Skype Files Petition Requesting that FCC Declare that Carterfone Principles Apply to Wireless Carriers

2/20. Skype Communications filed a petition [36 pages in PDF] with the Federal Communications Commission (FCC) requesting that the FCC "declare that wireless carrier services are subject to the Carterfone principle that consumers have the right to attach any non-harmful device of their choosing to the network and that this, by necessity, includes users' rights to run Internet applications of their choosing." Skype provides voice of internet protocol (VOIP) applications.

Introduction. The petition asks that the Carterfone principle be applied to wireless carriers. However, the petition is also in the nature of a request for application of certain network neutrality principles to wireless carriers that provide broadband internet access.

The FCC adopted a Policy Statement [3 pages in PDF] in August, 2005. This statement provides, in part, that consumers "are entitled to connect their choice of legal devices that do not harm the network" and that "consumers are entitled to run applications and use services of their choice". The Skype petition cites this statement.

See also, story titled "FCC Adopts a Policy Statement Regarding Network Neutrality" in TLJ Daily E-Mail Alert No. 1,190, August 8, 2005. The FCC released the text of the Policy Statement on September 23, 2005. See, story titled "FCC Releases Policy Statement Regarding Internet Regulation" in TLJ Daily E-Mail Alert No. 1,221, September 26, 2005.

The petition also discusses the comment [17 pages in PDF] submitted by law professors Lawrence Lessig (Stanford) and Timothy Wu (Columbia) on August 22, 2003, urging that the FCC adopt a network neutrality rule. The Lessig/Wu comment is also discussed in the story titled "Cato Study Opposes FCC Imposition of Network Neutrality" in TLJ Daily E-Mail Alert No. 816, January 15, 2004.

Also, the Skype petition relies on Wu's February 15, 2007, paper titled "Wireless Net Neutrality: Cellular Carterfone and Consumer Choice in Mobile Broadband". See, summary and full text [30 pages in PDF]. See also, story titled "Tim Wu Paper Advocates Network Neutrality Mandates for Wireless Broadband Carriers" in TLJ Daily E-Mail Alert No. 1,546, March 5, 2007.

The petition states that "consolidation and the relationship between handset manufacturers and carriers are producing market practices that raise substantial questions about whether consumers are receiving the maximum benefits of wireless competition. For example, carriers are beginning aggressively to influence software and product design to the detriment of consumers."

The petition complains that "carriers are using their considerable influence over handset design and usage to maintain control over and limit subscribers' right to run software communications applications of their choosing. Instead of carrying subscribers' messages indifferent to content, carriers have exerted more and more control over the say consumers access the mobile Internet."

It elaborates that "Carriers are doing so, moreover, in violation of the Commission's Carterfone principle and the strictures of the Commission's original order permitting the bundling of consumer equipment and wireless service. The Commission should act now to enforce Caterfone and unlock the full benefits of wireless price competition and innovation."

Carrier Practices. The Skype petition identifies numerous practices by wireless carriers. For example, it complains about carriers' terms of service (TOS) for their customers.

It states that "Today, the major U.S. wireless carriers offer, or will soon offer, some form of 3G Internet access. However, the largest wireless operators include in their terms of service explicit limitations that make it impossible for consumers to use the full features of 3G devices to access and utilized applications and services of their choosing. These terms of service typically prohibit the use of the 3G service for VOIP applications such as Skype."

It states that the AT&T/Cingular TOS states the following: "Prohibited use include ... Voice over IP". The petition adds that Verizon's TOS prohibits "host computer applications". These restrictions, Skype argues, go beyond protecting the network from harm.

Skype also complains about disabling of Wi-Fi capability. For example, it asserts that Nokia offered its E62 smartphone in Europe with Wi-Fi capability, but when it released its US version, the E61, there was not Wi-Fi capability. The petition alleges that the purpose of this is to prevent consumers from running a VOIP application on the device, and using Wi-Fi hotspots to engage in voice communications. The petition alleges that this device strip down is an example how a carrier (Cingular, now AT&T) exercised control over devices.

Skype also complains in its petition about a similar disabling of Bluetooth data transfer capability.

It also complains about carriers' locking handsets to a particular service.

