House Judiciary Committee Holds Hearing on Network Neutrality

4/25. The House Judiciary Committee's (HJC) Task Force on Telecom and Antitrust held an oversight hearing titled "Network Neutrality: Competition, Innovation and Nondiscriminatory Access".

The witnesses were Paul Misener (Amazon.com), Earl Comstock (CompTel), Timothy Wu (Columbia Law School),  and Walter McCormick (U.S. Telecom Association). That is, there were three proponents of network neutrality rules, and one opponent (McCormick).

McCormick wrote in his short prepared testimony [4 pages in PDF], which he read, that "I make the same commitment to you that our member companies make to their customers: We will not block, impair, or degrade content, applications, or services." He said that "If a consumer wants to call Sears, we don’t connect them with Macy's", and that "The FCC has made it abundantly clear that it will move swiftly to protect consumers' right to be in control of their Internet experience."

McCormick was clear throughout his testimony that he was referring to his member companies' relationships with their customers, as opposed to the content providers that their customers access via their facilities.

He also said that "Our side believes that businesses that seek to profit on the use of next-generation networks should not be free of all costs associated with the increased capacity that is required for delivery of the advanced services and applications they seek to market."

And, he stated that "If you want more, then you pay more, is as American as it comes. It is a straightforward market proposition. As companies move into live video and gaming and advanced services, they will be seeking more bandwidth."

Rep. John Conyers (D-MI), the ranking Democrat on the full Committee, grilled McCormick about statements made by AT&T P/CEO Ed Whitacre regarding charging Google and other content companies for use of networks.

McCormick said that his member companies need to be able to manage their networks, offer virtual private networks, and provide secure facilities.

Wu wrote in his prepared statement [7 pages in PDF] that "Ninety-four percent of Americans have either zero, one, or two choices for broadband access. Many of us wish things were otherwise, but they are not. Given today’s market, it’s obvious that a firm like AT&T may earn, at the margin, more money by distorting competition among internet firms. It can, through implicit threats of degradation, extract a kind of protection money for those with the resources to pay up. It’s basically the Tony Soprano model of networking, and while it makes some sense for whoever is in a position to make threats, it isn’t particularly good for the nation’s economy, innovation, or consumer welfare."

Comstock wrote in his prepared testimony [30 pages in PDF] that common carrier principles should apply to broadband access. He wrote that "the Internet depends on basic common carrier rules to ensure the availability of an essential facility, namely the transmission networks over which Internet applications reach businesses and consumers. Those basic rules required all common carriers – incumbents and competitors alike -- to provide non-discriminatory service upon reasonable request, to permit attachment of devices to the network, and to interconnect their networks with other operators on a non-discriminatory basis. Without this historic legal foundation, the Net neutrality principles that the FCC has articulated to ``protect´´ the Internet fall well short of that goal".

Misener wrote in his prepared testimony [23 pages in PDF] the most detailed explanation of how telephone companies and cable companies might degrade service to some content providers. It is the same argument that he presented to the House Commerce Committee at its hearing on March 30, 2006. See, story titled "House Subcommittee on Telecommunications and the Internet Holds Hearing on COPE Act" in TLJ Daily E-Mail Alert No. 1,341, April 3, 2006.

Misener wrote in his testimony for this hearing that "For the foreseeable future, nearly all Americans will have two or fewer providers available: the phone company, the cable company, or both. And, unfortunately, consumers will continue to face discouragingly high costs of switching between them; equipment swaps, inside wiring changes, technician visits, long term contracts, and the bundling of multiple services all contribute to these costs."

He continued that "what exists for the vast majority of Americans is, at best, a duopoly of the local phone and cable companies. Widespread deployment of alternative broadband technologies capable of high quality video remains a distant hope and, with yet another mega-merger in the works (this time AT&T and BellSouth), the promise of inter-regional local phone company competition is all but dead." (Parentheses in original.)

He added that "content providers currently pay network operators for the amount of connection capacity they use, and network operators can charge consumers different prices depending upon how much bandwidth they use. This sort of connectivity ``tiering´´ makes perfect sense."

He concluded in his written testimony that "We ask that Congress keep the telco and cable operators from taking their market power over broadband Internet access and extending it to market power over broadband Internet content."

Trinko and Antitrust. Rep. Chris Cannon (R-UT) (at right), who presided, asked "What would happen to antitrust and enforcement if the Commerce bill is passed?"

Misener responded that "I am concerned that if that were to be passed, then the holding in Trinko might actually prevent antitrust enforcement in this area."

