TLJ News from July 6-10, 2005

Grokster Case Debated

7/8. The Progress and Freedom Foundation (PFF) hosted a panel discussion on Capitol Hill titled "MGM v. Grokster: What's Next?".

On June 27, 2005, the Supreme Court issued its unanimous opinion [55 pages in PDF] in MGM v. Grokster, reversing the judgment of the U.S. Court of Appeals (9thCir) regarding vicarious copyright infringement by the distributors of peer to peer (P2P) systems.

The Supreme Court held that "one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties." See also, story titled "Supreme Court Rules in MGM v. Grokster" in TLJ Daily E-Mail Alert No. 1,163, June 28, 2005.

The speakers at the PFF event were Cary Sherman (President of the Recording Industry Association of America), Sarah Deutsch (General Counsel of Verizon), Gigi Sohn (President of the Public Knowledge), James Burger (an attorney with the law firm of Dow Lohnes, who filed an amicus curiae brief with the Supreme Court on behalf of Intel), and Jim DeLong (PFF).

See, full story.

AEI Brookings Paper Argues State and Local Policies are Ineffective at Promoting Broadband

7/8. The AEI Brookings Joint Center for Regulatory Studies released a paper [PDF] by Scott Wallsten titled "Broadband Penetration: An Empirical Analysis of State and Federal Policies". It concludes that state and local governments can boost broadband penetration by providing access to rights of way. However, other efforts by state and local governments are ineffective. See also, abstract.

This paper is based upon statistical analysis. It finds that "guaranteed access to rights-of-way is strongly correlated with improvements in broadband penetration while universal service mechanisms and programs targeted at ``underserved´´ areas do not appear to improve penetration and may even be detrimental to it."

This paper further finds that "The share of telephone lines provided as UNE lines is correlated with slower growth in ADSL service, while share of lines provided through resale programs is correlated with faster growth in ADSL and total broadband penetration."

Also, the paper finds that "State laws restricting the ability of municipalities to build broadband networks are not significantly correlated with penetration", and that "tax incentives appear to have no impact".

However, the paper finds that "Some programs intended to improve rural access may have a positive impact."

Thus, this paper concludes that "most state-level policies are ineffective".

FCC Reports on Number of Phone Lines

7/8. The Federal Communications Commission's (FCC) Wireline Competition Bureau's (WCB) Industry Analysis and Technology Division (IATD) released a report [26 pages in PDF] titled "Local Telephone Competition: Status as of December 31, 2004".

The report aggregates data provided by carriers on Form 477 regarding the number of switched access lines and wireless telephone subscribership.

The report shows that the decline of end user switched access lines continued in the second half of 2004. Total lines declined from 180.1 Million in June of 2004 to 177.9 Million in December of 2004. The number of lines peaked in 2000.

ILEC end user switched access lines declined from 148.1 Million to 145.1 Million. However, CLEC lines increased from 32.0 Million to 32.9 Million.

People and Appointments

7/8. Lynne Beresford was named Commissioner for Trademarks at the U.S. Patent and Trademark Office (USPTO). She has been the acting Commissioner since September 1, 2004. She has worked for the USPTO since 1979. See, USPTO release.

More News

7/8. Viviane Redding, the EU Commissioner for Information Society and Media, gave a speech in Brussels, Belgium, titled "Reinforcing the links between the EU and Japan in the ICT and media business".

7/8. The U.S. Court of Appeals (FedCir) issued its opinion [27 pages in PDF] in SanDisk v. Memorex Products, a patent infringement case involving flash EEprom technology. SanDisk is the holder of U.S. Patent No. 5,602,987. SanDisk filed a complaint in U.S. District Court (NDCal) against Memorex and others alleging patent infringement. The District Court granted summary judgment of non-infringement. The Court of Appeals vacated and remanded. It concluded that the District Court "misread the claims at issue, and erred in finding a prosecution disclaimer in support of its reading". It also rejected the contention that judicial estoppel forecloses SanDisk's claim construction arguments on appeal. See also, SanDisk's release praising the decision of the Court of Appeals. This case is Sandisk Corporation v. Memorex Products, Inc., et al., U.S. Court of Appeals for the Federal Circuit, App. Ct. Nos. 04-1422 and 04-1610, appeals from the U.S. District Court for the Northern District of California, Judge Vaughn Walker presiding.

FCC Meeting Agenda Includes Further NPRM on Media Ownership Rules

7/7. The Federal Communications Commission (FCC) released an agenda [3 pages in PDF] for its event titled "Open Commission Meeting", on July 14, 2005. It is scheduled to adopt a further notice of proposed rulemaking regarding its media ownership rules.