And finally, Skype's petition complains about software development. The petition states that "In stark contrast to the open development standards that exist on the Internet, wireless carriers have exerted control over devices as well as the mobile operating systems upon which they run. Many have institute an elaborate set of application locks that make running unaffiliated applications like Skype difficult if not impossible."

Request for Relief. Skype requests in this petition that the FCC "make unmistakably clear that Carterfone will be enforced in the wireless industry, to initiate a proceeding to evaluate wireless carrier practices in light of Carterfone, and to create an industry-led mechanism to ensure the openness of wireless networks. Doing so will ensure both that consumers retain a right to run the applications of their choosing and attach all non-harmful devices to the wireless network. Finally, Commission involvement will ensure that carriers cannot use illegitimate network management practices as an excuse for otherwise anti-consumer behavior."

Wireless Carrier's Reaction. Steve Largent, head of the CTIA, responded in a release that "Skype's self-interested filing contains glaring legal flaws and a complete disregard for the vast consumer benefits provided by the competitive marketplace. Skype's ``recommendations´´ will freeze the innovation and choice hundreds of millions of consumers enjoy today. The call for imposing monopoly era Carterfone rules to today's vibrant market is unmistakably the wrong number."

FCC Grants Qwest Petition for Forbearance

2/20. The Federal Communications Commission (FCC) announced, but did not release, an order that conditionally grants in part and denies in part the petition for forbearance filed by Qwest Communications International seeking relief from statutory and regulatory obligations that apply to Qwest’s provision, on an integrated basis, of in-region, interstate, interLATA telecommunications services.

This forthcoming order conditionally grants forbearance to allow Qwest to provide long distance services on an integrated basis and subject to non-dominant carrier regulations.

The FCC released a Public Notice [6 pages in PDF] that describes this forthcoming order. This is DA 07-12 in WC Docket No. 05-333.

The FCC wrote in this notice that "In order to avoid dominant carrier regulation of its in-region, interstate, interLATA services, Qwest currently must provide these services through separate affiliates that meet the requirements of section 272 of the Communications Act and the Commission’s implementing rules. The Commission’s Order conditionally allows Qwest to provide these services through its BOC or through other Qwest affiliates that do not comply with section 272 or the Commission’s rules implementing that section, without those services becoming subject to dominant carrier regulation." (Footnote omitted.)

FCC Commissioners Jonathan Adelstein and Michael Copps wrote in a joint concurring statement [PDF] that they support the order because the FCC "must take into account the rapidly changing long distance market and the unique competitive position of the petitioner", but that they merely concur because "we remain concerned that the Commission has not completed its industry-wide review of these issues and does not have in place a comprehensive mechanism for monitoring changes in the marketplace (e.g., in the long distance, wireless, and access markets) that would enable the Commission to reliably make decisions in this area." (Parentheses in original.)

Qwest's Gary Lytle stated in a release that "With this historic, unanimous vote, the FCC recognized that competition in Qwest's service territory is thriving. We applaud the FCC for freeing us from legacy requirements imposed on our long-distance service that had hindered our ability to deliver service to customers."

Lytle added that "Consumers benefit from the robust communications marketplace where cable, wireless, VoIP and other long-distance providers compete for their business. Residential, government, and business customers will realize improved services and cost savings as a result."

Randy May of the Free State Foundation, a group that advocates free markets and deregulation, wrote in a release that this decision is appropriate, and that the FCC should use its forbearance authority more often.

May added this: "doesn't the notion of having a plethora of regulatory requirements based on a distinction between ``long distance´´ and ``local´´ services seem outdated in an era when people increasingly buy buckets of minutes priced irrespective of distance? Not only do the cellular, cable, and VoIP providers sell plans with buckets of ``anywhere´´ minutes, so do the telephone companies. Most people under thirty don't even know what you mean if you say, ``I'm going to make a long distance call.´´"

SEC Files and Settles Complaint Against Veritas Software

2/20. The Securities and Exchange Commission (SEC) filed a civil complaint [PDF] in U.S. District Court (DC) against Veritas Software alleging Section 10b fraud, and other violations of federal securities laws, in connection with its alleged inflated reporting of revenues.

The SEC simultaneously announced in a release that it settled the case with Veritas. In this settlement, Veritas admits no wrong doing, pays no fine, and merely consents to entry of a judgment enjoining it from violating federal securities laws.

