|TLJ News from June 16-20, 2006|
6/20. The U.S. Court of Appeals (DCCir) issued its opinion [23 pages in PDF] in Verizon v. FCC. The Court of Appeals denied in part and dismissed in part petitions for review of a final order of the Federal Communications Commission (FCC) regarding use of the add-back accounting rule for rates charges by local exchange carriers for access to their networks. This case is Verizon Telephone Companies, et al. v. FCC and USA, U.S. Court of Appeals for the District of Columbia, App. Ct. Nos. 04-1331 and 04-1332, petitions for review of a final order of the FCC.
6/20. The U.S. Court of Appeals (11thCir) issued its opinion [16 pages in PDF] in Wexler v. Anderson, a case regarding the constitutionality of the state of Florida's implementation of its Electronic Voting Systems Act. Some counties in Florida enable electronic voting with touch screen voting machines. Rep. Robert Wexler (D-FL), who is also a member of the House Judiciary Committee, and others, filed a complaint in U.S. District Court (SDFl). The District Court rejected the challenge, and the Court of Appeals affirmed. This case is Robert Wexler, et al. v. Arthur Anderson, et al., U.S. Court of Appeals for the 11th Circuit, App. Ct. No. No. 04-16280, an appeal from the U.S. District Court for the Southern District of Florida, D.C. No. 04-80216-CV-JIC.
6/20. The U.S. Court of Appeals (4thCir) issued its opinion [5 pages in PDF] in XO v. MetroPCS, a contract dispute regarding payment for completion of phone calls. MetroPCS provides wireless telephone service. MetroPCS routed calls to XO Communications' network, pursuant to contracts, for completion. The two companies disputed the amounts owing under the contracts. The District Court granted summary judgment for MetroPCS. The Court of Appeals affirmed in an opinion that it designated as "unpublished". This case is XO Communications, Inc. v. MetroPCS, Inc., U.S. Court of Appeals for the 4th Circuit, App. Ct. No. 05-1218, an appeal from the U.S. District Court for the Eastern District of Virginia, D.C. No. CA-04-845.
6/20. The National Telecommunications and Information Administration (NTIA) published a notice in the Federal Register announcing that it intents to delete the system of records titled "Radio Spectrum Management Career Development Program". The notice adds that "This system of records is no longer collected or maintained by the National Telecommunications and Information Administration. There are no records remaining in the system." The deadline to submit comments to the NTIA is July 20, 2006. See, Federal Register, June 20, 2006, Vol. 71, No. 118, at Page 35416.
6/20. The Center for Democracy and Technology (CDT) released a paper [12 pages in PDF] titled "Preserving the Essential Internet". It advocates legislation to protect "internet" neutrality, rather than "network" neutrality. It states that "the focus of the debate today should be squarely on preserving the openness of the Internet -- as opposed to other, non-Internet services that also may be carried over broadband networks. We believe that companies investing in broadband networks should be free to use those networks for a wide range of non-Internet services on terms and conditions of their own choosing. For that reason, we believe that ``Internet´´ neutrality better reflects the proper scope of the issue than does ``network´´ neutrality. Our recommendation is to distinguish between ``networks´´ and ``the Internet´´ and to focus the policy debate on the latter." It states that legislation should not address "cable television and other non-Internet services" offered over broadband networks, but that "In the absence of legislated safeguards, there is a real risk that network providers will not choose to retain the core elements of Internet neutrality. This risk, and the potential consequences, are simply too great to take no action."
Senate Commerce Committee Releases New Draft of Communications Reform Bill
6/19. The Senate Commerce Committee (SCC) released yet another discussion draft [156 pages in PDF] Sen. Ted Stevens' (R-AK) bill titled the "Communications, Consumers' Choice, and Broadband Deployment Act".
This bill was introduced as S 2686. However, this latest discussion draft is numbered HR 5252, which is the number of the Rep. Joe Barton's (R-TX) communications reform bill.
On June 8, 2006, the House amended and approved HR 5252, the "Communications Opportunity, Promotion, and Enhancement Act of 2006" (COPE Act). See, story titled "House Approves COPE Act, Without Network Neutrality Amendment" in TLJ Daily E-Mail Alert No. 1,388, June 9, 2006.
Both HR 5252, as approved by the House, and Sen. Stevens' bill, address various communications related issues, including network neutrality, video franchising, municipal broadband, and universal service subsidies. However, the two bills are quite different.
The SCC held a hearing on the bill on June 13. See, story titled "Senate Commerce Committee Holds Hearing on Communications Reform Bill" in TLJ Daily E-Mail Alert No. 1,391, June 14, 2006. At that hearing Sen. Stevens said that the bill ought to enable the Federal Communications Commission (FCC) to address "net neutrality issues that affect consumers, and let the basic providers, the large providers, hire their attorneys to battle out" their disputes. He added that "When it comes to interfering with the marketplace, in terms of major expenditures of capital, I think we should stay away." The latest discussion draft incorporates these principles.
The latest version of Sen. Stevens' (at left) bill contains an completely rewritten Title IX, which pertains to network neutrality. In the previous version of the bill, this title contained only one section, 901, titled "Neutral Networks for Consumers". It provided for annual studies by the FCC for five years, but no legislative mandates.