The FCC's agenda provides the following title for this item: "2002 Biennial Regulatory Review -- Review of the Commission's Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996 (MB Docket No. 02-277); Cross-Ownership of Broadcast Stations and Newspapers (MM Docket No. 01-235); Rules and Policies Concerning Multiple Ownership of Radio Broadcast Stations in Local Markets (MM Docket No. 01-317); and Definition of Radio Markets (MM Docket No. 00-244)."

On June 24, 2004, the U.S. Court of Appeals (3rdCir) issued its opinion [213 pages in PDF] in Prometheus Radio Project v. FCC overturning some of the FCC's latest media ownership rules. See, story titled "3rd Circuit Rules in Media Ownership Case" in TLJ Daily E-Mail Alert No. 930, July 1, 2004.

The Supreme Court denied certiorari. See, order list of June 13, 2005, and story titled "Supreme Court Denies Certiorari in Media Ownership Rules Case" in TLJ Daily E-Mail Alert No. 1,153, June 14, 2005.

Pursuant to a forum shopping strategy, opponents of the FCC's rules filed petitions for review in multiple circuits. The Judicial Panel on Multidistrict Litigation then assigned the case by lottery to the Third Circuit. This is significant because previous petitions for review had been heard by the DC Circuit. The FCC now faces the task of writing rules that are consistent with disparate opinions of these two circuits.

On June 2, 2003, the FCC announced its Report and Order and Notice of Proposed Rulemaking amending its media ownership rules. See, story titled "FCC Announces Revisions to Media Ownership Rules" in TLJ Daily E-Mail Alert No. 672, June 3, 2003. See also, story titled "FCC Releases Media Ownership Order and NPRM" in TLJ Daily E-Mail Alert No. 692, July 7, 2003.

The 2003 rule changes were a response to the directions of the U.S. Court of Appeals (DCCir). For example, on April 2, 2002, the DC Circuit issued its opinion in Sinclair Broadcast Group v. FCC, remanding the FCC's local television ownership rule for further consideration. See, story titled "DC Circuit Remands Local TV Ownership Rule to FCC" in TLJ Daily E-Mail Alert No. 402, April 3, 2002.

Similarly, on February 19, 2002, the DC Circuit issued its opinion in Fox v. FCC. The Court held that the FCC's national TV station ownership rule (NTSO) and its cable broadcast cross ownership rule (CBCO) both violate the Administrative Procedure Act (APA) as arbitrary and capricious, and Section 202(h) of the Telecom Act. See, stories titled "DC Circuit Vacates Cable Broadcast Cross Ownership Rule", TLJ Daily E-Mail Alert No. 372, February 20, 2002, and "FCC Files Petition for Review of Appeals Court Opinion in Fox v. FCC" in TLJ Daily E-Mail Alert No. 415, April 22, 2002.

The agenda for the FCC's July 14 event also includes four other items. The FCC is scheduled to adopt an order regarding captioned telephone service and the compensation of two line captioned telephone calls from the Interstate Telecommunications Relay Services (TRS) Fund. This is CC Docket No. 98-67 and CG Docket No. 03-123. The FCC is also scheduled to adopt a report and order regarding the provision of Video Relay Service (VRS), including speed of answer, hours of service, and VRS Mail. This is CG Docket No. 03-123 and CC Docket No. 98-67. The FCC is also scheduled to adopt an order on reconsideration regarding the compensation of Spanish translation VRS from the Interstate TRS Fund. This is CC Docket No. 98-67 and CG Docket No. 03-123.

Finally, the FCC is scheduled to adopt a NPRM regarding the FCC's closed captioning rules, and a Petition for Rulemaking filed by Telecommunications for the Deaf, Inc. and several other consumer organizations representing deaf and hard of hearing individuals, seeking the establishment of quality standards and compliance mechanisms for closed captioning.

This event is scheduled for 9:30 AM on Thursday, July 14, 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.

EPIC Complains to FTC About Online Information Brokers

7/7. The Electronic Privacy Information Center (EPIC) submitted a complaint to the Federal Trade Commission (FTC) that alleges that Intelligent e-Commerce, Inc. (IEI) has violated Section 5(a) of the FTC Act in connection with its sale of personal information via its web site, Moreover, the EPIC urges the FTC "to initiate an industry-wide investigation into online investigation sites".

The EPIC states that these online investigation businesses violate individual's privacy, violate laws restricting the dissemination of information, and could lead to harm or homicide by stalkers.