The complaint alleges that Veritas "artificially inflated reported revenues in connection with a $20 million round-trip transaction with America Online, Inc. ("AOL") and smaller round-trip transactions with two other Internet companies in 2000. In addition, to produce what it believed were exceptional or "museum quality" financial results, Veritas systematically manipulated its financial results through 2002 by (a) periodically recording and maintaining excess accrued liabilities or cushions in its accrual accounts; (b) cutting off professional service revenue upon reaching internal targets; and (c) inflating its deferred revenue balance."

It adds that Veritas reported materially false and misleading financial results in periodic reports filed with the SEC.

The four count complaint alleges:

• fraud in violation of Section 10b of the Exchange Act, and rule 10b-5 thereunder, and Section 17 of the Securities Act.
• reporting violations under of Section 13 of the Exchange Act, and rules thereunder.
• record keeping violations under Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and rules thereunder.
• aiding and abetting fraud in violation of Section 10b of the Exchange Act, and rule 10b-5 thereunder.

This case is Securities and Exchange Commission v. Veritas Software Corporation, U.S. District Court for the District of Columbia, D.C. No. 1:07CV00364, Judge Ricardo Urbino presiding.

District Court Holds that Injury in Fact is a Prerequisite for Standing in Lost Data Case

2/20. The U.S. District Court (DC) issued a Memorandum Opinion [17 pages in PDF] in Randolph v. ING Life Insurance and Casualty Company, a case regarding standing to sue for lost data.

Summary. The District Court held that it lacks jurisdiction over a purported class action against an insurance company alleging invasion of privacy and negligence in connection with the loss of a laptop computer containing personal information.

The District Court held that the plaintiffs lack standing because they failed to allege in their complaint a cognizable injury in fact, and therefore, the court lacks jurisdiction.

The opinion suggests that actual identity theft would be an injury in fact, but that increased likelihood of becoming a victim of identity theft is not injury in fact. The plaintiffs in this case only alleged the latter.

The District Court's ruling is based upon its application of Article III, Section 2, of the Constitution, which provides that "The judicial Power shall extend to all Cases ... Controversies ..."

There are now several recent federal District Court opinions holding that injury in fact must be alleged in a lost data case.

It should also be noted that this is a lost laptop case, and that the main case relied upon by the District Court was similar in nature. The outcome might have been different if this had been a targeted data theft case. In this case a house burglar stole an employee's laptop. There is no allegation that the laptop was targeted for its data. Perhaps this should be contrasted with cases in which identity thieves, or criminal data brokers, steal for the purpose of obtaining personal data for illegal uses.

Background. ING Life Insurance and Casualty Company (ING), among other things, provides investment advice, administrative services, and record keeping to participants in the District of Columbia 457 Deferred Compensation Plan.

Regina Randolph and six other individual plaintiffs are current or former District of Columbia employees and participants in the plan. Two are currently police officers. The plaintiffs provided personally identifying information, including names, addresses and social security numbers, to ING.

A laptop computer containing their personal information was stolen from the home of an ING employee. ING disclosed the theft.

The District Court wrote that the "Plaintiffs do not allege that the burglary was anything other than a common burglary or that it was undertaken for the purpose of accessing Plaintiffs' Information." It added that "none of the Plaintiffs assert that they have actually been the victim of identity theft. Instead, Plaintiffs allege that the disclosure of their Information raises concerns about Plaintiffs' safety because, for example, Plaintiffs' Information could be used to find out where police personnel live."

The plaintiffs alleged in their complaint that they "have been exposed to a risk of substantial harm and inconvenience".

Randolph and six others filed a complaint in the Superior Court for the District of Columbia alleging two counts of invasion of privacy, one count of gross negligence, and one count of negligence. The complaint did not plead breach of fiduciary duty. The plaintiffs seek class action status. ING removed the action to the U.S. District Court (DC).

ING sought dismissal pursuant to Federal Rule of Civil Procedure (FRCP) 12(b)(1) and 12(b)(6). FRCP 12(b)(1) pertains to "lack of jurisdiction over the subject matter", while FRCP 12(b)(6) pertains to "failure to state a claim upon which relief can be granted".

