TLJ News from May 11-15, 2005

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5/14. President Bush discussed trade in his Saturday radio address. He stated that "On Tuesday I will welcome our newest United States Trade Representative, former Congressman Rob Portman. Ambassador Portman understands that expanding trade is vital for American workers and consumers. He will make sure we vigorously enforce the trade laws on the books, while also working to continue opening foreign markets to American crops and products. The Central America Free Trade Agreement would help us achieve these goals. This agreement would help the new democracies in our hemisphere deliver better jobs and higher labor standards to their workers, and it would create a more level playing field for American goods and services. Congress needs to pass this important legislation."

5/14. Federal Communications Commission (FCC) Commissioner Michael Copps gave another speech [2 pages in PDF] on media concentration.

Pulver Writes That FCC's Imminent VOIP E911 Order May Be a Regulatory Black Hole for Innovative Services

5/13. Jeff Pulver, a pioneer of voice over internet protocol (VOIP), wrote an essay in his web site on May 13, 2005 regarding the Federal Communications Commission's (FCC) forthcoming First Report and Order and Notice of Proposed Rulemaking (NPRM) regarding E911 requirements for internet protocol (IP) enabled services. The FCC's agenda [PDF] for its May 19 meeting lists this item.

Pulver wrote that "now that E911 for VoIP is on the agenda for the next FCC meeting, and if reports are true and the FCC will mandate that all two-way connected Voice over Broadband service providers in the US need to also provide E911 services (even for nomadic services), without making a parallel and equal demand on the LECs to ensure local access to the PSAPs and an explicit prohibition against port blocking, such a ruling could have the one-sided effect of removing the unaffiliated Voice over Broadband service providers from the marketplace and so will begin the era of the ``death of the local VoBB service provider.´´" (Parentheses in original.)

He added that "this may be good for the incumbent who is seeing increasing price pressure on a daily basis, it is the consumer who ends up losing, and losing big. Once the competition goes away, prices will bounce back up and service offerings will devolve." is the provider of the Free World Dialup (FWD) service. On February 12, 2004, the FCC adopted a declaratory ruling that concluded that FWD is "not telecommunications as defined by the Act", that FWD is "not telecommunications service as defined by the Act", and that FWD is "an information service as defined by the Act". See, story titled "FCC Rules Pulver's FWD Is Not Telecommunications, Is Not Telecommunications Service, and Is Information Service" in TLJ Daily E-Mail Alert No. 836, February 13, 2004.

Pulver continued in his May 13 piece that he fears "that the FCC E911 Order will be too broad and suck within its regulatory black hole many of the current and here-to-for unimagined innovative services that do not intend to serve as mere replacement services for traditional voice telephony."

"Instead of focusing on the US marketplace, my friends, the voice over broadband entrepreneurs, may instead decide to focus their business activities in countries that have a more forward looking IP-based communications strategy." He added that "Strange as how it sounds, even Canada looks to be a more fertile ground for continued technology innovation than the US, if E911 becomes mandated for VoIP, including nomadic VoIP offerings. If VoIP was the first great driver of broadband, I fear that America will drop even further down the ranks of the countries in broadband penetration and that will further sink the US economy for many decades to come."

People and Appointments

Pascal Lamy5/13. The General Council of the World Trade Organization (WTO) will meet on May 26. It will select the next Director General. The WTO's selection committee has picked Pascal Lamy. Lamy is a Frenchman who was until recently the EU's Commissioner for Trade. Lamy will serve a four year term beginning on September 1, 2005. He will replace the current Director General, Supachai Panitchpakdi. The U.S. Trade Representative, Robert Portman, praised the selection of Lamy. He stated in a release that "I believe he'll rise to the challenge of serving as the neutral leader and advocate of ambition in the ongoing Doha trade round."

5/13. Supachai Panitchpakdi, who will finish his term as Director General of the World Trade Organization (WTO) at the end of August, was picked to lead the United Nations Conference on Trade and Development (UNCTAD). See, WTO release.

5/13. President Bush announced his intent to designate Gordon England to be acting Deputy Secretary of Defense. See, White House release.