The FTC has no specific statutory authority to regulate the practices of online information brokers or investigators. Section 5 of the FTCA, which is codified at 15 U.S.C. § 45(a)(1), is a general grant of authority to prevent unfair or deceptive practices in interstate commerce.

It provides, in part, that "Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful."

The EPIC asserts that IEI has engaged in deceptive practices. For example, the complaint alleges that "IEI has misrepresented its right to legally obtain, or cause others to obtain, this protected information. It offers for $187, ``Cell Phone Package - includes Name, Address and Call Records´´ for customers who wish to purchase a copy of a third party's cellular phone record."

The complaint elaborates that under Communications Act, at 47 U.S.C. § 222, et. seq., telecommunications carriers must protect the confidentiality of consumer proprietary network information (CPNI), which includes calling history and activity, billing records, and unlisted telephone numbers of service subscribers. The complaint adds that "The Act prohibits carriers from using CPNI even for their own marketing purposes. Furthermore, the Act prohibits carriers from using, disclosing, or permitting access to CPNI without approval of the customer or as otherwise required by law if the use or disclosure is not in connection with the provided service."

The EPIC's complaint resembles a legal pleading. However, the FTC Act creates no administrative cause of action at the FTC for private parties. Parties, such as the EPIC, may submit complaints to the FTC. In fact, the FTC encourages the submission of public complaints. However, it is within the sole discretion of the FTC to determine whether to conduct any investigation, or take any action. Although, the FTC has taken action following some of the EPIC's past complaints.

The EPIC also asks the FTC to investigate other information brokerage web sites, including,,,, and

The EPIC's complaint requests that the FTC investigate IEI and similar business. It also requests the FTC to "stop the advertisement for sale of legally protected personal information".

The complaint also requests that "Seek legislation giving consumers protections against pretexting outside the financial services sector". Requests regarding future legislation are not typically a part of administrative complaint proceedings.

5th Circuit Rules on Copyrightability of Graphic Designs

7/7. The U.S. Court of Appeals (5thCir) issued its opinion [13 pages in PDF] in Galiano v. Harrah's, a copyright case involving copyrightable subject matter. This case deals with the copyrightability of clothing designs. However, the Court of Appeals' analysis of what constitutes "artistic craftsmanship" and what constitutes "mechanical or utilitarian aspects" for the purposes of copyrightability of designs may be of interest beyond the clothing industry.

Jane Galiano is the owner of Gianna', Inc., a corporate clothing design and consulting business. Gianna's designed costumes for Harrah's Entertainment, Inc., for use in Harrah's gambling casinos. Gianna's and Harrah's did not reach a long term agreement. However, Harrah's used the designs provided to it by Gianna's.

Gianna's registered copyrights in its sketches of costumes provided to Harrah's. It then filed a complaint in U.S. District Court (EDLa) against Harrah's alleging copyright infringement. Harrah's counterclaimed for fraud on the Copyright Office.

The District Court granted summary judgment to Harrah's on the copyright infringement claim, and denied Gianna's motion for summary judgment on the fraud on the Copyright Office claim. The District Court also awarded Harrah's attorneys fees. The parties appealed and briefed all three issues.

The Court of Appeals affirmed the summary judgment on the infringement claim, with a detailed analysis of copyrightable subject matter.

17 U.S.C. § 102 provides, in part, that "Copyright protection subsists, in accordance with this title, in original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. Works of authorship include the following categories: ... (5) pictorial, graphic, and sculptural works ..."

17 U.S.C. § 101, the definitional section, provides, in part, that a "``Pictorial, graphic, and sculptural works´´ include two-dimensional and three-dimensional works of fine, graphic, and applied art, photographs, prints and art reproductions, maps, globes, charts, diagrams, models, and technical drawings, including architectural plans. Such works shall include works of artistic craftsmanship insofar as their form but not their mechanical or utilitarian aspects are concerned; the design of a useful article, as defined in this section, shall be considered a pictorial, graphic, or sculptural work only if, and only to the extent that, such design incorporates pictorial, graphic, or sculptural features that can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article."

The Court of Appeals dismissed the appeal of the District Court's denial of summary judgment on the fraud on the Copyright Office counterclaim, for lack of appellate jurisdiction.

This case is Jane Galliano and Gianna's, Inc. v. Harrah's Operating Company, Inc. and Harrah's Entertainment, Inc., U.S. Court of Appeals for the 5th Circuit, App. Ct. Nos. m 04-30521 and m 04-30806, appeals from the U.S. District Court for the Eastern District of Louisiana. Judge Jerry Smith wrote the opinion of the Court of Appeals, in which Judges DeMoss and Davis joined.