Consumer Bill of Rights. The new Title IX contains a "Internet Consumer Bill of Rights Act of 2006". It requires, at Section 903, that,
"each Internet service provider shall allow each subscriber to---
(1) access and post any lawful content of that subscriber’s choosing;
(2) access any web page of that subscriber's choosing;
(3) access and run any voice application, software, or service of that subscriber's choosing;
(4) access and run any video application, software, or service of that subscriber's choosing;
(5) access and run any email application, software, or service of that subscriber's choosing;
(6) access and run any search engine of that subscriber's choosing;
(7) access and run any other application, software, or service of that subscriber’s choosing;
(8) connect any legal device of that subscriber's choosing to the Internet access equipment of that subscriber, if such device does not harm the network of the Internet service provider; and
(9) receive clear and conspicuous information, in plain language, about the estimated speeds, capabilities, limitations, and pricing of any Internet service offered to the public."
Title IX defines the term "internet service" as "any service that provides access to the public Internet directly to the public", and the term "subscriber" as "a retail end user that purchases Internet service".
This section protects only "subscribers" from certain potential business practices of their "internet service providers". It does not regulate the relationship between service providers and internet content companies.
Free Speech Rights. Section 904 contains two clauses under the heading of "Application of the First Amendment".
First, it provides that "no Federal, State, or local government may limit, restrict, ban, prohibit, or otherwise regulate content on the Internet because of the religious views, political views, or any other views expressed in such content unless specifically authorized by law". What this clause means is another question. The First Amendment's free speech clause, and its incorporation into the Fourteenth Amendment, already limits governments attempts to regulate expression. Moreover, no government can authorize the violation of First Amendment rights.
Second, it provides that "no Internet service provider engaged in interstate commerce may limit, restrict, ban, prohibit, or otherwise regulate content on the Internet because of the religious views, political views, or any other views expressed in such content unless specifically authorized by law". The First Amendment only regulates state action. This appears to be an attempt to extend a limited First Amendment like restriction to internet service providers.
Stand Alone Internet Access Service. Section 905 of the draft bill requires that "An Internet service provider shall offer to any potential subscriber any Internet service such provider offers without requiring that subscriber to purchase or use any telecommunications service, information service, IP-enabled voice service, video service, or other service offered by such Internet service provider."
The House bill also has a stand alone offering requirement. It provides that "A broadband service provider shall not require a subscriber, as a condition on the purchase of any broadband service the provider offers, to purchase any cable service, telecommunications service, or VOIP service offered by the provider."
The House bill only affects broadband offerings, while the Senate draft affects all internet access offerings.
Exceptions. Section 906 of the Senate draft allows internet service providers to "protect the security, privacy, or integrity of the network", "facilitate diagnostics, technical support, maintenance, network management, or repair of the network or service of such provider", "prevent or detect unauthorized, fraudulent, or otherwise unlawful uses of the network or service of such provider", "block access to content, applications, or services that Federal or State law expressly authorizes to be blocked, including child pornography", provide parental controls, and allow subscribers to block content.
Section 910 contains two further exceptions. First, it provides that "Nothing in this title shall ... preclude an Internet service provider from displaying advertisements in connection with a broadband service". Second, it provides that "Nothing in this title shall ... apply to a service in which Internet service is not the primary service, such as a video service offered under Title VI of the Communications Act ..."
Adjudicative Enforcement by FCC. The Senate draft bill then provides that the FCC must write procedural rules that establish an adjudicatory enforcement of the Consumer Bill of Rights set out in Section 903, but that it must not write substantive rules on the same subject.
Section 907(a) provides that the FCC "shall, by rule, establish an adjudicatory enforcement procedure under which -- (1) any subscriber aggrieved by a violation of the requirements of section 903 may initiate an enforcement action by filing a complaint, in such form and in such manner as the Commission may prescribe; and (2) the Commission shall make a determination, after notice and an opportunity for a hearing, with respect to any bona fide complaint not later than 120 days after the date on which such complaint is received."
But then, Section 908 provides that "Except as provided in section 907(a), the Commission shall not --- (1) promulgate any regulations implementing this title; nor (2) enlarge or modify the obligations imposed on Internet service providers through the adjudicatory process under section 907."
This FCC adjudicatory process would only address alleged violations of the Section 903 Consumer Bill of Rights. It would not encompass alleged violations of Section 904 (free speech) or Section 905 (stand alone service).
If this draft were enacted into law, then, while the FCC would be barred from promulgating substantive rules regarding the extent of consumers' network neutrality rights, the FCC would write orders in adjudicatory proceedings that would contain legal guidance regarding the extent of consumers' network neutrality rights, which it might follow in subsequent adjudicatory proceedings. The FCC would likely create substantive law one way or the other. Also, judicial review of such adjudicatory orders would be available only to parties to such proceedings, while judicial review is more broadly available in rule making proceedings.
The SCC is scheduled to mark this bill on Thursday, June 22, at 2:00 PM.