5/13. President Bush nominated James Letten to be the U.S. Attorney for the Eastern District of Louisiana for a term of four years. See, White House release.

5/13. President Bush announced his intent to nominate Janice Gardner to be Assistant Secretary for Intelligence and Analysis at the Department of the Treasury. See, White House release.

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5/13. The Department of Justice's (DOJ) Antitrust Division announced that it has decided to close its investigation into the newspaper joint operating arrangement (JOA) between the Seattle Times Company and Hearst Communications, Inc. under the Newspaper Preservation Act (NPA). The DOJ stated in a release that it "did not find sufficient basis to conclude that the Seattle Times Company engaged in improper conduct that is likely to lead to monopolization of the Seattle newspaper market."

5/13. BellSouth announced in a release that it "has signed an agreement for the sale of its 34.75 percent equity ownership in Cellcom, a cellular communications operator in Israel. Discount Investment Corp, Ltd. (TLV: DISI.TA), which currently holds a 25 percent interest in Cellcom, has agreed to pay BellSouth $625 million for BellSouth's entire Cellcom ownership interest. BellSouth expects to record a gain on the transaction based on the book value at closing. Based on current book value, the after-tax gain would be approximately $235 million or 13 cents per share."

5/13. José Manuel Barroso, the President of the European Commission, gave a speech in New York City titled "The EU and the US: A Bilateral Partnership for Global Solutions".

FCC Meeting Agenda Includes Adopting E911 Rules for IP Enabled Services

5/12. The Federal Communications Commission (FCC) released an agenda [PDF] for its event titled "Open Meeting", scheduled for Thursday, May 19, 2005. This agenda includes consideration of a report and order and NPRM regarding E911 requirements for IP enabled services.

There are two items on the agenda. First, there is a First Report and Order and Notice of Proposed Rulemaking (NPRM) regarding E911 requirements for internet protocol (IP) enabled services.

The FCC's agenda states that this item is part of WC Docket No. 04-36. This docket number refers to the FCC's larger proceeding regarding IP enabled services generally. This proceeding addresses a wide range of issues, including E911, compensation, the Universal Service Fund, consumer protection, and disability access requirements.

The FCC adopted its IP enabled services Notice of Proposed Rulemaking (NPRM) [97 pages in PDF] on February 12, 2004, and released it on March 10, 2004. It is FCC 04-28 in WC Docket 04-36. See also, story titled "FCC Adopts NPRM Regarding Regulation of Internet Protocol Services" in TLJ Daily E-Mail Alert No. 837, February 16, 2004.

Second, the FCC will consider a NPRM and Further NPRM regarding its lack of management and oversight of its programs that subsidize schools and libraries and rural health care.

The Government Accountability Office (GAO) released a report [21 pages in PDF] in March titled "Telecommunications: Concerns Regarding the Structure and FCC's Management of the E-Rate Program".

This GAO report found that the "FCC has not developed meaningful performance goals and measures for assessing and managing the program. As a result, there is no way to tell whether the program has resulted in the cost-effective deployment and use of advanced telecommunications services for schools and libraries." It further found that the "FCC’s program oversight mechanisms contain weaknesses that limit FCC’s management of the program and its ability to understand the scope of waste, fraud, and abuse within the program. For example, FCC's rulemakings have often lacked specificity and have led to situations where important USAC administrative procedures have been deemed unenforceable by FCC."

The report further concluded that "We believe that issues exist concerning the applicability of certain statutes and the extent to which FCC has delegated certain functions for the E-rate program to USAC -- issues that FCC needs to explore and resolve."

The House Commerce Committee's Subcommittee on Oversight and Investigations held a hearing on this GAO report on March 16, 2005. At this hearing, Rep. Joe Barton (R-TX), the Chairman of the full Committee, questioned whether the subsidy program for schools and libraries should be discontinued, whether it should be limited to low income schools, and whether its administration should be be transferred away from the FCC to another government agency with more competence in administering grant and subsidy programs. See, story titled "Chairman Barton Suggests Ending E-Rate Program" in TLJ Daily E-Mail Alert No. 1,097, March 17, 2005.