FCC Reports on Number of Broadband Lines and Wireless Channels

7/7. The Federal Communications Commission (FCC) released a report [PDF] titled "High-Speed Services for Internet Access: Status as of December 31, 2004".

This report states that "Subscribership to high-speed services increased by 17% during the second half of 2004, to a total of 37.9 million lines (or wireless channels) in service." (Parentheses in original.) It further states that "High-speed ADSL lines in service increased by 21% during the second half of 2004, to 13.8 million lines. High-speed connections over coaxial cable systems (cable modem service) increased by 15%, to 21.4 million lines."

The report states the 4.6% of zip codes have no high speed service. 12.5% of zip codes have only one service provider. 16.3% of zip codes have two service providers. About 67% of zip codes of three or more service providers.

The FCC employs a minimal definition of "high speed". It includes lines and channels "delivering transmissions to the subscriber at a speed in excess of 200 kbps in at least one direction".

Kyle McSlarrow, P/CEO of the National Cable & Telecommunications Association (NCTA), stated in a release that "The findings in the FCC's report underscore the great return on the cable industry's $100 billion investment in building a nationwide broadband infrastructure. The report reaffirms our industry's commitment to rapid deployment of broadband services and to further providing consumers with a growing array of choices. It also validates the light regulatory touch applied by Congress and the FCC to broadband policy, which has and will continue to result in a vibrant and competitive broadband marketplace providing great value to American consumers."

On the other hand, Walter McCormick, P/CEO of the U.S. Telecom Association (USTA), stated in a release that the FCC's report "underscores the urgent need for Congress to update U.S. telecom laws". He also wrote that "this report provides a compelling portrait of the vigorous, technologically diverse competition that defines today's broadband marketplace. A majority of Americans now are able to choose among a growing array of satellite, wireless, fiber and powerline broadband solutions. In this environment, Chairman Martin said it best: `We need to place all broadband providers on equal footing … free of undue regulation that can stifle infrastructure investment.´" McCormick added that "Now, it's up to Congress to update U.S. telecom laws to encourage vigorous investment and head-to-head competition from all companies in order to speed the future faster."

Rep. Sensenbrenner Addresses PATRIOT Act Extensions

7/7. Rep. James Sensenbrenner (R-WI), the Chairman of the House Judiciary Committee (HJC), released a statement [PDF] about extending the expiring provisions of the USA PATRIOT Act.

He stated, with reference to the terrorist attacks in London on July 7, that "It is not by luck that the United States has not been attacked since September 11, 2001. It is through increased cooperation and information sharing among law enforcement and intelligence agencies as well as the enhanced domestic security and investigative tools contained in legislation such as the PATRIOT Act."

Rep. Sensenbrenner said that the HJC "will soon markup legislation reauthorizing the counter terrorism tools established by Congress in the PATRIOT Act after the terrorist attacks of 9-11."

He added that "Now, more than ever, it is incumbent upon Congress and the American people not to let our guard down in the face of this terrorist threat to our homeland, our freedom, our security, and our democratic way of life."

The PATRIOT Act, which was hurriedly enacted in October of 2001, provides that sixteen of its provisions sunset at the end of 2005, unless extended.

William Moschella, the Assistant Attorney General in charge of the Department of Justice's (DOJ) Office of Legislative Affairs, spoke at an luncheon in the Capitol Building on June 30, 2005. He stated that the DOJ is currently negotiating regarding revisions to some sections of the PATRIOT Act. However, he would not state what those revisions might be.

The luncheon was sponsored by the Advisory Committee to the Congressional Internet Caucus. It was titled "The U.S. PATRIOT Act and E-Surveillance".

More Copyright News

7/7. The Copyright Office published a notice in the Federal Register that explains, recites, and sets the effective date (January 1, 2005) of its final rule regarding royalty rates for the retransmission of digital over the air television broadcast signals by satellite carriers under the statutory license. See, Federal Register, July 7, 2005, Vol. 70, No. 129, at Pages 39178 - 39180.

7/7. The Copyright Office published notice in the Federal Register requesting public comments on its first report to the Congress required by the Satellite Home Viewer Extension and Reauthorization Act of 2004. Comments are due by August 22, 2005. Reply comments are due by September 12, 2005. See, Federal Register, July 7, 2005, Vol. 70, No. 129, at Pages 39343 - 39345.