District Court Opinion. The District Court remanded the case to the Superior Court pursuant to FRCP 12(b)(1). The District Court did not address the merits of the FRCP 12(b)(6) motion.

The court relied on the leading Supreme Court cases, including Allen v. Wright, 468 U.S. 737 (1984) and Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992), for general principles of standing.

The District Court reasoned that "As an Article III court, this Court's judicial power is limited to adjudicating actual ``cases´´ and ``controversies.´´" The District Court wrote that the case or controversy requirement encompasses the principle of standing, and that standing is an "irreducible constitutional minimum".

It continued that to satisfy the standing requirements, a plaintiff must establish that he or she has (1) suffered an injury in fact, an invasion of a legally protected interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical, (2) which is fairly traceable to the challenged act, and (3) is likely to be redressed by a favorable decision.

It added that to ground Article III standing, the injury alleged cannot be conjectural or hypothetical, remote, speculative, or abstract. It must be certainly impending.

The Court wrote that the "Plaintiffs in the instant action allege that they ``have been placed at a substantial risk of harm in the form of identity theft.´´ ... They fail, however, to allege any injury that is ``actual or imminent, not conjectural or hypothetical.´´ ... Plaintiffs clearly allege that their Information was stolen by a burglar, but they do not allege that the burglar who stole the laptop did so in order to access their Information, or that their Information has actually been accessed since the laptop was stolen. Plaintiffs’ allegations therefore amount to mere speculation that at some unspecified point in the indefinite future they will be the victims of identity theft. However, to ground Article III standing, ``the injury alleged cannot be conjectural or hypothetical, remote, speculative, or abstract. Rather it must be certainly impending.´´ ... Plaintiffs' claims that they are subject to an increased risk of identity theft and inconvenience as a result of the burglary therefore fail to allege an injury in fact." (Citations omitted.)

The District Court added that purchase of credit monitoring services, or other protection efforts, is not injury in fact either.

Also, while the plaintiffs did not plead breach of fiduciary duty, the District Court added that even if they had, they would still lack standing for failure to plead injury of fact.

This is a District Court opinion. There have also been several other recent District Court opinions (which are cited in the Memorandum Opinion) that have held that injury in fact is a prerequisite for standing in lost data cases. However, the Appeals Courts have yet to address this issue.

In addition, because this case was previously removed from the Superior Court for the District of Columbia to the District Court, and the District Court found that it lacks jurisdiction, it remanded the case to the Superior Court, rather than dismiss it. The case returns to the Superior Court, where the plaintiffs originally filed the case.

Article III defines the jurisdiction of the federal courts, not the state courts. However, the District of Columbia is not a state, and the Constitutional principles of standing apply in the Superior Court. Thus, if the Superior Court applies the Constitutional principles of standing the same way as the District Court, it will dismiss. But then, judges do not always apply the same principles in the same way.

ING is represented by Alan Charles Raul, Juan Morillo, and Stephen Nickelsburg of the Washington DC office of the law firm of Sidley Austin.

This case is Regina Randolph, et al. v. ING Life Insurance and Casualty Company, U.S. District Court for the District of Columbia, D.C. No. 06-1228 (CKK), Judge Colleen Kotelly presiding.

Supreme Court News

2/20. The Supreme Court issued an order in Credit Suisse Sec. (USA) v. Glen Billing, Sup. Ct. No. 05-1157. See, Order List [66 pages in PDF] at page 38. The order grants numerous motions to file amicus curiae briefs. The Office of the Solicitor General (OSG) wrote in its brief that the issues are as follows: "1. Whether an antitrust complaint predicated on alleged collusive activity in the securities markets must, in order to survive a motion to dismiss on grounds of implied antitrust immunity, set forth allegations sufficient to support a reasonably grounded expectation that the plaintiff's claims do not rest on collaborative activities that are either permitted under the securities laws or inextricably intertwined with such permissible activities. 2. Whether conduct that is prohibited under the regulatory scheme governing public offerings of securities is categorically immune from liability under the federal antitrust laws because of the extensive regulatory authority exercised by the Securities and Exchange Commission over such conduct." See also, Supreme Court docket.