Stevens Bill Includes Changes to FCC and Judicial Procedure
6/19. The Senate Commerce Committee (SCC) released a discussion draft [156 pages in PDF] Sen. Ted Stevens' (R-AK) bill titled the "Communications, Consumers' Choice, and Broadband Deployment Act". This draft would give the federal courts in the District of Columbia exclusive jurisdiction over challenges to rulings and regulations of the Federal Communications Commission (FCC). It would also further enhance the FCC's ability to conduct its activities and operations in secret.
This bill was introduced as S 2686. However, this latest discussion draft is numbered HR 5252, which is the number of the Rep. Joe Barton's (R-TX) communications reform bill. The House approved its version of HR 5252 on June 8, 2006.
District of Columbia. Section 1004 of the draft bill provides, in full, that "Notwithstanding any other provision of law, any civil action challenging a ruling or regulation of the Federal Communications Commission under this Act, or under the Communications Act of 1934 (47 U.S.C. 151 et seq.) as amended by this Act, or the application of any such ruling or regulation to any person or circumstance, shall be brought in the United States District Court for the District of Columbia."
First, this would move challenges to FCC rulings and regulations from the Court of Appeals to the District Court. Currently, petitions for review of final orders of the FCC go directly to any of the circuits of the U.S. Court of Appeals.
District Court Judges in the District of Columbia tend to have less experience and expertise in dealing with federal agency procedure, and communications laws, than do the Court of Appeals Judges in the District of Columbia. The District Court may be less likely to overturn FCC rulings and regulations.
Also, since those who challenge FCC orders currently must go directly to the Court of Appeals, and the Supreme Court rarely reviews Court of Appeals rulings, challengers have only one shot at overturning the order of the FCC, and the process is relatively quick. If the Stevens proposal were enacted into law, since there is a right of appeal, the process of challenging FCC rulings or regulations would become an at least two step process, thus taking more time and effort.
Second, this would move to the District of Columbia all actions involving "any civil action challenging ... the application of" FCC rules or regulations.
Third, since the DC Circuit has jurisdiction over appeals from the District Court for the District of Columbia, the Stevens proposal would have the effect of creating, in the DC Circuit, a specialized appellate court for federal communications law. It might be comparable to the Federal Circuit's near exclusive jurisdiction over patent matters.
As with many statutes related to jurisdiction and venue, this draft is full of ambiguities. For example, what is an "action challenging ... the application of any such ruling or regulation to any person or circumstance"?
What if the challenge to the "application of any" FCC ruling or regulation arises by way of affirmative defense, counterclaim, or intervening claim? Will District of Columbia jurisdiction depend on who files first?
What does "this Act, or under the Communications Act of 1934 (47 U.S.C 151 et seq.)" mean? The CALEA, for example, is codified at 47 U.S.C. § 1001 et seq., but the statute enacted by the Congress, HR 4922 (103rd Congress) and Public Law No. 103-414, states that it amends Title 18, which is the criminal code. Hence, what court would hear a challenge to a FCC CALEA order?
What if the FCC promulgates a regulation, and asserts it is authorized by the Communications Act to do so, and then someone challenges that regulation, under Title 5, and asserts the FCC lacks authority under the Communications Act to promulgate that regulation? Is this an action "under the Communications Act"?
Does the clause "under the Communications Act" refer back to "civil action", to "ruling or regulation", or what?
Open Meetings Law. The latest draft of the Stevens bill would also amend the Communications Act, to provide the FCC an exemption from certain open meeting requirements of the Administrative Procedure Act. It would enable the FCC to operate in greater secrecy, and with less transparency, than it currently operates.
Section 1001 of the latest draft of the Stevens bill would only affect the FCC. The Federal Trade Commission (FTC), Securities and Exchange Commission (SEC), and other agencies covered by 5 U.S.C. § 552b would remain unaffected.
The bill provides that "Notwithstanding 552b of title 5, United States Code, and section 4(h) of this Act, the Commission may conduct a meeting that is not open to the public if the meeting is attended by (A) all members of the Commission; or (B) at least 1 member of the political party whose members are in the minority."
Second, it provides that "The Commission may not vote or make any final decision on any matter pending before it in a meeting that is not open to the public, unless (A) otherwise authorized by section 552b(b) of title 5, United States Code; or (B) the Commission has moved its operations outside Washington, D.C., pursuant to a Continuity of Operations Plan."
Third, it provides that "If the Commission conducts a meeting that is not open to the public under this section, the Commission shall promptly publish an executive summary describing the matters discussed at that meeting after the meeting ends, except for such matters as the Commission determines may be withheld under section 552b(c) of title 5, United States Code. This paragraph does not apply to a meeting described in paragraph (4)."
Fourth, this paragraph (4) provides that "Neither section 552b of title 5, United States Code, nor paragraph (1) of this subsection applies to (A) a meeting of 3 or more members of the Commission with the President, any person employed by the Office of the President, any official of a Federal, State, or local agency, a Member of Congress or his staff; (B) the attendance, by 3 or more members of the Commission, at a forum or conference to discuss general communications issues; or (C) a meeting of 3 or more members of the Commission when the Continuity of Operations Plan is in effect and the Commission is operating under the terms of that Plan."