7/7. The Copyright Office published a notice in the Federal Register stating that it will hold two public roundtables on orphan works. The first will be held in Washington DC on Tuesday, July 26, 2005, from 9:00 AM to 5:00 PM, and on Wednesday, July 27, 2005, from 9:00 AM to 5:00 PM. The second will be held in Berkeley, California on Tuesday, August 2, 2005, from 9:00 AM to 5:00 PM. Requests to participate in the roundtables must be received by the Copyright Office by 5:00 PM (EDT) on July 15, 2005. See, Federal Register, July 7, 2005, Vol. 70, No. 129, at Pages 39341 - 39343.

More News

7/7. The EU issued a release in which it stated that it "sent letters to eleven EU Member States for failing to implement properly EU rules on electronic communications, including telecommunications. The Member States involved in this further round of Treaty infringement proceedings are the Czech Republic, France, Greece, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia and Finland. The key issues at stake include the independence of the national telecoms regulator, the requirement of number portability and of comprehensive subscriber directories, designation of ``universal service´´ providers, and the availability of the European emergency number 112."

7/7. The Department of Homeland Security (DHS) published a lengthy notice in the Federal Register regarding its forthcoming modifications to its United States Visitor and Immigrant Status Indicator Technology Program (US-VISIT). The DHS will conduct a proof of concept in order to verify the utility of radio frequency identification (RFID) technology to automatically, passively, and remotely record the entry and exit of covered individuals. The DHS will also revise its Privacy Impact Assessment (PIA) to discuss the impact of RFID technology on individual privacy. For more information, contact Nuala Kelly, Chief Privacy Officer of the DHS, and Steve Yonkers, US-VISIT Privacy Officer. See, Federal Register, July 7, 2005, Vol. 70, No. 129, at Pages 39300 - 39323.

7/7. The Federal Communications Commission (FCC) published a notice in the Federal Register that describes and recites its final order regarding changes to its low power FM rules. The FCC adopted this order and NPRM on March 16, 2005. It is FCC 05-75 in MM Docket No. 99-25. See, Federal Register, July 7, 2005, Vol. 70, No. 129, at Pages 39182 - 39186. The FCC published a related notice in the Federal Register that describes and sets comment deadlines for the notice of proposed rule making (NPRM) portion of this item. Initial comments are due by August 8, 2005. Reply comments are due by August 22, 2005. See, Federal Register, July 7, 2005, Vol. 70, No. 129, at Pages 39217 - 39227.

DOJ Approves Alltel's Acquisition of Western Wireless, With Divestitures

7/6. The Department of Justice (DOJ) filed a complaint in U.S. District Court (DC) against Alltel Corporation alleging violation of federal antitrust law in connection with Alltel's acquisition of Western Wireless. The DOJ also filed a proposed consent decree settling the case. The consent decree requires that Alltel divest assets in rural areas in the states of Arkansas, Kansas, and Nebraska.

The DOJ's Antitrust Division stated in a release that "ALLTEL and Western Wireless are regional mobile wireless services providers that serve many rural markets. Although a combination of these two regional providers gives the merged firm the benefit of having a larger service area footprint, the divestitures are required to assure continued competition in specific markets where ALLTEL and Western Wireless are each other's most significant competitors. According to the complaint, the proposed transaction would substantially reduce competition for mobile wireless telecommunications services in 16 areas where both ALLTEL and Western Wireless currently operate."

Alltel stated in a release that "Under the agreement, Alltel will divest 16 markets in Arkansas, Kansas and Nebraska now owned and operated by Western Wireless. The divestiture agreement includes all the assets - licenses, retail stores, employees and cell sites - used to operate the CDMA (Code Division Multiple Access) wireless business in those markets. The company also will divest the Cellular One brand that is owned by Western Wireless."

On July 6, Alltel filed a Form 8-K and attached exhibit titled "Unaudited Pro Forma Combined Condensed Financial Information" with the Securities and Exchange Commission (SEC). See also, Alltel's June 24, 2005 SEC filings.

Public Knowledge Proposes Government Planning and Regulation of Broadband Internet Services

7/6. The Public Knowledge (PK) released a paper [16 PDF] titled "Principles for an Open Broadband Future". See also, PK's executive summary. The argument of the paper is that in many areas, "government policies may be required to open markets".

The PK is a Washington DC based interest group that has primarily focused on advocating the weakening of intellectual property rights. However, this paper has almost nothing to do with intellectual property. Rather, this paper contains the PK's proposals for revising the Communications Act. It recommends government planning and a wide range of new government regulation of internet protocol (IP) based services at both the federal and state level.