On January 13, 2004, the Supreme Court issued its opinion in Verizon v. Trinko, reversing the U.S. Court of Appeals (2ndCir). The Supreme Court held that a claim alleging a breach of an ILEC's duty under the 1996 Telecom Act to share its network with competitors does not state a violation of Section 2 of the Sherman Act. This is a significant victory for the ILECs. See, story titled "Supreme Court Holds That There is No Sherman Act Claim in Verizon v. Trinko" in TLJ Daily E-Mail Alert No. 815, January 14, 2004. This opinion is reported at 540 U.S. 398.

See also, story titled "Supreme Court Grants Certiorari in Verizon v. Trinko" in TLJ Daily E-Mail Alert No. 620, March 11, 2003; and story titled "FTC and DOJ Support Grant of Certiorari in Verizon v. Trinko Antitrust Case" in TLJ Daily E-Mail Alert No. 570, December 18, 2002.

Comstock said of the Commerce Committee's COPE Act, "as drafted, it appears to give exclusive authority to the FCC, and then limit that authority" to the FCC's network neutrality statement. He continued that "the concern would be that it might be  interpreted, especially in light of Trinko, to have preempted antitrust enforcement. And that is a major concern."

Comstock continued that there is "These entities, particularly the Bell companies, are claiming protection under the filed rate doctrine. There are issues having to do with whether I am directly buying services from them, whether I am an indirect purchaser, with respect to the antitrust laws, that we need clarification on. And I think having that Commerce Committee language that FCC has exclusive authority to deal with these matters might pose some problems as well."

McCormick said, "I am sure that if there is a concern that that language would have any negative impact on antitrust enforcement, we could probably reach an agreement among the three of us to let it drop out, and let the antitrust laws govern". He added that "if that language in that bill is a concern to these constituents, we could probably reach an agreement".

Cannon then asked, "would your organization support codifying those principles in antitrust law."

McCormick responded, "No. We believe that the antitrust laws are very explicit."

He added that "traditional antitrust analysis is the analysis that ought to be applied to this marketplace" and that "we shouldn't be subject to double jeopardy".

McCormick may have meant merely that he would be willing to drop Title II of the COPE Act, which provides that the FCC is authorized to enforce its August 2005 policy statement [3 pages in PDF] regarding network neutrality through case by case adjudicatory proceedings. However, he was not clear. He did not make himself available to reporters after the hearing.

Comstock also addressed this issue in his prepared testimony. He wrote that "The Supreme Court’s Trinko decision has been interpreted by some courts as limiting the availability of the antitrust laws to protect consumers and competition in the communications arena. The Court reasoned that no antitrust action arose because the FCC and a State regulatory body were actively regulating the anti-competitive behavior being complained of, and dismissed the case without ever examining the effectiveness of that presumed regulatory oversight. Yet the FCC has recently made significant changes to the structure of our Nation’s communications laws through its interpretations of specific provisions Congress added in the Telecommunications Act of 1996, effectively removing any regulatory constraints on the behavior of incumbent telephone and cable network operators, and the Supreme Court in Brand X appears to support the FCC’s decision not to regulate."

He added that "COMPTEL urges the Committee to introduce and adopt legislation creating a specific antitrust remedy to enforce Net neutrality by prohibiting anticompetitive behavior by transmission network operators. By using the private enforcement mechanisms and treble damages available under the antitrust laws, Congress can create an effective alternative to the FCC’s apparent unwillingness to implement the pro-competitive rules adopted by Congress in the 1996 Act. Further, the Committee should also include specific language to address the misperception created by the Trinko case, and adopt new legislation that makes clear that the antitrust laws continue to apply in addition to any regulatory regime that may or may not be implemented by a regulatory agency. Compliance with a specific regulatory regime that is actually being enforced by a regulatory agency should be available as an affirmative defense to an antitrust claim, but the mere presence on the books of a regulatory regime that is not being enforced should not be allowed to nullify the procompetitive effect of the antitrust laws."

Foreign Owned Telecom Monopolies. Misener also wrote and spoke about anti-competitive behavior by foreign telecom companies, some of which are monopolies. He wrote that "foreign broadband Internet access network operators have plans to restrict world-leading American content companies' access to overseas consumers".

He elaborated that "Recent news reports confirm that foreign network operators such as Deutsche Telekom and Telecom Italia also are interested in extending their market power over their networks to market power over content. Thus, if U.S. policymakers were to allow American network operators to extract oligopoly rents from American content providers, our policymakers would be simultaneously setting a precedent for allowing foreign operators to exercise the same leverage over world-leading American Internet content companies and their customers."