Paragraph (4)(A) would enable three or more members to meet with any government official. One issue area that this would impact would be the FCC's increasing involvement in electronic surveillance, collection of phone records, and technology mandates that might facilitate government surveillance and data collection. That is, DOJ and NSA employees would be able to lobby and pressure the FCC in complete secrecy.
Paragraph (4)(B), regarding "a forum or conference", is similar to many other provisions in state and federal open meeting, lobbying, campaign finance, and other laws. However, it lacks a qualifying term found in similar provisions, such as "public", "open to the public", or televised, broadcast or web cast. That is, as written, it enables the FCC Commissioners to meet in secrecy with any industry group at an event that it designates as a "forum or conference", even if reporters, and uninvited but affected persons, are excluded.
Disclosure. Section 1001 of the draft bill would negatively impact the ability of TLJ to obtain information about the activities and operations of the FCC for news reporting purposes. Hence, readers may wish to question the objectivity or accuracy of any TLJ reporting on Section 1001.
People and Appointments
6/19. Robert Zoellick resigned as Deputy Secretary of State. He will go to work for Goldman Sachs Group in New York. No replacement for Zoellick has been announced. See, statements by Zoellick and Secretary of State Condi Rice. During President Bush's first term, Zoellick was the U.S. Trade Representative (USTR). His replacement as USTR, Robert Portman, recently left the Office of the USTR to become head of the Office of Management and Budget (OMB).
6/19. Phil Bond was named P/CEO of the Information Technology Association of America (ITAA). Bond previously worked for Monster Worldwide. Before that, he worked at the Department of Commerce, where he was Chief of Staff to former Secretary of Commerce Donald Evans, and Under Secretary of Commerce for Technology. Before that, he worked for former Rep. Jennifer Dunn (R-WA). The previous head of the ITAA, Harris Miller, resigned in January of 2006 to run for a seat in the U.S. Senate. He narrowly lost in the Democratic primary on June 13 to James Webb, who will face Sen. George Allen (R-VA) in the November general election. The interim President of the ITAA was Robert Laurence.
6/19. Federal Reserve Board (FRB) Governor Mark Olson was named Chairman of the Public Company Accounting Oversight Board (PCAOB) until 2010. See, SEC release.
6/19. Kayla Gillan was re-appointed to the Public Company Accounting Oversight Board (PCAOB). She has been a member since 2002. See, SEC release.
6/19. Vice President Richard Cheney gave a speech, and answered questions, at the Gerald R. Ford Journalism Prize Luncheon in Washington DC. He spoke in vague terms about electronic surveillance, and news stories about government surveillance. He said that "the technology has evolved so dramatically in the telecommunications area in the last several years that the FISA Act does not fit precisely all circumstances that we now are faced with. But we work very closely with the FISA courts in terms of carrying out our duties and responsibilities in that area." He also said that "I do believe that there need to be secrets", and that "the fact of the matter is that there have been stories written that are damaging, if you will, from the standpoint of national security". See, transcript.
6/19. The U.S. Court of Appeals (10thCir) issued an opinion [50 pages in PDF] in In Re Qwest Communications International, Inc. Securities Litigation, regarding assertion of the attorney client (AC) and work product (WP) privileges. Qwest produced certain documents for the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) during their investigations. Subsequently, parties to civil litigation sought those same documents. Qwest asserted asserted AC and WP privileges. The District Court held that Qwest waived the AC and WP privileges by voluntarily providing the documents to the DOJ and SEC. The Court of Appeals denied Qwest's petition for writ of mandamus. It rejected Qwests argument that there was only a selective or limited waiver. This case is App. Ct. No. 06-1070, a petition for writ of mandamus to the U.S. District Court for the District of Colorado, D.C. No. 01-CV-1451-REB-CBS.
6/19. The European Commission (EC) announced that it adopted "two initiatives to put a legally sound framework in place for the transfer of PNR (Passenger Name Records) data to the United States". See, release. On May 30, 2006, the European Union's (EU) Court of Justice (COJ) issued its judgment in European Parliament v. Council of the European Union, annulling the 2004 agreement [7 pages in PDF] between the U.S. and the EU regarding providing airlines' PNR data to the U.S. government. See, section titled "More News" in TLJ Daily E-Mail Alert No. 1,389, June 12, 2006.
6/19. The Supreme Court denied certiorari in Crater Corporation v. Lucent Technologies, a patent, contract, and misappropriation of trade secrets case in which the Lucent and the U.S. asserted the state secrets privilege. The Office of the Solicitor General (and Peter Keisler of the Civil Division) submitted a brief urging the Supreme Court to deny certiorari. This lets stand the September 7, 2005, opinion [22 pages in PDF] of the U.S. Court of Appeals (FedCir). See, stories titled "Federal Circuit Issues Opinion on State Secrets Privilege" in TLJ Daily E-Mail Alert No. 1,209, September 8, 2005, and "Crater v. Lucent" in TLJ Daily E-Mail Alert No. 203, June 7, 2001. This case is Sup. Ct. No. 05-1135 and App. Ct. No. 04-1349. See, Order List [10 pages in PDF] at page 9 and Supreme Court docket.
