allocating more spectrum for use by public safety entities. It states that "Congress should support pending legislation which provides for the expedited and increased assignment of radio spectrum for public safety purposes. Furthermore, high-risk urban areas such as New York City and Washington, D.C., should establish signal corps units to ensure communications connectivity between and among civilian authorities, local first responders, and the National Guard. Federal funding of such units should be given high priority by Congress."

Congressional Hearings. Several Congressional Committees have scheduled hearings. On Wednesday, August 3, the Senate Governmental Affairs Committee will hold a hearing on the 9/11 Commission's recommendation to establish a National Counterterrorism Center. Also on August 3, the House Government Reform Committee will hold a hearing titled "Moving from `Need to Know´ to `Need to Share´: A Review of the 9-11 Commission’s Recommendations".

On August 23 the House Financial Services Committee will hold a hearing titled "The 9/11 Commission Report: Identifying and Preventing Terrorist Financing".

In addition, the Senate Commerce Committee scheduled for August 5, and then postponed, a hearing on the 9/11 Commission's recommendations regarding transportation security. It has not yet set a new date.

Muris to Leave FTC on August 15

8/2. Federal Trade Commission (FTC) Chairman Timothy Muris released a statement. He wrote that "I have resigned as Chairman of the Federal Trade Commission, effective August 15. By announcing his intention to appoint Deborah P. Majoras as an FTC Commissioner and the next Chairman, the President ensures the FTC’s ability to continue its strong record of competition and consumer protection achievements."

President Bush gave both Majoras and Liebowitz recess appointments on July 30, 2004, after Sen. Ron Wyden (D-OR) successfully delayed Senate consideration of the nominations. See, story titled "Muris Resigns, Majoras Nominated" in TLJ Daily E-Mail Alert No. 896, May 12, 2004; story titled "Senate Commerce Committee Holds Hearing on FTC Nominees" in TLJ Daily E-Mail Alert No. 910, June 3, 2004; and story titled "Bush Gives Majoras and Liebowitz Recess Appointments to the FTC" in TLJ Daily E-Mail Alert No. 950, August 2, 2004.

Muris added that "Debbie is a highly talented and experienced lawyer, and will be an excellent Chairman. I am confident that she will provide continuity to the FTC’s important missions. Additionally, the President has announced his intention to appoint Jonathan Leibowitz as a Commissioner. Jon brings many talents to the FTC, including a legislative and antitrust background. He will be an impressive Commissioner."

People and Appointments

8/2. Lisa Prager joined the Washington DC office of the law firm of Gray Cary Ware & Freidenrich. The firm's largest offices are in San Diego and Silicon Valley, California. She will work in the firm's international trade practice. She was previously Deputy Assistant Secretary for Export Enforcement in the Department of Commerce's Bureau of Industry and Security. The BIS, which is also still known as the Bureau of Export Administration, regulates, among other things, the export of computers, software and communications equipment.

More News

8/2. The U.S. Court of Appeals (9thCir) issued its opinion [23 pages in PDF] in Focus Media v. NBC, an appeal in an involuntary Chapter 7 bankruptcy case involving a company that booked and paid for commercial spots from television and radio stations on behalf of advertising clients. The Appeals Court affirmed the District Court. This case is Focus Media, Inc. v. National Broadcasting Company, et al., No. 03-55808, an appeal from the U.S. District Court for the Central District of California, D.C. No. CV-01-01146-AHS.

8/2. The U.S. Patent and Trademark Office (USPTO) announced that web users can now use the UPSTO's Public PAIR (patent application and information retrieval) "to track the status of a public patent application as it moves from publication to final disposition, and review documents in the official application file, including all decisions made by patent examiners and their reasons for making them". The USPTO currently has documents available for about 500,000 applications. New documents will be made available for about 300,000 applications each year. See, USPTO release. Patent applications generally become available 18 months after they are filed. See, 35 U.S.C. § 122(b).

Terrorism Threat Level Raised for Financial Services Facilities in Washington DC, NYC and NJ

8/1. Secretary of Homeland Security Tom Ridge stated at a press conference in Washington DC on Sunday afternoon, August 1, that "the United States Government is raising the threat level to Code Orange for the financial services sector in New York City, Northern New Jersey and Washington, DC." See, transcript.

Ridge (at right) explained that "As of now, this is what we know: reports indicate that al-Qaeda is targeting several specific buildings, including the International Monetary Fund and World Bank in DC; Prudential Financial in Northern New Jersey; and Citigroup buildings and the New York Stock Exchange in New York. Let me assure you, actions to further strengthen security around these buildings are already underway. Additionally, we're concerned about targets beyond these and are working to get more information."

He added that "Compared to previous threat reporting, these intelligence reports have provided a level of detail that is very specific. The quality of this intelligence, based on multiple reporting streams in multiple locations, is rarely seen and is alarming in both the amount and specificity of the information."

The main World Bank building is located at 1818 H St. NW, just off of Pennsylvania Ave. between the White House and George Washington University (GWU). It takes up the block between 18th and 19th and G and H Streets. The International Monetary Fund (IMF) building is located at 700 19th St. NW. It takes up the block just to the west of the World Bank. In the next block to the west is the GWU School of Law.

The Federal Reserve Bank buildings are several blocks to the south. The main Treasury Building and Treasury annex are several blocks to the east, on the other side of the White House, near the U.S. Court of Appeals for the Federal Circuit.

Go to News from July 26-31, 2004.