2/20. The Supreme Court denied certiorari in Illinois Public Telecommunications Association v. Illinois Commerce Commission, Sup. Ct. No. 06-543. See, Order List [66 pages in PDF] at page 40. This lets stand the November 23, 2005, opinion of the Appellate Court of Illinois, First District. The Supreme Court of Illinois denied leave to appeal on May 24, 2006.

2/20. The Supreme Court denied certiorari in Telekom SA Ltd. v. Telcordia Technologies, Inc., Sup. Ct. No. 06-663. See, Order List [66 pages in PDF] at page 40. This lets stand the August 14, 2006, opinion [PDF] of the U.S. Court of Appeals (3rdCir), App. Ct. No. 05-1653. See also, Supreme Court docket.

2/20. The Supreme Court denied rehearing in M2 Software, Inc. v. M2 Communications, Inc., Sup. Ct. NO. 06-515. See, Order List [66 pages in PDF] at page 65, and Supreme Court docket. The Supreme Court denied also denied mandamus in In Re M2 Software, Inc., Sup. Ct. No. 06-846, at page 64. See, Supreme Court docket.

People and Appointments

2/20. President Bush announced his intent to appoint Dennis Carlton to be a member of the Antitrust Modernization Commission (Government Representative). See, White House release.

More News

2/20. The Government Accountability Office (GAO) released a report [79 pages in PDF] titled "Telecommunications: Issues Related to the Structure and Funding of Public Television".

2/20. The U.S. Court of Appeals (FedCir) issued its opinion [14 pages in PDF] in MyMail v. AOL, affirming the District Court's judgment of non-infringement. MyMail is the assignee of U.S. Patent No. 6,571,290, titled "Method and apparatus for providing fungible intercourse over a network". It filed a complaint in U.S. District Court (EDTex) against AOL, Earthlink, Prodigy and other internet service providers alleging patent infringement. The District Court granted summary judgment of non-infringement. The Court of Appeals affirmed the judgment of the District Court. This case is MyMail, Ltd. v. America Online, Inc., et al., U.S. Court of Appeals for the Federal Circuit, App. Ct. Nos. 06-1147 and 06-1172, appeals from the U.S. District Court for the Eastern District of Texas, D.C. No. 6:04-cv-00189-LED, Judge Leonard Davis presiding.

XM and Sirius Announce Plans to Merge

2/19. XM Satellite Radio and Sirius Satellite Radio announced that they have "entered into a definitive agreement, under which the companies will be combined in a tax-free, all-stock merger of equals". See, XM release and Sirius release.

FCC Chairman Kevin Martin stated in a release that "Obviously the Commission will evaluate any transaction filed to make a determination whether or not approval would be in the public interest. The hurdle here, however, would be high as the Commission originally prohibited one company from holding the only two satellite radio licenses. The companies would need to demonstrate that consumers would clearly be better off with both more choice and affordable prices."

Mel Karmazin (CEO of Sirius) and Gary Parsons (Chairman of XM) held a joint conference call on February 20, 2007. They argued that the proposed merger is in the best interests of shareholders and consumers, and should be approved by regulators.

Karmazin said that within 20 days of signing the two would file a Hart Scott Rodino notice with the Department of Justice. He added that within 25 days of signing the two would file an application with the FCC. The two received spectrum licenses from the FCC ten years ago. At that time the FCC provided that there would be two satellite radio competitors.

Karmazin and Parsons argued that much has changed in the past ten years that warrants reconsideration by the FCC. They also argued that the merger is not anti-competitive and would benefits consumers. They do not view this as a two to one merger. Rather, they argued that XM and Sirius are two small players in the very large market for audio entertainment.

The two also used presentation slides [PDF] during the conference call. Karmazin argued that XM and Sirius compete with iPods, MP3 players, internet radio, cell phones, WiMax, WiFi, MediaFlo, and others. (See, page 15 of slides.) He said that XM and Sirius are now "part of a highly competitive and rapidly evolving marketplace", and that the merger would enable them to compete in this marketplace.

He said that it would be a bad business model for satellite radio providers to target each others' customers. There are not enough of them. Rather, he said, they are targeting "the ninety percent of the people who are not subscribers to satellite radio".

Parsons said that consumers would benefit by having more channel capacity and more programs from one provider. He said that the companies would benefit from reduced costs. He also stated that the merged company would have greater reach, thus making it more attractive to advertisers.