"American policymakers must consider the effects of our domestic regulatory actions on our global competitiveness." Misener continued that "If foreign network operators, almost all of which face no competition and are fully or partly owned by foreign governments, with obvious incentives to favor non-American content companies, are allowed to extract discriminatory rents from American content companies, our competitiveness both as an industry and a nation will suffer. Put another way, even if it were sound policy for Congress to allow American network operators to extract oligopoly rents from American content companies, it could not be sound policy to set the precedent for foreign network operators to extort payments from world-leading American content companies. How could our trade representatives challenge such actions abroad if we permit them here at home? Clearly, we must not lay the groundwork for every network operator around the globe to extort payments from American Internet companies. The only way we can hope to prevent this outcome is to hold the line domestically: we must not allow consumer choice of content to be artificially restricted by network operators with market power."

Copyright Liability. Rep. Adam Schiff (D-CA) advanced the argument, which McCormick disputed, that if broadband service providers negotiate agreements with content providers, such as future Grokster type companies, then this will weaken their argument that they are merely providers of dumb pipes who have no liability for the infringement that takes place over their networks.

Swedish Model. Rep. Cannon also used this hearing to obtain testimony on the Internet Tax Freedom Act (ITFA), and municipal offerings of broadband services.

Three witnesses said that they support extending the ITFA, and one (Wu) said "why not".

Misener expressed support for municipal offerings of services. Rep. Cannon also asked Misener if he was familiar with the "Swedish model". Misener claimed that he had "no recollection" of her.

House Commerce Committee Begins Mark Up of COPE Bill

4/25. The House Commerce Committee (HCC) began its mark up of HR __, a yet to be introduced bill to be titled the "Communications Opportunity, Promotion, and Enhancement Act of 2006", or COPE Act. HCC members made opening statements. The HCC will begin consideration of amendments at 10:00 AM on Wednesday, April 26.

The HCC's Subcommittee on Telecommunications and the Internet amended and approved the COPE Act on April 5, 2006. See, stories titled "House Subcommittee Approves COPE Act", "House Subcommittee Rejects Network Neutrality Amendment", and "Amendment by Amendment Summary of Subcommittee Mark Up of COPE Act" in TLJ Daily E-Mail Alert No. 1,344, April 6, 2006.

Rep. Joe Barton (R-TX), the Chairman of the HCC, and sponsor apparent of the bill, summarized the bill. Title I of the bill provides that certain cable operators may obtain a national cable franchise. Title II provides that the Federal Communications Commission (FCC) is authorized to enforce its August 2005 policy statement [3 pages in PDF] regarding network neutrality through case by case adjudicatory proceedings. Title III extends the E-911 regulatory regime to voice over internet protocol (VOIP) service. Title IV provides that state and local entities may provide any telecommunications, information or cable service.

Rep. Barton said that the markup would continue into Thursday if required, but that he did not expect this to happen.

Rep. John Dingell (D-MI), the ranking Democrat on the HCC, read a prepared opening statement. He said that  "this bill promises many consumers more harm than good".

"First, some consumers may actually lose cable service. The cable industry admits that once cable companies switch to a national franchise, they may not continue serving all of the households they currently are required to serve. ... Second, even if service is not withdrawn, the bill lets operators avoid maintaining or upgrading facilities in certain neighborhoods. ... Third, the bill removes a current requirement on cable operators that as part and parcel of using the public rights-of-way, the operators must provide service to all households in a franchise area."

He also criticized the network neutrality language as too weak. He said that "The bill before us permits the private taxation of the Internet. Private tax collectors could single out certain Web sites to pay extra fees while they select others for preferential treatment. The open and innovative Internet has flourished under network neutrality legal protections until last year. Why should this Committee turn over control of the free flow of the Internet to the whims of cable and telephone companies?"

He concluded that "I cannot support the legislation as drafted." He added that he will have amendments, but did not identify what they would be.

Rep. Ed Markey (D-MA) criticized the bill's lack of a hard network neutrality mandate. He said he and Rep. Rick Boucher (D-VA), Rep. Anna Eshoo (D-CA), and Rep. Jay Inslee (D-WA) would offer an amendment.

He also criticized the national franchise section's lack of a build out requirement. He said the Rep. Dingell would offer an amendment on that topic.

Rep. Marsha Blackburn (R-TN) raised the subject of 47 U.S.C. § 332. She said that states are using the "other terms and conditions" phrase to regulate wireless services, and that this needs to stop. She said that she will offer an amendment, along with Rep. Rick Boucher (D-VA) and Rep. Jay Inslee (D-WA).

Subsection 332(c)(3)(A) provides, in part, that "Notwithstanding sections 152(b) and 221(b) of this title, no State or local government shall have any authority to regulate the entry of or the rates charged by any commercial mobile service or any private mobile service, except that this paragraph shall not prohibit a State from regulating the other terms and conditions of commercial mobile services."