Government Provision of Broadband Service. The paper states that currently, "there is no guarantee that municipalities have the right to deploy broadband services for their consumers". It states that "at least 15 states have adopted laws banning or limiting these municipal networks".

Hence, the PK paper argues that "One approach Congress should strongly consider is to guarantee the right of municipalities to provide their own broadband services." It adds that "Congress should preempt these state laws and permit municipalities to serve the needs of their local communities."

For a discussion of the pro and cons of government entry in the broadband services market, see story titled "US Chamber Hosts Panel on Municipal Broadband" in TLJ Daily E-Mail Alert No. 1,160, June 23, 2005.

Federal and Local Franchising of Video Services. The paper also addresses franchising of video services. However, it lacks clarity. First, it proposes that the Congress codify "a national franchise for new entrants into broadband video services". Currently, cable service providers must obtain local franchises. New entrants, particularly phone companies, do not want to subjected to the same franchising requirement. The paper states that "Those seeking to compete in the provision of broadband video will be severely delayed if they must seek franchises from 10,000+ local authorities throughout the country."

However, the paper goes on to state that these local government must still be able to collect franchise fees from video service providers. It further states that "Congress should be cognizant of the important role of local authorities in the provision of multi-channel video services, including, but not limited to, ensuring universal access, promoting competition and community media, and protecting public safety."

Network Neutrality. The PK paper also contains several proposals that might be categorized as network neutrality, or network freedom, principles.

It argues that "Consumers must have the right to attach to the broadband network any equipment that does not harm the operation of the network."

The paper expresses the concern that "broadband companies could design their broadband networks in proprietary ways to favor the network owners’ equipment and prevent access by the equipment sold by non-partner companies."

It also argues that people should be allowed to use any applications that run on the network.

These provisions are similar to some of the principles advanced by former FCC Chairman Michael Powell, law professor Timothy Wu, and others. However, Powell identified these as "network freedoms". He did not advocate that the government mandate these principles.

That is, on February 8, 2004 Powell gave a speech [PDF] titled "Preserving Internet Freedom: Guiding Principles for the Industry", in which he discussed his concept of "network freedom". See, story titled "Powell Opposes Regulations to Impose Broadband Network Neutrality" in TLJ Daily E-Mail Alert No. 833, February 10, 2004.

Powell argued in that speech for a concept that he called "Net Freedom" -- the concept that consumers should be able to use their broadband connections to "use the content, applications and devices they want", without restrictions imposed by their broadband service providers. He also argued that at this time "the case for government imposed regulations regarding the use or provision of broadband content, applications and devices is unconvincing and speculative".

Also, on October 19, 2004 Powell gave a speech [5 pages in PDF] at the Voice on the Net Conference in Boston, Massachusetts in which he enumerated four internet freedoms. See, story titled "Powell Discusses VOIP Regulation" in TLJ Daily E-Mail Alert No. 1,000, October 20, 2004.

The PK paper also raises a series of concerns that are currently mostly hypothetical. "If network owners are allowed to discriminate in any manner against certain traffic, applications or networks, the customer’s experience of the Internet could be severely curtailed. For example, a broadband network provider might block consumers from using their broadband connection to access a virtual private network (VPN) allowing them to work from home. A broadband network provider might only allow users to purchase products online using its affiliated credit card. A network owner might contract with a web site portal to give that portal preferential access or intentionally give slower speed connections to web sites owned by its competitors. Or it could make the user experience of competitor websites more unpleasant by embedding extra pop-up ads or other distractions in those websites."

The paper also expresses concern that cable companies may block or degrade video over internet protocol service running over their cable networks.

The FCC did recently order a broadband service provider to stop blocking voice over IP traffic. See, story titled "FCC Stops Broadband Provider From Blocking VOIP Traffic" in TLJ Daily E-Mail Alert No. 1,089, March 7, 2005. This proceeding is titled "In the Matter of Madison River Communications, LLC and affiliated companies". This order is DA 05-543 in File No. EB-05-IH-0110.

Interconnection. The PK paper states that "Every broadband network should be able to interconnect with every other broadband network."

The paper later states that this requirement should apply to "all public networks" and "all broadband networks that make service available to the public". (Emphasis in original.)

Currently, telecommunications operates under a statutory interconnection requirement. See, 47 U.S.C. §§ 251. The internet does not. The operators of the various networks that comprise the internet have interconnected through privately negotiated agreements. The PK paper proposes to extend a telecommunications style interconnection regulatory regime upon internet protocol networks.