He said that currently there are about 14 Million satellite radio subscribers. In contrast, there are 237 Million car radios, 230 Million PCs, 39 Million iPods, and 209 Million wireless subscribers.

Adam Thierer of the Progress and Freedom Foundation (PFF) wrote a short paper advocating regulatory approval of the merger.

He wrote that satellite radio faces both direct and indirect competition. The direct competitors include CDs; AM and FM radio; iPods, MP3 players and digital music stories; podcasts; online file sharing; internet radio; and cable radio. The indirect competitors include "broadcast TV, cable TV, satellite TV, DVDs, video-on-demand, online newspapers, the endless array of magazines, Internet websites, search engines, computer software, video games".

Thierer argued that "it was always questionable whether the satellite radio sector could sustain two healthy competitors".

Now, iPods and MP3 players represent "a very serious threat to satellite radio. And once the iPhone and the Zune phone hit the market, satellite radio could be in even more trouble." Thierer concluded that "hopefully this merger will ensure that satellite radio remains a vibrant competitor in our new media marketplace for years to come."

Karmazin also stated in the teleconference that the proposed merger will not affect negotiations with the Recording Industry Association of America (RIAA) over royalties.

The House and Senate are in recess this week. Karmazin added that the satellite radio providers will visit Congressional offices next week to explain why the proposed merger is in the best interests of consumers.

The National Association of Broadcaster's (NAB) Dennis Wharton stated in a release "Given the government's history of opposing monopolies in all forms, NAB would be shocked if federal regulators permitted a merger of XM and Sirius. It bears mentioning that regulators summarily rejected a similar monopoly merger of the nation's only two satellite television companies -- DirecTV and DISH Network -- just a few years back."

Wharton continued that "When the FCC authorized satellite radio, it specifically found that the public would be served best by two competitive nationwide systems. Now, with their stock prices at rock bottom and their business model in disarray because of profligate spending practices, they seek a government bail-out to avoid competing in the marketplace."

"In coming weeks, policymakers will have to weigh whether an industry that makes Howard Stern its poster child should be rewarded with a monopoly platform for offensive programming. We're hopeful that this anti-consumer proposal will be rejected", said Wharton.

However, the NAB is offering two inconsistent arguments regarding satellite radio. In the present matter, it argues that the relevant market is satellite radio, and that the proposed merger would be a two to one transaction that would harm consumers in the satellite radio market. On the other hand, it has also argued that both terrestrial and satellite radio compete in the same audio entertainment market, and that consumers would be protected by limiting the types of content that satellite radio is allowed offer.

For example, the NAB published a statement in its web site during the 109th Congress regarding competition between terrestrial and satellite radio in the audio entertainment market. It wrote that "With 96% of Americans listening to free, local radio once a week and three-quarters tuning in daily -- and satellite occupying less than 1% of the market -- hometown radio continues to be the dominant source for compelling audio entertainment."

It wrote also that the "NAB urges Members of Congress to cosponsor H.R. 998 and S. 2418 and support their enactment". These were bills in the 109th Congress. The latest version of this bill, HR 983, was introduced on February 12, 2007. See, related story in this issue titled "Green and Pickering Reintroduce Bill to Protect Terrestrial Radio from Satellite Radio Competition".

Also, Gigi Sohn, head of the Public Knowledge (PK), wrote in the PK web site "How is it that the National Association of Broadcasters, which is seeking regulatory relief from current media ownership caps, has the gumption to criticize the proposed merger of XM Satellite Radio and Sirius Satellite Radio?"

Sirius is represented in this matter by the Washington DC law firm of Wiley Rein. FCC Chairman Martin previously worked for this firm. XM is represented by the law firms of Skadden Arps, Jones Day, and Latham & Watkins.

Broadband Regulation Bill Filed in Maryland Legislature

2/19. In the state of Maryland's General Assembly, on February 7, 2007, Del. Herman Taylor (D-Montgomery County) and others introduced HB 1069, a state bill pertaining to broadband access and network neutrality.