Rep. Bart Gordon (D-TN) said that he and Rep. Chip Pickering (R-MS), Rep. John Shimkus (R-IL), and Rep. Anna Eshoo (D-CA) would offer an amendment regarding VOIP/E911.

Rep. Jan Shakowsky (D-IL) said that the lack of stronger network neutrality language threatens the innovative nature of the internet. She said that she will offer an amendment.

Rep. Mike Doyle (D-PA) said that he would offer an amendment to give local governments more enforcement authority.

Portman Says There Will Be A Seamless Transition at USTR

4/25. Outgoing U.S. Trade Representative (USTR) Rob Portman held a news conference. See, transcript [14 pages in PDF]. He talked about his replacement, Susan Schwab, transition at the Office of the USTR, and the Doha round negotiations.

Bush has nominated Portman (at right) to be Director of the Office of Management and Budget (OMB). He has not yet been confirmed by the Senate.

He said that "In the mean time I will be very engaged on the USTR issues including Doha. What is very fortunate for the United States trade agenda is that Susan Schwab was in place and she's fully conversant on all the issues including Doha. Some of you remember seeing her in Hong Kong. She handled the services sector issues in Hong Kong. She also has handled the general Doha responsibilities back here where Peter Algeier handles them in Geneva. Peter is our ambassador in Geneva, chief negotiator in Geneva. Peter will also stay. Karan will also stay, who is the other deputy. So Susan had Europe, the Americas, and a lot of topical areas and some Doha responsibility and the Middle East. Then Karan had and still will have Africa, Asia and so on. So it really is going to be a seamless transition. We will not miss a beat at USTR."

He also said that "The United States has been and will continue to be totally committed to an ambitious result. We believe this should occur across the board from domestic support to reductions in tariffs and all goods from computers to corn."

Cox Testifies Regarding Interactive Data

4/25. The Senate Banking Committee held a hearing titled "A Review of Current Securities Issues". The sole witness was Chris Cox, Chairman of the Securities and Exchange Commission (SEC). He spoke about, among other topics, the SEC's plans for XBRL.

XBRL is an acronym for "eXtensible Business Reporting Language". The SEC states in a summary of XBRL that "Interactive data relies on standard definitions to ``tag´´ various kinds of information, turning SEC financial reports that have previously been text-only into documents that can be retrieved through computer searches, and analyzed in a variety of spreadsheet programs and analytical software."

Cox wrote in his prepared testimony [PDF] that "In a well ordered market, educated consumers can choose from a number of competitive products, and find what they want at a price they are willing to pay. But in order to educate themselves, investors need comparative facts. So while investors must bear the responsibility of learning what they can about their investment choices, the correlative duty of sellers of investment products is to provide the relevant information. What's more, in order for investors to make sound decisions, the seller's information has to be understandable, accessible, and accurate."

Cox (at left) then discussed four initiatives being implemented by the SEC that are relevant to this. He wrote that one of these is "Moving from long, hard-to-read disclosure documents to easy-to-navigate Web pages that let investors click through to find what they want". And, this will be accomplished through the use of "interactive data".

Cox said that "The beauty of interactive data is that it will not only make today's 10Ks, proxies, and mutual fund prospectuses more useful to investors, but it will also reduce much of the time and expense that companies currently devote to filing SEC reports."

"The key to making this happen is looking at the data on the forms independently from the forms themselves. That's what we mean by interactive data. Computer codes can tag each separate piece of information on a report, and tell us what it is: operating income, interest expense, and so forth. That way, every number in a report or financial statement is individually identified, both qualitatively and quantitatively."

"For individual investors, this means they'll be able to quickly search for any information they want without slogging through an 80-page document. And it means they could search through our database not by the names of individual reports, but instead just by looking up the companies that file them", said Cox.

"In hearings and briefings before this and other committees, you've heard the technology variously described as data tagging, or XBRL, or my personal favorite, interactive data. But whatever one calls it, the point is the same: to allow investors to more easily access, search, analyze, and compare data provided by public companies. The move to interactive data represents a sorely needed upgrade in the SEC's electronic disclosure regime."

Cox also said that "EDGAR may be electronic, but it isn't interactive. It doesn't begin to tap the potential of the Web. Because today's EDGAR filings are really just snapshots of paper reports that are stored in electronic form, the information they contain isn't searchable. Nor can it be used in any of the myriad ways that electronic data now speed around offices, home computers, and the Internet."

He concluded that "Our aim is to move from long, hard-to-read disclosure documents to easy-to-navigate Web pages that let investors click through to find what they want. We want to emancipate the data from the page, and let it find its way across the Internet and around the world in the form of RSS feeds, AJAX applications, and whatever comes next."