6/19. The Supreme Court denied certiorari in Empresa Cuban Del Tobaco v. General Cigar Co., Inc., a trademark dispute between a U.S. company and a Cuban enterprise involving the Cuban Assets Control Regulations (CACRs). The U.S. Court of Appeals (2ndCir) held that the Cuban enterprise could not acquire the COHIBA trademark in the U.S. because of the CACRs. The Office of the Solicitor General submitted a brief urging the Supreme Court to deny certiorari. See, Order List [10 pages in PDF] at 2 and Supreme Court docket. This case is Sup. Ct. No. 05-417, and App. Ct. Nos. 04-2527-cv and 04-3005-cv.
6/19. The Supreme Court denied certiorari in SmithKline Beecham v. Apotex, a patent case. The Office of the Solicitor General submitted a brief urging the Supreme Court to deny certiorari. This case is Sup. Ct. No. 05-489 and App. Ct. Nos. 03-1285 and 03-1313. See, Order List [10 pages in PDF] at page 9 at Supreme Court docket.
6/19. The Supreme Court denied certiorari in New Cingular Wireless v. Porsha Meoli, Sup. Ct. No. 05-1169, and Cingular Wireless v. Jaime Wing, Sup. Ct. No. 05-1170. Both are petitions for writ of certiorari to the Court of Appeal of California. See, Order List [10 pages in PDF] at page 2, and Supreme docket and docket.
FCC Drops Multicast Must Carry Item
6/18. The Federal Communications Commission (FCC) removed the multicast must carry item from the agenda [PDF] of its event titled "Open Meeting", scheduled for June 21, 2006. See also, story titled "FCC Announces Agenda for June 21 Meeting" in TLJ Daily E-Mail Alert No. 1,392, June 15, 2006.
An FCC spokesman stated in a release on June 18, 2006, that "There did not appear to be consensus for moving forward at this time".
The FCC declined to impose multicast must carry obligations on cable operators in its last order. See, story titled "FCC Adopts Digital Multicasting Must Carry Order" in TLJ Daily E-Mail Alert No. 1,075, February 11, 2005.
Kyle McSlarrow, head of the National Cable Telecommunications Association (NCTA), stated in a release on June 19, 2006, that "We're pleased the Commission has reconsidered its intention to impose multicast must-carry rules. The FCC correctly decided this matter on the two previous instances in which it determined that multicasting mandates would be unwise. We believe multicasting mandates are harmful to consumers. And we believe that marketplace and consumer demand -- not the government -- should determine what programming services are carried."
This is CS Docket No. 98-120.
DC Circuit Upholds FCC's Unbundling Rules
6/16. The U.S. Court of Appeals (DCCir) issued its opinion [41 pages in PDF] in Covad v. FCC, denying all petitions for review of the Federal Communications Commission's (FCC) December 2004 order [185 pages in PDF] regarding incumbent local exchange carriers' (ILECs) obligations under 47 U.S.C. § 251 to make available unbundled network elements (UNEs) to competitive local exchange carriers (CLECs). The Court of Appeals or Supreme Court overturned parts of the FCC's previous three orders. The Court of Appeals wrote that the "fourth try is a charm".
Introduction. This case is a consolidation of numerous petitions for review filed by ILECs, CLECs, and others. Basically, ILECs do not like unbundling requirements, and argued that the FCC order should have imposed less unbundling requirements on them. In contrast, the petitioning CLECs favor unbundling requirements, and argued that the FCC order should have imposed more requirements on the ILECs. The Court of Appeals denied all petitions.
Section 251 requires the ILECs, such as Verizon, to make available to CLECs, such as Covad, UNEs at regulated rates. It further requires the FCC to write implementing rules.
The Court of Appeals offered this summary of the concept of unbundling: "Suppose a CLEC (such as Covad) wants to serve customers in Washington, D.C. One way of doing so is for Covad to purchase its own switches, trunks, and loops, which it can then use to offer service to its new customers. However, given that the local ILEC (e.g., Verizon) has already deployed switches, trunks, and loops to serve the market, it might be economically impossible for Covad to duplicate competitively Verizon’s infrastructure. Through regulatory unbundling, however, Covad might be able to lease Verizon’s switches, trunks, and loops as UNEs. Covad could then use combinations of UNEs to cobble together a network and compete against Verizon in Washington." (Parentheses in original.)
The Court added that "The ILECs unsurprisingly dislike seeing their own networks wielded as competitive weapons by CLECs -- especially when the CLECs enjoy access to UNEs at TELRIC rates", or "Total Element Long-Run Incremental Cost". Similarly, "Given the lower cost of UNEs, the CLECs favor widespread unbundling, while ILECs favor fewer UNEs and the greater availability of higher-priced TSASs", tariffed special access services.
The Court commented that "This tug-of-war -- between CLECs advocating more unbundling and ILECs advocating less -- has been the nub of an ongoing, decade-long dispute between incumbents and their would-be competitors."
An explanation of this case, and the Court's opinion, requires an understanding of the statute, the history of the FCC's prior implementing orders, the Courts' prior opinions, as well as the Court's analysis of the FCC's most recent order. The Court of Appeals opinion is 41 pages, single spaced, and still refers the reader back to prior items. The following is an incomplete overview.