The FCC's agenda identifies this item as follows: "Comprehensive Review of Universal Service Fund Management, Administration, and Oversight; Federal-State Joint Board on Universal Service (CC Docket No. 96-45); Schools and Libraries Universal Service Support Mechanism (CC Docket No. 02-6); Rural Health Care Support Mechanism (WC Docket No. 02-60); Lifeline and Link-up (WC Docket No. 03-109); and Changes to the Board of Directors for the National Exchange Carrier Association, Inc (CC Docket No. 97-21)."

This event is scheduled for 9:30 AM on Thursday, May 19, 2005 in the FCC's Commission Meeting Room, Room TW-C305, 445 12th Street, SW. The event will be webcast by the FCC. The FCC does not always take up all of the items on its agenda. The FCC does not always start its monthly meetings at the scheduled time. The FCC usually does not release at its meetings copies of the items that its adopts at its meetings.

Debate Over Broadcast Flag Legislation Begins

5/12. On May 6, 2005, the U.S.Court of Appeals (DCCir) issued its opinion [34 pages in PDF] in American Library Association v. FCC overturning the Federal Communications Commission's (FCC) broadcast flag rules. The Court held that "There is no statutory foundation for the broadcast flag rules". This week, proponents and opponents of legislation to expand FCC authority in this area commenced their lobbying efforts.

Public Knowledge, one of the groups that challenged the FCC's broadcast flag rules in court, released a draft bill that it states comes from the Motion Picture Association of America (MPAA). The MPAA intervened in the Court of Appeals in support of the FCC and its broadcast flag rules.

The MPAA's draft bill would provide, in part, as follows:

  "(a) AUTHORITY.-- 47 USC Section 303 is amended to add a new subsection (z) to read as follows:
    (z) Have authority to adopt regulations governing digital television apparatus necessary to control the indiscriminate redistribution of digital television broadcast content over digital networks.
  (b) RATIFICATION.-- The Report and Order in the matter of Digital Broadcast Content Protection (__ C.F.R. __) which was adopted by the Commission on November 4, 2003, effective January 20, 2004, and the Order in the matter of Digital Output Protection Technology and Recording Method Certifications (__ FCC Rcd __) which was adopted by the Commission on August 4, 2004, is ratified."

Gigi Sohn, President of Public Knowledge, stated in a release that "This language is more sweeping than even the FCC contemplated. It would give the Commission unparalleled new power over the development and use of digital and analog consumer electronics technology. It empowers the FCC to approve technologies that prevent currently used video cassette recorders (VCRs) from working, and would allow the FCC to shut off every TiVo in every home today. Clearly, we hope Congress will reject this big-government, anti-consumer approach."

The MPAA and its legal counsel did not immediately take or return a phone calls from TLJ.

After the Court of Appeals released its opinion, Edward Fritts, P/CEO of the National Association of Broadcasters (NAB), wrote in a release that "Without a 'broadcast flag,' consumers may lose access to the very best programming offered on local television. This remedy is designed to protect against unauthorized indiscriminate redistribution of programming over the Internet. We will work with Congress to authorize implementation of a broadcast flag that preserves the uniquely American system of free, local television."

Tim Lee, of the Cato Institute, responded to Fritts in short paper titled "Broadcast Flag Burning". Lee wrote that "With luck, members of Congress will understand that the ``uniquely American system´´ is not free local television, as Mr. Fritts would have it, but free markets. There is nothing American about giving government bureaucrats the power to mandate the design of consumer electronics equipment. They might also want to suggest to Mr. Fritts that the businesses he represents would be more successful in the marketplace if they didn't spend so much time in Washington lobbying for restrictions on their customers' freedom."

On Friday, May 20, the Progress and Freedom Foundation (PFF) will host a panel discussion on Capitol Hill titled "The Future of The Broadcast Flag: Implications for Congress, the FCC and the DTV Transition". The speakers will be John Rogovin (former FCC General Counsel), Fritz Attaway (MPAA) and James Burger (Dow Lohnes). This luncheon will be held at 12:00 NOON in Room 1537 of the Longworth Building. See, notice.