Sen. Richard Shelby (R-AL) wrote in his opening statement that Chairman Cox's "technology-driven proposals promoting electronic delivery of proxy materials and the use of interactive data will empower shareholders to make better informed investment decisions."

See, the SEC's February 2005 rule changes that initiated the SEC's XBRL Voluntary Program.

Chairman Cox and other SEC Commissioners have frequently spoken about the XBRL program. See for example, speech of November 7, 2005, in Tokyo, Japan, and speech of November 11, 2005, in Boca Raton, Florida. See also, story titled "SEC Chairman Cox Discusses Use of Interactive Data in Corporate Reporting" in TLJ Daily E-Mail Alert No. 1,250, November 9, 2005.

See also, story titled "AEI Paper Urges Quicker SEC Development of XBRL for GAAP" in TLJ Daily E-Mail Alert No. 1,324, March 7, 2006.

Bush Renominates Martin

4/25. President Bush renominated Kevin Martin to be a Commissioner of the Federal Communications Commission (FCC). See, White House release and release.

Commissioner Michael Copps stated in a release [PDF] that "I am pleased that the President has renominated Kevin Martin as Chairman of the Federal Communications Commission. Kevin has been both a colleague and a friend since we came to the Commission together in 2001. We work well together. Early on, I learned that Kevin was not only a savvy policymaker but a consensus builder as well. More importantly, I quickly discovered he was a man of his word and an individual of character and integrity. I look forward to continuing to work with him on the many important issues before the Commission."

Commissioner Deborah Tate stated in a release [PDF] that "The announcement today by President Bush regarding his intention to nominate Kevin Martin for a second term as Chairman of the FCC is great news. It's great news for consumers, for our country, and for those of us who are honored to serve with him here at the FCC. Beginning first as a state official, and now at the Commission, I have seen firsthand his commitment to competition and technology-neutral policies that will spur economic growth, always balanced with his deep sense of public service. Congratulations to Chairman Martin, and I look forward to working with him during this exciting digital era."

Commissioner Jonathan Adelstein wrote in a release [PDF] that "I welcome the White House’s announcement of the renomination of Kevin J. Martin as Chairman of the Federal Communications Commission.  Chairman Martin has proven himself a dedicated public servant, a thoughtful policymaker, and an energetic colleague during our time together on the Commission.  I look forward to our continued work together as we address the many challenging issues before the Commission."

Martin stated in a release [PDF] that "I am honored to have been renominated for a second term as Commissioner and Chairman of the Federal Communications Commission.  I thank President Bush for the privilege to continue to serve in his Administration. This is an exciting time of growth and innovation in the communications sector.  I look forward to working with the Administration, Congress, my fellow Commissioners and the talented staff at the FCC to provide all Americans with the services and opportunities offered by the best communications system in the world today."

People and Appointments

4/25. The Senate confirmed Gray Miller to be a Judge of the U.S. District  Court for the Southern District of Texas by a vote of 93-0. See, Roll Call No. 93.

4/25. Eric Miller was named acting Deputy General Counsel of the Federal Communications Commission (FCC). See, FCC release. He previously worked on the Department of Justice's (DOJ) Civil Division's Appellate Staff. Before that, he worked in the DOJ's Office of Legal Counsel (OLC). He is also a former law clerk for Justice Clarence Thomas and Judge Laurence Silberman of the U.S. Court of Appeals (DCCir) and FISA appeals court.

4/25. The Senate confirmed Gray Hampton Miller to be a Judge of the U.S. District Court for the Southern District of Texas by a vote of 93-0. See, Roll Call No. 93.

More News

4/25. The House approved HR 4709, the "Law Enforcement and Phone Privacy Protection Act of 2006", by a vote of 409-0. See, Roll Call No. 101.

House Commerce Committee to Mark Up COPE Act

4/24. The House Commerce Committee (HCC) will meet to begin its mark up of HR __, a yet to be introduced bill titled the "Communications Opportunity, Promotion, and Enhancement Act of 2006", or COPE Act.

The HCC will begin with opening statements of members at 5:00 PM on Tuesday, April 25, 2006. It will then proceed to consideration of amendments at 10:00 AM on Wednesday, April 26. The hearing will be webcast by the HCC. See, HCC notice. This could be a long mark up session. The Subcommittee mark up lasted until about 6:00 PM.

The HCC's Subcommittee on Telecommunications and the Internet amended and approved the COPE Act on April 5, 2006. See, stories titled "House Subcommittee Approves COPE Act", "House Subcommittee Rejects Network Neutrality Amendment", and "Amendment by Amendment Summary of Subcommittee Mark Up of COPE Act" in TLJ Daily E-Mail Alert No. 1,344, April 6, 2006.