Statute. 47 U.S.C. § 251(c)(3) provides that ILECs have "The duty to provide, to any requesting telecommunications carrier for the provision of a telecommunications service, nondiscriminatory access to network elements on an unbundled basis at any technically feasible point on rates, terms, and conditions that are just, reasonable, and nondiscriminatory in accordance with the terms and conditions of the agreement and the requirements of this section and section 252 of this title. An incumbent local exchange carrier shall provide such unbundled network elements in a manner that allows requesting carriers to combine such elements in order to provide such telecommunications service."
Section 251(d)(2) requires the FCC, in establishing unbundling requirements, to "consider, at a minimum, whether ... the failure to provide access to such network elements would impair the ability of the telecommunications carrier seeking access to provide the services that it seeks to offer." The interpretation of the work "impair" has been central the FCC's unbundling orders, and the Court opinions overturning them.
These Section 251 unbundling requirements were created by the Telecommunications Act of 1996. 47 U.S.C. § 251(d)(1) requires that "Within 6 months after February 8, 1996, the Commission shall complete all actions necessary to establish regulations to implement the requirements of this section."
History of FCC Attempts to Implement § 251 UNE Obligations. In the following years, the FCC wrote four orders containing implementing rules. Parts of the previous three were overturned by the Courts. The Supreme Court rejected the FCC's first attempt in AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366 (1999). The Court of Appeals (DCCir) rejected the FCC's second attempt in U.S. Telecom Ass’n v. FCC, 290 F.3d 415 (2002).
The FCC announced its third set of rules on February 20, 2003, but did not release the text of this triennial review order [576 pages in PDF] until August 21, 2003, six months later. See, story titled "Summary of FCC Triennial Review Order" in TLJ Daily E-Mail Alert No. 725, August 25, 2003. See also, stories titled "FCC Announces UNE Report and Order", "FCC Order Offers Broadband Regulatory Relief", "FCC Announces Decision on Switching", "Commentary: Republicans Split On FCC UNE Order", and "Congressional Reaction To FCC UNE Order" in TLJ Daily E-Mail Alert No. 609, February 21, 2003.
On March 2, 2004, the U.S. Court of Appeals (DCCir) issued its opinion [62 pages in PDF] in USTA v. FCC, overturning parts of the FCC's triennial review order (TRO), and remanding the proceeding to the FCC. See also, story titled "Appeals Court Overturns Key Provisions of FCC Triennial Review Order" and story titled "Reaction to the Appeals Court Opinion in USTA v. FCC" in TLJ Daily E-Mail Alert No. 848, March 3, 2004.
The FCC adopted its fourth order on December 15, 2005. It is also sometimes referred to as the triennial review remand order. It amended the existing unbundling rules to bring them into compliance with the March 2, 2004, opinion.
See, stories titled "FCC Adopts Unbundling Order" in TLJ Daily E-Mail Alert No. 1,039, December 16, 2004, and "Reaction to FCC Unbundling Order" in TLJ Daily E-Mail Alert No. 1,041, December 20, 2005. The FCC released this order [185 pages in PDF] on February 4, 2005. See, story titled "FCC Releases Unbundling Order" in TLJ Daily E-Mail Alert No. 1,071, February 7, 2005. This order is FCC 04-290 in WC Docket No. 04-313 and CC Docket No. 01-338. This is the order upheld by the just released opinion.
December 2004 Order. The Court of Appeals summarized the four substantive sections of the FCC's order, titled "Unbundling Framework" (FCC order, at Section IV, Paragraphs 20-65), "Dedicated Interoffice Transport" (§ V, ¶¶ 66-145), "High Capacity Loops" (§ VI, ¶¶ 146-198), and "Mass Market Local Circuit Switching" (§ VII, ¶¶ 199-228).
First, the Court wrote that the FCC "altered its unbundling framework. The FCC clarified that it would find ``impairment´´ where it would be ``uneconomic´´ for a ``reasonably efficient´´ CLEC to compete without UNEs."
Second, the Court wrote that the FCC "amended its impairment findings for dedicated interoffice transport. ``Dedicated transport facilities´´ refer to facilities that are dedicated to a particular carrier used for transmission between or among ILEC wire centers. For purposes of this opinion, transport comes in two varieties: ``DS1´´ (which can carry 24 voice calls simultaneously) and ``DS3´´ (which has 28 times the capacity of DS1 facilities and can therefore carry 672 voice calls simultaneously)." (Citations to the order omitted. Parentheses in original.)
Third, the Court wrote that the FCC "amended its impairment findings for DS1 and DS3 loops. The Commission noted it is often not economical for a CLEC to deploy its own DS1 loops, given their capacity limitations. However, the FCC explained that to offer DS1 or DS3 service, CLECs ``install high-capacity fiber-optic cables [including DS3 loops and ``optical carrier level n,´´ or ``OCn,´´ facilities] and then use electronics to light the fiber at specific capacity levels, often `channelizing´ these higher-capacity offerings into multiple lower-capacity streams.´´ Thus, the FCC concluded, CLECs are not impaired without DS1/DS3 UNEs in markets where CLECs have deployed -- or could economically deploy -- higher-capacity facilities that can be ``channelized´´ to provide service at lower levels." (Footnote and citations to the order omitted. Brackets in original.)