Greenspan Addresses Info Tech and Corporate Management

5/12. Federal Reserve Board (FRB) Chairman Alan Greenspan gave a commencement address at the Wharton School, at the University of Pennsylvania, in Philadelphia, Pennsylvania.

One of the topics that he discussed is the effect of information technologies on corporate management.

Greenspan stated that "Arguably, with information systems now accessible to broader ranges of managers and other employees, the monopoly power that proprietary information affords has been significantly reduced. Moreover, the availability of vital information now often extends beyond the borders of the company to suppliers and customers as well."

He added that "A generation ago, for example, a purchasing manager rarely divulged to a supplier the state of the company's inventory position. It was presumed that such information in the hands of suppliers would undermine the bargaining position of the purchasing manager. Today such information is broadly and routinely shared to facilitate just-in-time supply systems. In general, technologies may be in the process of facilitating a much broader access to information, with the consequence that CEOs could increasingly face more-careful monitoring."

FRB Vice Chairman Addresses Globalization, Trade and Technology

5/12. Federal Reserve Board (FRB) Vice Chairman Roger Ferguson gave a speech titled "Globalization: Evidence and Policy Implications".

He began by stating that "I believe that globalization is, on balance, a positive development for the world economy. Perhaps more to the point, I think that globalization is here to stay and that further globalization is inevitable."

Roger FergusonFerguson (at left) also commented on some of the technology related aspects of trade and globalization.

For example, he said that technological innovation is lowering non-policy barriers to trade. He stated that "significant barriers to trade still exist. Policy barriers such as tariffs, quotas, and licensing restrictions are especially important in the areas of agriculture and services. According to some research, moreover, official trade policy is only one of several barriers; some others are transportation costs, language barriers, and information costs. The threat of renewed protectionism, which captured headlines here and elsewhere in recent weeks, poses a serious challenge to the lowering of policy barriers in the ongoing Doha Round of trade negotiations. Whatever happens to trade policy barriers, however, technological innovations are likely to continue lowering nonpolicy barriers to trade." (Footnote omitted.)

He also argued that the growth of U.S. technology sector has increased demand for educated workers, but not unskilled workers, and this plays a role in opposition to globalization in the U.S.

He stated that while globalization has increased competition and variety, and lowered costs, many in the U.S. still opposed globalization. He explained that "competition and progress invariably produce winners and losers. Even if all consumers gain, a few producers may gain a lot and few others may lose a lot. Another answer is that, for the advanced economies, opening up markets to products from low-wage countries may disproportionately benefit those with the highest incomes, while greater immigration may hold down blue-collar wages, thereby creating greater inequality of incomes. Economists who have studied rising income inequality in America generally conclude that, although international trade and migration have contributed slightly, the main factor by far has been progress in information technology, which has boosted the demand for educated workers relative to those with low skills."

He spoke via teleconference to the Association for Financial Professionals Global Corporate Treasurers Forum in San Francisco, California.

People and Appointments

5/12. Linda Thomsen was named Director of the Securities and Exchange Commission's (SEC) Division of Enforcement. She will replace Stephen Cutler. Thomsen has worked at the SEC since 1995. Before that, she worked for the law firm of Davis Polk & Wardwell. See, SEC release.

5/12. Jon Tripp, who worked for the House Commerce Committee on media relations on technology related topics, left the Committee at the end of April. He has started a real estate business.

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5/12. The Federal Communications Commission's (FCC) Wireless Telecommunications Bureau released a public notice [2 pages in PDF] that outlines the process for acceptance of applications for 800 MHz band licenses in connection with implementation of the reconfiguration of the band. This notice is DA 05-1340.

5/12. The Recording Industry Association of America (RIAA) announced the filing of complaints, against retail businesses, by record companies, in U.S. District Courts in New York and Florida, alleging copyright infringement in connection with the sale of pirated CDs. The RIAA stated in a release that "some retailers -- such as the owners of convenience stores, liquor stores or corner markets -- are attempting to make a quick buck by re-selling illegal CDs, or, in some cases, manufacturing counterfeit CDs themselves".