Title I of the bill provides that certain cable operators may obtain a national cable franchise. Title II provides that the Federal Communications Commission (FCC) is authorized to enforce its August 2005 policy statement [3 pages in PDF] regarding network neutrality through case by case adjudicatory proceedings. Title III extends the E-911 regulatory regime to voice over internet protocol (VOIP) service. Title IV provides that state and local entities may provide any telecommunications, information or cable service.

On April 24 an ad hoc group titled the Save the Internet coalition held a telephonic news conference to criticize the network neutrality provisions of the bill as insufficient to protect the historically open nature of the internet.

The participants included Vint Cerf (Google), Tim Carr (Free Press), Craig Newmark (Craig's List), Chris Rabb (Afro Netizen.com), Gigi Sohn (Public Knowledge), Mark Cooper (Consumer Federation of America), and Craig Fields (Gun Owners of America).

Cerf argued that the lack of a hard network neutrality mandate will destroy the openness and neutrality of the internet, and thereby harm innovation. He said that network neutrality entails enabling content providers to access their consumers.

Fields argued that internet communications has changed grass roots lobbying, and hence, the political process. He said that previously politicians could move legislation so quickly that grass roots lobbying campaigns, using U.S. Postal Service mail, could not be organized quickly enough to affect the legislative process. He continued that with internet communications, grass roots lobbying moves more quickly. He said that "the politicians can't hide behind time anymore".

However, he argued that the telecommunications companies that are lobbying for enactment of the COPE Act "have internal anti-gun policies", and will use the control over the broadband access facilities to shut out organizations from the free market of ideas.

EC Court of First Instance Begins Hearing of Microsoft Appeal

4/24. The European Commission's (EC) Court of First Instance began its hearing on Microsoft's appeal of the EC's March 2004 action regarding Microsoft's Media Player.

The EC announced its Commission Decision [302 pages in PDF] on March 24, 2004, and released it on April 22, 2004. The EC fined Microsoft 497,196,304 Euros, and ordered it to sell Windows without Media Player and make certain intellectual property available to competitors. See also, story titled "European Commission Seeks 497 Million Euros and Code Removal from Microsoft" in TLJ Daily E-Mail Alert No. 863, March 25, 2004; and story titled "European Commission Releases Microsoft Decision" in TLJ Daily E-Mail Alert No. 883, April 23, 2004.

Microsoft argued in its opening statement that "There are very serious issues at stake in this case that could affect the incentives for innovation in Europe. The two fundamental questions in this case are whether companies can improve their products by developing new features that consumers want, and whether successful innovators must hand over their valuable technology and intellectual property to competitors. These questions are critical to the success of individual companies, and also to the economic vitality of any competitive market.

Microsoft continued that "The facts show that competition in the online media player market has continued to grow. The average number of media players used by consumers has risen to 2.6 in 2006, up from 2.1 in 2004. Major PC manufacturers also have increased the number of media players they pre-install on computers sold in Europe -- from an average of 1.4 media players in 2004 to 3.2 media players per computer in 2006. The rapid rise of Apple's iTunes service and Macromedia's Flash media player demonstrate the vigorous competition in the media player market."

It added that "Regarding interoperability, most large corporations in Europe operate IT systems composed of both Microsoft and non-Microsoft products. In fact, many major European companies and public administrations provided evidence that interoperability already exists between Windows server software and competitor products, and has for many years."

Hewitt Pate, who was the chief U.S. antitrust enforcer at the time that the EC made its decision, frequently criticized the EC's decision. See for example, stories titled "US Antitrust Chief Says EU's Microsoft Decision Could Harm Innovation and Consumers" in TLJ Daily E-Mail Alert No. 863, March 25, 2004; "Pate Criticizes EC Decision Regarding Microsoft" in TLJ Daily E-Mail Alert No. 869, April 5, 2004; and "Pate Addresses US EU Differences on Antitrust, Microsoft, and IPR" in TLJ Daily E-Mail Alert No. 913, June 8, 2004.

People and Appointments

4/24. President Bush nominated Philip Gutierrez to be a Judge of the U.S. District Court for the Central District of California. See, White House release. He is currently a Judge of the Superior Court of California, Los Angeles County.

4/24. President Bush nominated Daniel Porter Jordan III to be a Judge of the U.S. District Court for the Southern District of Mississippi. See, White House release.

4/24. President Bush nominated Daniel Sullivan to be an Assistant Secretary of State (Economic and Business Affairs). If confirmed by the Senate, he will replace Anthony Wayne. See, White House release. Bush had previously announced that he would make the nomination.

4/20. Douglas Wiley was named EVP of Government Relations at the National Association of Broadcasters (NAB). He previously worked for the Electronics Industry Association (EIA). See, NAB release.