Third, the Court wrote that the FCC "concluded that ILECs no longer need to provide CLECs with unbundled access to mass market local circuit switching (``MMLS´´). The FCC adopted transitional rules to wean CLECs off the local circuit switching UNEs that are currently in use. Specifically, the Commission afforded CLECs 12 months to eliminate their reliance on unbundled MMLS, and it increased the rates at which ILECs are compensated for unbundled local switching during the transitional period ..." (Parentheses in original.)
Holding of the Court. The Court characterized the ILECs' arguments thus: "the ILECs argue that the FCC unlawfully failed to consider the relevance of TSASs in its unbundling analysis. Second, the ILECs argue that the Commission imposed impossibly high thresholds for assessing the state of competition in the market for DS1/DS3 loops and transport."
It characterized the CLECs' arguments thus: "the CLECs argue that they are universally impaired without unbundled access to DS1 loops, DS3 loops, and DS1 transport. Second, the CLECs argue that they are universally impaired without unbundled access to mass market local switching. Third, the CLECs argue that the Commission’s transitional rules for implementing the Order are arbitrary and capricious."
The Court rejected all petitions for review.
This case is Covad Communications Company, et al. v. FCC, U.S. Court of Appeals for the District of Columbia, App. Ct. Nos. 05-1095, 05-1100, 05-1101, 05-1108, 05-1110, 05-1122, 05-1130, 05-1133, 05-1137, 05-1224, petitions for review of a final order of the FCC. Judge Sentelle wrote the opinion of the Court of Appeals, in which Judges Ginsburg and Griffith joined.
2nd Circuit Holds No Misappropriation in Stock Market Indexes Case
6/16. The U.S. Court of Appeals (2ndCir) issued its opinion [23 pages in PDF] in Dow Jones v. International Securities Exchange, a case regarding misappropriation of intellectual property under New York state law.
Dow Jones and McGraw-Hill created and maintain stock market indexes. Dow Jones is the creator of the Dow Jones Industrial Average (DJIA). McGraw-Hill is the creator of the Standard & Poor 500 Index (S&P 500). The creation and maintenance of these indices requires great effort, expertise, creativity, and expense.
Dow Jones and McGraw-Hill both license their products to financial institutions, and for use in financial products that utilize their indexes.
Dow Jones and McGraw-Hill have each licensed the creation of an exchange traded fund (ETF) that tracks the performance of their index, and provides a vehicle for public investment in a pool of securities that reflects the performance of their index. Dow Jones has licensed DIAMONDS, and McGraw-Hill has licensed SPDR.
International Securities Exchange, Inc. (ISE) is an options exchange. Options Clearing Corporation (OCC) is an options clearing agency. ISE announced its intent to offer options trading on shares of DIAMONDS and SPDR. OCC announced that it would clear these trades.
ISE and OCC did not obtain a license from either Dow Jones or McGraw-Hill.
Dow Jones and McGraw-Hill then filed complaints in U.S. District Court (SDNY) against ISE and OCC alleging that the announced plans would misappropriate their intellectual property interest in the underlying indexes, and constitute unfair competition, under New York law. They also alleged that ISE and OCC would infringe and dilute their trademarks.
The District Court dismissed the complaints for failure to state a claim. This appeal followed.
The Court of Appeals affirmed. It held that an options exchange, by creating, listing, and facilitating the trading of options on shares in an ETF designed to track a proprietary market index, does not misappropriate the intellectual property rights of the creator of that index.
The Court wrote that "Plaintiffs intentionally disseminate their index values to inform the public. They cannot complain when the defendants do nothing more than draw information from that publication of the index values."
The misappropriation and unfair competition claims both involve questions New York state law. The Court's opinion is not binding on courts that interpret the laws of other states. Moreover, there is no federal statutory or common law cause of action for misappropriation. In addition, this is a federal court rending an opinion on a matter of state law. It is not binding on the courts of the state of New York. However, while an opinion with these characteristics would usually have little impact, given the rarity of opinions on misappropriation of market index IP rights, and the Court which rendered it, this opinion may have an unusual impact.
Perhaps it should also be noted that in recent years when Congressional Committees have considered general legislation that would create a federal statutory intellectual property right in collections of data, opponents have argued that such legislation is unnecessary, in part because creators of collections of data can rely on state law actions based upon the doctrine of misappropriation. However, Dow Jones and McGraw-Hill were unsuccessful in asserting misappropriation in this case.
See for example, story titled "House Judiciary Committee Approves Database Protection Bill" in TLJ Daily E-Mail Alert No. 822, January 23, 2004.
This case is Dow Jones & Company, Inc. v. International Securities Exchange, Inc. and Options Clearing Corporation, and McGraw-Hill Companies, Inc. v. International Securities Exchange, Inc., U.S.Court of Appeals for the 2nd Circuit, App. Ct. Nos. 05-4812-cv and 05-4972-cv, appeals from the U.S. District Court for the Southern District of New York, Judge Harold Baer presiding.