Also, when the government imposes an interconnection requirement, this also entails regulatory proceedings involving interconnection in which the regulator sets the terms and prices of interconnection. That is, an interconnection mandate implies government price regulation.

Retail Price Regulation. The PK paper states that "Broadband service must be priced at affordable levels". The paper states that government should ensure this, but is not specific as to what mechanisms should be used. It suggests as possibilities extension of universal service style taxation and cross subsidization, and "subsidies or tax credits". It also suggests that "broadband prices could be reduced to below-cost levels by regulation".

Spectrum Management. In one area the PK paper makes tentative and limited proposals of a deregulatory nature -- spectrum management. While the paper contains nothing regarding increasing property rights in spectrum, and free markets for spectrum rights, it does argue for modifying the "command and control" model of spectrum regulation. It argues that new technologies, including smart radio, warrant both more spectrum sharing, and more flexible use of spectrum.

The paper also proposes that "Unlicensed services should have the benefit of a presumption that they be authorized in any spectrum band as long as they do not cause interference with existing licensees."

And finally, the PK paper states that the Congress should impose all of this new regulation with "as light a regulatory touch as possible".

9th Circuit Rules on Ripeness of Challenge to Interim Rates for Access to UNEs

7/6. The U.S. Court of Appeals (9thCir) issued its opinion [31 pages in PDF] in Verizon v. Peevey, holding that Verizon's challenge to California's interim rates for access to UNEs is ripe for review. The District Court must now decide whether or not the interim rates order must be overturned.

The Court of Appeals held that, when a state public utilities commission (PUC), acting pursuant to 47 U.S.C. §§ 251 and § 252, sets interim rates for access to an incumbent local exchange carrier's (ILEC) network by competitive local exchange carriers (CLECs), and the ILEC has cognizable claims which cannot and will not be compensated by a later adjustment, or true-up, then the ILEC's judicial challenge to the PUC's interim rates is ripe for judicial review.

The Public Utilities Commission of California issued an interim rate order governing the rates that Verizon California may charge for access to unbundled network elements (UNEs).

Verizon California, an ILEC, filed a complaint in U.S. District Court (NDCal) against Michael Peevey, and the other members of the California PUC alleging that the interim rate order is arbitrary and capricious, and contrary to the Communications Act, among other claims.

AT&T Communications of California, MCI Worldcom, and MCIMetro Access Transmission Services intervened.

The District Court denied Verizon's motion for summary judgment, and dismissed the claims, without reaching the merits of the claims, on the grounds that they are not ripe for judicial review.

The Court of Appeals vacated, and remanded, with instructions to proceed to rule on the merits of the claims.

This case is Verizon California v. Michael Peevey, et al., U.S. Court of Appeals for the 9th Circuit, App. Ct. No. 04-15155, an appeal from the U.S. District Court for the Northern District of California, D.C. No. CV-03-02838-THE, Judge Thelton Henderson presiding. Judge John Noonan wrote the opinion of the Court of Appeals, in which Judge Robert Jones joined. Judge Carlos Bea wrote a concurring opinion.

7th Circuit Rules on Federal Preemption in Suit Involving Long Distance Telephone Rates

7/6. The U.S. Court of Appeals (7thCir) issued its opinion [18 pages in PDF] in Dreamscape Design v. Affinity Network, holding that federal law preempts state law claims of fraud and breach of contract that were related to rates for long distance telephone service.

Dreamscape Design, Inc. is a class action plaintiff. It filed a complaint in state court in Illinois against Affinity Network, Inc., an interexchange carrier, alleging, among other things, that it violated the Illinois Consumer Fraud Act (ICFA) by making misrepresentations about its rates for long distance telephone service.

Affinity removed the action to the U.S. District Court (CDIll), asserting that the state law claims are preempted by the Communications Act, and in particular, by the ancient filed rate doctrine. Hence, Affinity argued that there is federal question jurisdiction.

The District Court held that most of the claims are preempted by federal law. It also granted Affinity’s motion to compel arbitration in accordance with a clause in Affinity’s tariff mandating arbitration of disputes. The arbitrator dismissed the claims, but with leave to amend the complaint. Dreamscape filed an amended complaint. The Court dismissed, pursuant to Boomer v. AT&T Corp., 309 F.3d 404 (7th Cir. 2002). See, story titled "7th Circuit Upholds Mandatory Arbitration Clause in AT&T Consumer Contract" in TLJ Daily E-Mail Alert No. 531, October 21, 2002.