More News

4/24. The Department of Commerce's (DOC) Bureau of Industry and Security (BIS) published a notice in the Federal Register that describes, recites, and sets the effective date for, amendments to the Export Administration Regulations. These amendments make extensive changes regarding the export of high performance computers. The effective date is April 24, 2006 for most provisions. See, Federal Register, April 24, 2006, Vol. 71, No. 78, at Pages 20876-20894.

4/24. Sen. Bill Nelson (D-FL) and Sen. Olympia Snowe (R-ME) introduced S  2630, a bill to amend the Communications Act of 1934 to prohibit manipulation of caller identification information. It was referred to the Senate Commerce Committee. Both Senators are members.

4/24. The Supreme Court issued an order in Microsoft v. AT&T, a patent infringement case. See, Order List [8 pages in PDF] at page 1. It states that "The Solicitor General is invited to file a brief in this case expressing the views of the United States. The Chief Justice took no part in the consideration or decision of this petition." This is a petition for writ of certiorari to the U.S. Court of Appeals (FedCir). The Supreme Court has not yet decided whether or not to grant certiorari. The Court of Appeals issued its opinion [20 pages in PDF] on July 13, 2005. It affirmed the judgment of the U.S. District Court (SDNY) that Microsoft infringed U.S. Reissue Patent No. 32,580, under 35 U.S.C. § 271(f). Microsoft is represented by Ted Olson of Gibson Dunn & Crutcher. AT&T is represented by Stephen Neal of Cooley Godward. Gregory Coleman of Weil Gotshal & Manges filed an amicus curiae brief on behalf of the Software & Information Industry Association. This is Sup. Ct. No. 05-1056, App. Ct. No. 04-1285, and D.C. No. 01-CV-4872. See also, Supreme Court docket.

4/24. The Supreme Court denied rehearing in Norman v. BellSouth Intellectual Property, a domain name dispute involving the domain bellessouth.com. This is Sup. Ct. No. 05-718.

Bush Continues His ACA Pitch

4/21. President Bush gave another in a series of speeches promoting his "American Competitiveness Agenda", or ACA. He participated in a panel discussion at Cisco Systems' offices in San Jose, California. Other participants included California Governor Arnold Schwarzenegger, and Cisco P/CEO John Chambers.

He again advocated increasing federal spending on basic research, making the research and development tax credit permanent, and improving science, technology, engineering and math (STEM) education. See, White House press office transcript. See also, Cisco web page with photographs, webcast, and related information.

Bush said that "I do believe it is as proper use of federal taxpayer money to double the R&D commitment in the physical sciences at the federal level."

He next discussed the R&D tax credit. "I think it makes sense to encourage the private sector to spend the $200 billion a year we do total -- $3 billion right out of Cisco. One way to do so is through the tax code. The research and development tax credit makes a lot of sense. Interestingly enough, the research and development tax credit expires on a regular basis. And, therefore, people have to come, hat in hand, to Congress and say, oh, save us., Unfortunately, it is difficult to plan for some companies if you're worried about whether or not the research and development tax credit exists. Therefore, to keep us on the leading edge of change, to make sure we're the innovative capital of the world, Congress needs to make the research and development tax credit a permanent part of the tax code."

Bush also addressed STEM education. He said that "if we don't educate our children in math and science, jobs are going to go to other countries. ... Math and science are going to be vital to make sure that this country educates the engineers, the chemists, the physicists".

He added that "the federal government is going to make supplemental service money available for students who are falling behind in math right before they get into high school. That's one way to correct the problem, is to measure, to identify and to solve. And that's what we intend to do through the new math initiative."

He also said that "we've got to make sure that we understand what works. So I put together a national math panel with math experts that will help develop curriculum and teaching tools so that we can say to the states and local school districts, here's what the experts think. Instead of kind of grasping for what might be relevant and might work, we're actually calling people together who know what they're talking about -- just like we did in reading -- and say, here, here's what you need to try in order to meet the standards."

On April 18, President Bush created, by executive order, a National Mathematics Advisory Panel within the Department of Education. See, story titled "Bush Creates National Mathematics Advisory Panel" in TLJ Daily E-Mail Alert No. 1,353, April 19, 2006.

He also discussed the "Advanced Placement program. It's a program that sets high standards and has classroom rigor. One of the problems we have is not enough teachers know how to teach AP. I'm going to ask the Congress to fund enough money to help train 70,000 teachers so they can become prepared to teach Advanced Placement."