This bill states that "THE GENERAL ASSEMBLY FINDS (1) THAT A BROADBAND PROVIDER THAT OFFERS BROADBAND INTERNET SERVICE TO THE PUBLIC SHOULD NOT PROVIDE OR SELL TO INTERNET CONTENT, APPLICATION, OR SERVICE PROVIDERS, INCLUDING ANY AFFILIATE OF A BROADBAND SERVICE COMPANY, ANY SERVICE THAT PROVIDES, DEGRADES, OR GIVES PRIORITY TO ANY PACKET SOURCE OVER THAT COMPANY’S BROADBAND INTERNET ACCESS SERVICE BASED ON ITS SOURCE, OWNERSHIP, OR DESTINATION".

The bill then mandates the filing of detailed quarterly reports by broadband access providers regarding the services which they offer, broken down to the zip code plus four level.

Art Brodsky of the Public Knowledge (PK) wrote in the PK web site that this bill "shows there is still a state role to play".

On February 19, the Free State Foundation (FSF) released a report [PDF] titled "Net Neutrality Is A Federal Issue". The author is James Speta, a professor at Northwestern University School of Law.

While "Moving regulatory fights from federal to state regulatory fora (or vice versa) has a venerable history in telecommunications", writes Speta, "network neutrality is the quintessential federal issue".

He argues that "applications and content on the Internet are distributed nationally -- and internationally. Almost never will a user access only in-state websites. Network neutrality regulation addresses the relationship between Internet access providers on the one hand and applications and content providers on the other. As a matter of telecommunications doctrine, therefore, network neutrality is a federal issue".

He also argues that "Internet access providers themselves have national footprints, design their networks based on national business practices, and advertise in national media. As a matter of policy, any fragmentation caused by different state network neutrality rules would introduce inefficiencies".

Speta concludes that "Federal preemption is not only the current policy as a doctrinal matter, it is the best policy for broadband regulation overall."

Panel Debates M2Z Proposal

2/16. The Progress and Freedom Foundation (PFF) hosted a panel discussion titled "Allocating the Electromagnetic Spectrum: A Discussion of the M2Z Proposal".

The speakers were Thomas Lenard (PFF, moderator), Robert Atkinson (Information Technology and Innovation Foundation), Chris Guttman-McCabe (CTIA -- The Wireless Association), John Muleta (M2Z Networks), and Lawrence White (New York University). It was attended by representatives of companies, industry groups, Congressional offices, the Federal Communications Commission (FCC), and the National Telecommunications and Information Administration (NTIA).

The discussion focused on M2Z's proposed method of obtaining the requisite spectrum license from the FCC. Muleta, who was recently the Chief of the FCC Wireless Bureau, also discussed the nature of the service that would be offered by M2Z, and the benefits to the public that would flow there from.

The CTIA's Guttman-McCabe roundly criticized the notion of giving away spectrum without an auction. Many of the CTIA's members would like to bid in a competitive auction for use of spectrum.

White also criticized the M2Z proposal. He argued that spectrum is like government owned real estate. The government does not give away oil and gas leases, or timber leases, said White. It should not give away spectrum licenses either.

M2Z proposes to use the 2155-2175 MHz band to provide wireless internet access. M2Z wants the spectrum for free, and without FCC rules. In return, M2Z proposes to offer free service for consumers and law enforcement at 384 kbps downstream and 128 kbps upstream, and pay 5% of its revenues from subscribers to the federal government. See also, story titled "FCC Accepts for Filing M2Z's Application for Free Spectrum" in TLJ Daily E-Mail Alert No. 1,532, February 5, 2007.

White also argued that the M2Z proposal represents a return to the command and control model. It is both user and use specified.

Muleta said that M2Z promises to make its free 384 mbps service available to 95% of the US population within 10 years.

Atkinson questioned whether in 10 years 384 mbps service will be considered fast. He also expressed concern that M2Z would roll out first in high density, high income areas, and that by the time it provides broadband service to rural areas, other broadband providers will already be there.

Atkinson also noted that the M2Z service would violate some of the network neutrality principles. For example, it would block peer to peer.

M2Z would make money by selling access at faster rates. It would also make money from advertising.

TLJ spoke with Muleta (at right) after the event. He explained that the M2Z service would enable localized search results, and paid localized ads. He said that wireless access devices provide a network with GPS based location information. He pulled a wireless device out of his pocket and said that the network knows where it is.