Rep. Barton Proposes Outlawing Use of SSNs for Non-Governmental Purposes

5/11. Rep. Joe Barton (R-TX), the Chairman of the House Commerce Committee, stated at a hearing on consumer data security that the Congress should outlaw the use of social security numbers for non-governmental purposes. He spoke during the questioning of witnesses at a hearing of the Subcommittee on Commerce, Trade, and Consumer Protection titled "Securing Consumers' Data: Options Following Security Breaches". See, full story.

Senate Commerce Committee Holds Hearing on Spyware

5/11. The Senate Commerce Committee (SCC) held a hearing on spyware. Sen. Ron Wyden (D-OR), who gave up his membership on the SCC at the beginning of the 109th Congress to join the Senate Finance Committee, testified as a witness in support of spyware legislation.

Sen. Conrad Burns (R-MT), Sen. Wyden and others sponsored S 2145, "The Spy Block Act", in the 108th Congress. The SCC, but not the full Senate, approved that bill. See, stories titled "Senate Commerce Committee Approves Spyware Bill" in TLJ Daily E-Mail Alert No. 983, September 24, 2004, and "Senators Introduce Anti-Spyware Bill" in TLJ Daily E-Mail Alert No. 847, March 2, 2004.

On March 20, 2005, Sen. Burns, Sen. Wyden, Sen. Barbara Boxer (D-CA), and Sen. Bill Nelson (D-FL) reintroduced this bill as S 687, also titled "The Spy Block Act". Sen. Wyden wrote in his prepared testimony that S 687 "got strong support from this committee last year, it enjoys support among some key industry players and I offer it up as one way to tackle this problem. I understand the House has begun to move legislation, and I know the members of this committee are anxious to get to work on this legislation."

The House Commerce Committee (HCC) has already approved and reported a spyware bill in the present Congress, HR 29, the "Securely Protect Yourself Against Cyber Trespass Act", or SPY Act, sponsored by Rep. Mary Bono (R-CA) and others. See, story titled "House Commerce Committee Approves Spyware Bill" in TLJ Daily E-Mail Alert No. 1,092, March 10, 2005. The full House has not yet considered the bill.

HR 29 (109th) is a revised version of HR 2929 (108th), also titled the SPY ACT, which the House approved by a vote of 399-1 on October 5, 2004. See, Roll Call No. 495. HR 2929 was the HCC's spyware bill. HR 29 (109th Congress), like HR 2929 (108th Congress) prohibits certain conduct with respect to spyware, and gives the Federal Trade Commission (FTC) civil enforcement authority. See also, story titled "House Passes First Spyware Bill" and story titled "Summary of House Commerce Committee Spyware Bill" in TLJ Daily E-Mail Alert No. 991, October 6, 2004.

There is also a spyware bill that falls within the jurisdiction of the House Judiciary Committee (HJC), HR 744 (109th), the "Internet Spyware (I-SPY) Prevention Act of 2005", sponsored by Rep. Bob Goodlatte (R-VA), Rep. Zoe Lofgren (D-CA), and others. It amends Title 18 to provide criminal penalties for certain conduct related to spyware. HR 744 (109th) is a re-introduction of HR 4661 (108th Congress), titled the "Internet Spyware (I-SPY) Prevention Act of 2004". The House approved HR 4661 by a vote of 415-0 on October 6, 2004. See, Roll Call No. 503. See also, story titled "House Approves Second Spyware Bill" in TLJ Daily E-Mail Alert No. 993, October 8, 2004. The HJC has not yet acted on HR 744 (109th).

See also, prepared testimony of Trevor Hughes, Executive Director of the Network Advertising Initiative, prepared testimony of David Moll, CEO of Webroot Software, and prepared testimony of Ari Schwartz, of the Center for Democracy and Technology (CDT).

Hughes advocated only limited legislation. He wrote that "One danger of broadly drafted spyware legislation is that it will prevent legitimate businesses from being able to effectively operate online. Under some of the bills that have been introduced, ubiquitous and important tools like cookies and web beacons are affected. Other bills have gone far beyond the immediate concerns associated with spyware and have proposed standards for online advertising that will be very harmful to the primary economic support for the vast quantities of free online media. We must also be wary of spyware legislation that inappropriately includes online privacy standards. Federal spyware legislation should focus carefully on fraudulent and deceptive practices." He also argued that federal spyware legislation should preempt state spyware laws.