The Court of Appeals affirmed. It reasoned that "Although it may be tempting to view a filed tariff as simply another contract enforceable under state law, this court and others have recognized that tariffs are something more -- at least the equivalent of federal regulations or law -- so suits to challenge or invalidate tariffs arise under federal law."

"Under the filed tariff doctrine, courts may not award relief (whether in the form of damages or restitution) that would have the effect of imposing any rate other than that reflected in the filed tariff." The Court added that "This is so even if a carrier intentionally misrepresents its rate and a customer relies on the misrepresentation."

"The mandatory aspect of the regulatory scheme came to an end following passage of the Telecommunications Act of 1996. ... Pursuant to the act, the FCC issued a series of orders mandating detariffing, and as of July 31, 2001, the tariff requirement was canceled altogether."

The Court continued that "Our opinion in Boomer addressed the preemption question in the wake of detariffing, when the terms of individual contracts or customer service agreements governed long-distance service. In Boomer, the plaintiff, an AT&T customer, brought a putative class-action suit alleging that AT&T overcharged customers in violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. ... Like Affinity, AT&T notified its customers that, after detariffing, all of its rates and conditions would be set forth in a customer service agreement. ... AT&T’s CSA included an arbitration clause, which the plaintiff challenged as unenforceable under Illinois law. The district court agreed with the plaintiff and denied AT&T’s motion to compel arbitration. We reversed the district court’s order, holding that the plaintiff’s state law challenges to the arbitration clause were preempted by federal law."

The Court then reviewed the claims in the complaint in detail, and concluded, pursuant to these principles, that the claims are preempted by federal law. It affirmed the dismissal.

This case is Dreamscape Design, Inc. v. Affinity Network, Inc., U.S. Court of Appeals for the 7th Circuit, App. Ct. No. 04-3035, an appeal from the U.S. District Court for the Central District District of Illinois, D.C. No. 02 C 2235, Judge Michael McCuskey presiding. Judge Kanne wrote the opinion of the Court of Appeals, in which Judges Rovner and Sykes joined.

People and Appointments

7/6. Diane Dietz was named Senior Director of Public Affairs at Comcast Corporation. She will direct Comcast's national community investment and outreach initiatives, and oversee The Comcast Foundation. See, Comcast release.

7/6. David Kornblau, the Securities and Exchange Commission's (SEC) Enforcement Division's Chief Litigation Counsel, will leave the SEC in August. He will become Head of Regulatory Affairs for Merrill Lynch in New York. See, SEC release.

More News

7/6. The U.S. Court of Appeals (10thCir) issued its opinion in USA v. Foote, a criminal case regarding trafficking in counterfeit trademarks, in violation of the Counterfeit Trademark Act, 18 U.S.C. § 2320, and 18 U.S.C. § 371. This case is U.S.A. v. Jerome Daniel Foote, No. 03-3263, an appeal from the U.S. District Court for the District of Kansas, D.C. No. 00-CR-20091-KHV. Judge Murphy wrote the opinion of the Court of Appeals, in which Judges Seymour and Porfilio joined.

7/6. The Federal Communications Commission (FCC) published a notice in the Federal Register that describes and and sets comment deadlines for its Further Notice of Proposed Rule Making (FNPRM) regarding advancing the date on which all new television receiving equipment must include the capability to receive over the air DTV broadcast signals from July 1, 2007, to a date no later than December 31, 2006. The FCC adopted and released this item on June 9, 2005. This item is FCC 05-121 in ET Docket No. 05-24. Initial comments are due by July 27, 2005. Reply comments are due by August 10, 2005. See, Federal Register, July 6, 2005, Vol. 70, No. 128, at Pages 38845 - 38848. See also, story titled "FCC Adopts Order and NPRM Regarding Its Digital Tuner Rules" in TLJ Daily E-Mail Alert No. 1,153, June 14, 2005.

7/6. The Federal Communications Commission (FCC) published a notice in the Federal Register that extends the deadlines for submitting comment in response to its notice of second further proposed rulemaking regarding horizontal and vertical cable ownership limits. The deadline to file initial comments is extended from July 8, 2005, to August 8, 2005. The deadline to file reply comments is extended from July 25, 2005, to September 9, 2005. The FCC adopted this Second Further NPRM on May 13, 2005, and released it on May 17, 2005. This item is FCC 05-96 in MM Docket No. 92-264. See, original notice in the Federal Register, June 8, 2005, Vol. 70, No. 109, at Pages 33679 - 33687.  See also, notice of extension of deadlines, in the Federal Register, July 6, 2005, Vol. 70, No. 128, at Pages 38848 - 38849.

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