In contrast, he said that wireless service providers do not now provide Google with location information. Hence, M2Z, but not Google, could provide information about nearby pizza shops to someone who does a search for pizza.

Muleta also said that the free level of service would be anonymous. Neither M2Z nor any reseller would have names, billing addresses, or credit card or other payment information for free users. As a free service, this would not be necessary. TLJ asked if criminals would migrate to this network. Muleta said that there are already anonymous wireless services. He added that M2Z would be subject to CALEA obligations.

Cyren Call. This event did not focus on the Cyren Call proposal. However, it bears some similarities to the M2Z proposal. It too seeks spectrum outside of the auction process.

On Friday, February 23 at 12:00 NOON, the New America Foundation (NAF) will host a panel discussion on Capitol Hill titled "Wireless Future: What is the Best Way to Bring Ubiquitous Broadband Access to All Americans?".

The speakers at that event will be Muleta (M2Z), Guttman-McCabe (CTIA), Morgan O'Brien (Cyren Call), Ben Scott (Free Press), John Scrivner (Wireless Internet Service Providers Association), and Michael Calabrese (NAF). Lunch will be served. See, NAF notice.

On April 27, 2006, Cyren Call Communications Corporation filed a petition for rulemaking with the FCC seeking reallocation of 30 MHz of commercial spectrum in the 747-762 MHz and 777-792 MHz bands, and assignment of that spectrum without auction for deployment of a nationwide broadband network that would provide first priority use to public safety users.

Section 337(a) of the Communications Act of 1934 requires that this spectrum be auctioned. Hence, on November 3, 2006, the FCC denied this petition, "without prejudice, leaving the docket open". See, Public Notice [2 pages in PDF] (DA 06-2278). This proceeding is RM No. 11348.

Cyren Call now seeks Congressional action that would enable it to acquire this spectrum outside of the auction process.

People and Appointments

2/16. Nick Kolovos will join the National Cable & Telecommunications Association (NCTA) as VP, Government Relations, effective March 12, 2007. He will report to Steve Vest, SVP for Government Relations. Kolovos previously worked for the CTIA - The Wireless Association. He has also worked for Rep. Anna Eshoo (D-CA), and at the Federal Communications Commission's (FCC) Wireless Bureau (WB).

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2/16. The Alliance for Public Technology (APT) released a report [PDF] titled "Achieving Universal Broadband: Policies for Stimulating Deployment and Demand". It states that a national goal should be to have 50% of U.S. citizens "connected to broadband services with 10 mbps downstream and 1 mbps upstream capacity by the end of 2010". It argues that "policy-makers have failed to put into place comprehensive telecommunication policies that promote broadband networks and services throughout the country, especially to underserved communities". Among the APT's recommendations are that the government "Require Universal Service Fund recipients to offer broadband services" and "Provide tax incentives, low interest loans, and grants for broadband deployment".

2/16. U.S. Patent and Trademark Office (USPTO) published a notice in the Federal Register that announces, describes, recites, and sets the comment deadline for proposed rule changes. The notice states that the USPTO proposes to change its rules "to conform them to certain amendments made to the Regulations under the Patent Cooperation Treaty (PCT) that will take effect on April 1, 2007. These amendments will result in the addition of a mechanism to the PCT system whereby applicants may request that the right to claim priority be restored in applications that meet certain requirements. In addition, these amendments will provide a means for applicants to insert a missing portion of an international application without the loss of the international filing date. These amendments also will clarify the circumstances and procedures under which the correction of an obvious mistake may be made in an international application. Finally, the Office is proposing to revise the search fee for international applications." The deadline to submit comments is March 19, 2007. See, Federal Register, February 16, 2007, Vol. 72, No. 32, at Pages 7583-7587.

2/16. The Government Accountability Office (GAO) provided prepared testimony [40 pages in PDF] for the House Homeland Security Committee titled "Homeland Security: US-VISIT Has Not Fully Met Expectations and Longstanding Program Management Challenges Need to Be Addressed".

2/16. The Los Angeles Economic Development Corporation (LAEDC) released a report [40 pages in PDF] titled "A False Bargain: The Los Angeles County Economic Consequences of Counterfeit Products".

Go to News from February 11-15, 2007.