Moll argued in his testimony that "we believe that it is best to fight technology with technology". He also pointed out that the federal and state governments already have authority to pursue distributors of some spyware. He stated that "The complaint filed by the FTC against Seismic, and the NY Attorney General’s case against Intermix, demonstrate that there are cases that can be pursued under current law in U.S. Courts. We encourage enforcement agencies and Attorneys General to deploy additional resources to join the fight against spyware."

He also commented on pending legislation. "In addition to existing law, we at Webroot also anticipate benefits from legislation such as Senator Burns’ bill, S. 687. The bill provides additional clarity and focus to the problems we are seeing, and I hope it will induce additional attention from enforcement agencies."

Schwartz wrote that the CDT supports spyware legislation, but "there is only so much that new legislation can do. We endorse the idea of calling specific attention to the worst types of deceptive software practices online as most of the spyware bills do. Enforcement will be crucial to any legislative effort. Therefore, we are strongly supportive of including powers for state Attorneys General. In addition, any legislation must take care to ensure that the use of complex affiliate relationships ... will not enable responsible parties to avoid liability."

He also stated that S 687 "marks a substantial step forward in addressing many of the concerns of consumer groups and companies."

However, he added that "CDT also remains firmly committed to idea that a long-term solution to spyware and other similar issues requires baseline online privacy legislation. Many of the issues raised by spyware may be easier to deal with in this context. This approach will also help us head off similar epidemics in the future, rather than reacting to them legislatively only after the fact."

CEA Write Rep. Barton Regarding Hard Cutoff Date for Analog Transmission

5/11. Gary Shapiro, P/CEO of the Consumer Electronics Association (CEA), wrote a letter to Rep. Joe Barton (R-TX), the Chairman of the House Commerce Committee, regarding a transition from analog television to digital television (DTV).

Shapiro, who wants a hard date for the cut off of analog transmission, said that the transition to DTV "will have little practical impact on the viewing habits of the vast majority of Americans. As 87% of American homes do not rely on over the air signals for broadcast content, the impact and even the need for televisions with tuners is increasingly questionable."

He elaborated that "The fact is that the percentage of American homes relying only on an over the air signal is low and shrinking. While the vast majority of Americans receive local and network feeds via cable and satellite (and soon via telephone line, cellular, wireless broadband and the Internet), relatively few rely exclusively on a free over the air antenna signal." (All parentheses in original.)

"Of the nearly 110 million American homes with at least one TV, 68% receive a cable signal and 22% receive a DBS signal. Our research shows that roughly 3% receive both cable and DBS. In total, 87% of American homes will have access to cable or satellite (and thus network and local feeds)." He added that "This means that if the cut off occurred today, less than 13% of the population of 110 million TV households would not have access to a broadcast signal through cable or satellite (though they could certainly start subscribing). And this number is shrinking every year."

He accused broadcasters of using "a ``Washington only´´ strategy of delaying the cut off date and seeking restrictions on cable, satellite and TV set makers (and now they are going after telephone companies who provide video signals)."

He stated that the few people who still "rely solely on free over the air broadcasting will understand that they have alternatives once a hard cut off date is set."

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5/11. The Office of the Massachusetts Attorney General (OMAG) filed a complaint in state court in Massachusetts against seven individuals and two corporations alleges violation of state and federal consumer protection laws, including the federal CAN SPAM Act, in connection with a spamming operation. The Suffolk Superior Court, Judge Ralph Gants presiding, issued an emergency order. The individual defendants are Leo Kuvayev, Vladislav Khokholkov, Anna Orlova, Pavel Tkachuk, Michelle Marco, Dennis Nartikoev, and Pavel Yashin. The corporate defendants are 2K Services, Ltd., and Ecash Pay, Ltd. See, OMAG release and release. Microsoft gathered and provided evidence for the Massachusetts AG. See, Microsoft release.

Go to News from May 6-10, 2005.