USTR Seeks Comments IPR Protection in Various Locations in China
6/16. The Office of the U.S. Trade Representative (USTR) published a notice in the Federal Register requesting comments regarding its special provincial review (SPR) of intellectual property rights (IPR) protection in Peoples Republic of China (PRC).
The USTR wrote that it "proposes to focus the SPR on the locations in China that are most economically significant for U.S. right holders, or which merit special attention for other reasons. USTR seeks public comments on the specific provinces and other jurisdictions at the provincial level that should be the focus of the SPR."
It added that "Within each province, municipality, or autonomous region that is included in the review, USTR proposes to examine the issues and locations of greatest interest to U.S. right holders. USTR therefore requests that, with respect to each province, municipality, and/or autonomous region recommended for inclusion in the SPR, commenters identify with particularity any key locations or issues that merit attention. Key locations could include, for example, particular regions, cities, towns, districts, sub-districts, or markets. Key issues could include, for example, counterfeiting or piracy of particular types of products in a particular location, or factors that affect the ability to enforce particular rights (e.g., positive or negative aspects of local policy, legislation, or resources)."
It also wrote that its "plans to seek more detailed public comments before concluding the SPR."
Comments are due by July 14, 2006. See, Federal Register, June 16, 2006, Vol. 71, No. 116, at Pages 34969-34970.
People and Appointments
6/16. Jason Hafemeister, Deputy U.S. Trade Representative, gave a speech, and answered questions, in Geneva, Switzerland, regarding agricultural trade and the stalled Doha round negotiations.
WTO Panel Releases Report on US-EC Dispute Over LCD Monitors
6/16. A dispute settlement panel of the World Trade Organization (WTO) released a report regarding the lack of uniform administration of customs laws in the European Communities (EC). In particular, the panel found a lack of uniform administration regarding LCD monitors.
Section VII [3 pages in PDF] of the report is titled "Conclusions and Recommendations". It states that "the Panel recommends that the Dispute Settlement Body request the European Communities to bring itself into conformity with respect to ... the administration of the Common Customs Tariff regarding the tariff classification of liquid crystal display monitors with digital video interface".
For the full document, see Part I of report [179 pages in PDF] and Part II of report [204 pages in PDF].
The Office of the U.S. Trade Representative (USTR) stated in a release that "A prominent example of the problem, discussed during the dispute, involves flat-panel liquid crystal display monitors with digital video interface (``LCD monitors´´). Some agencies classify LCD monitors as computer-related equipment (drawing a zero duty rate), while others classify the goods as ``other´´ monitors (drawing a 14 percent duty rate). For well over a year, the EC Commission has been unable to reconcile the divergent approaches of different agencies. The panel agreed with the United States that the EC fails to administer its customs law in a uniform manner when it comes to classification of LCD monitors." (Parentheses in original.)
However, the panel also found that the US "has not proved that the refusal to withdraw the revocation of BTI by the UK customs authorities with respect to the tariff classification of Sony PlayStation2 in the context of the Sony PlayStation2 case amounts to non-uniform administration", and that the US "has not proved that the interpretation and application of the amended explanatory notes to the Common Custom Tariff concerning camcorders in the context of the Camcorders case amounts to non-uniform administration".
Back on May 26, 2006, Sen. Charles Schumer (D-NY) and Sen. Hillary Clinton (D-NY) introduced a series of short bills to suspend temporarily the U.S. duty on various types of color flat panel screen monitors, and other monitors. See, Congressional Record, May 26, 2006, and Senate Bills 3312 through 3315.
Also on May 26, Sen. Diane Feinstein (D-CA) introduced a series of short bills to suspend temporarily the U.S. duty on various types of DVD camcorders (see, Congressional Record, May 26, 2006, and Senate Bills 3278 through 3281) and various types of wide-range high sensitivity color zoom digital security cameras (see, Congressional Record, May 26, 2006, and Senate Bills 3285 through 3287).
6/16. The Federal Communications Commission (FCC) released its 7th report [55 pages in PDF] to the Congress on satellite competition. This report is required by Section 646 of the Open-Market Reorganization for the Betterment of International Telecommunications Act (ORBIT Act). The report concludes that "U.S. policy goals regarding the promotion of a fully competitive global market for satellite communications services are being met in accordance with the ORBIT Act."
6/16. The Federal Communications Commission (FCC) released an order [PDF] regarding telecommunications relay services (TRS) and speech to speech services for individuals with hearing and speech disabilities.
6/16. The Heritage Foundation released a short paper titled "Health Care Information Technology: Getting the Policy Right". The author is Edmund Haislmaier.
6/16. Danny Ferrer pled guilty in U.S. District Court (EDVa) to one count of conspiracy and one count of criminal copyright infringement for selling pirated software through the mail. The Department of Justice (DOJ) stated in a release that "Ferrer and his co-conspirators operated the www.BUYSUSA.com Web site, which sold copies of software products that were copyrighted by companies such as Adobe Systems Inc., Autodesk, and Macromedia Inc. at prices substantially below the suggested retail price. The software products purchased on the website were reproduced on compact discs and distributed through the mail. The operation included a serial number that allowed the purchaser to activate and use the product." See also, Business Software Association (BSA) release.
Go to News from June 11-15, 2006.