President Bush also gave two other major speeches on his ACA during the same week. On April 19, 2006, Bush gave a similar speech at Tuskegee University in Alabama. See, story titled "Bush Discusses Research Funding, R&D Tax Credit, and STEM Education" in TLJ Daily E-Mail Alert No. 1,355, April 21, 2006. On April 18, 2006, Bush gave a similar speech at a public school in the Maryland suburbs of Washington DC. See, story titled "Bush Discusses His American Competitiveness Initiative" in TLJ Daily E-Mail Alert No. 1,353, April 19, 2006.

On April 20, 2006, William Archey, head of the American Electronics Association (AeA), spoke at a luncheon on Capitol Hill. He praised Bush's ACA, and compared it with two other proposals advanced by House Democrats and House Republicans. He said that the three proposals are basically the same, with some differences in the numbers. He commented that this could present an obstacle to enactment, since no group would be able to claim credit.

See also, House Democrats' Innovation Agenda and story titled "House Democrats Promote Their Innovation Agenda" in TLJ Daily E-Mail Alert No. 1,312, February 17, 2006.

More Trade News

4/21. On April 21, 2006, the Department of State (DOS) published a notice in the Federal Register that announces, summarizes, recites, and sets the effective date (April 21, 2006) for, amendments to its International Traffic in Arms Regulations (ITAR). See, Federal Register, April 21, 2006, Vol. 71, No. 77, at Pages 20534-20555.

The Department of Commerce's (DOC) Bureau of Industry and Security (BIS), which regulates exports, announced on April 20 in a revised notice in the Federal Register that the previously announced two day meeting of its Information Systems Technical Advisory Committee will be shortened to a one day meeting, to be held on April 26. See, Federal Register, April 20, 2006, Vol. 71, No. 76, at Page 20389.

The agenda for this meeting includes "VOIP Networks". A BIS employee contacted by TLJ declined to comment further on this agenda item.

Also, the BIS announced on April 11, 2006, the the DOC and the Ministry of Commerce of the People's Republic of China have agreed to establish a U.S.-China High Technology and Strategic Trade Working Group under the Joint Commission on Commerce and Trade (JCCT).

The BIS stated in a release that the US and PRC "have reviewed progress on cooperation in the context of the Exchange of Letters on the End-Use Visit Understanding (EUVU) signed at the 2004 Joint Commission on Commerce and Trade (JCCT), and continue to recognize that full implementation of the EUVU is essential to strengthening civilian high technology and strategic trade between the two countries."

Finally, the House Commerce Committee announced that it will meet to mark up the Communications Opportunity, Promotion, and Enhancement Act of 2006 on Tuesday, April 25 (opening statements), and Wednesday, April 26 (mark up). One possible subject of debate and amendments may be proposals to restrict foreign ownership of the national cable licenses that would be created by the bill.

More News

4/21. The Federal Communications Commission (FCC) released the text [89 pages in PDF] Ninth Report and Order establishing procedures by which new AWS licensees may relocate incumbent BRS and FS operations in spectrum that has been allocated for AWS. This order states that it establishes "procedures for the relocation of Broadband Radio Service (BRS) operations from the 2150-2160/62 MHz band. We also establish procedures for the relocation of Fixed Microwave Service (FS) operations from the 2160-2175 MHz band and modify existing relocation procedures for the 2110-2150 MHz and 2175-2180 MHz bands. In addition, we adopt cost-sharing rules to identify the reimbursement obligations for Advanced Wireless Service (AWS) and Mobile Satellite Service (MSS) entrants benefiting from the relocation of incumbent FS operations in the 2110-2150 MHz and 2160-2200 MHz bands and AWS entrants benefiting from the relocation of BRS incumbents in the 2150-2160/62 MHz band." (Footnote omitted.) The FCC adopted this order on April 12, 2006. This order is FCC 06-45 in in ET Docket No. 00-258 and WT Docket No. 02-353.

4/21. Sen. Olympia Snowe (R-ME), the Chairman of the Senate Committee on Small Business, released a statement regarding theft of intellectual property in the PR China. She wrote that "Small business owners in Maine and across our nation are fighting to remain competitive with countries such as China that flagrantly disregard intellectual property rights. Specialized shoe manufacturer New Balance has grown so concerned with the magnitude of this problem that they were forced to file suit against `New Barlan,´ a Chinese shoe manufacturer that sells nearly identical shoes." She added that "While I am pleased that progress was made during last week's U.S.-China Joint Commission on Commerce and Trade meetings, China must better protect U.S. intellectual property. The massive distribution of pirated music, movies, software, pharmaceuticals and manufactured parts has led to lost jobs, lost royalties and lost sales for American businesses -- small and large. I call upon law enforcement agencies from China and the United States to ramp up their efforts to develop and prosecute intellectual property cases. Fraudsters and thieves must be held accountable for intellectual property crimes."

Go to News from April 16-20, 2006.