TLJ News from August 26-31, 2011

DOJ Files Complaint to Block AT&T Acquisition of T-Mobile USA

8/31. The Department of Justice's (DOJ) Antitrust Division filed a complaint [25 pages in PDF] in the U.S. District Court (DC) against AT&T, T-Mobile USA and Deutsche Telekom that seeks an injunction against AT&T's acquisition of T-Mobile USA on the grounds that it would would substantially lessen competition in violation of Section 7 of the Clayton Act, which is codified at 15 U.S.C. § 18. See also, DOJ release.

Wayne Watts, General Counsel of AT&T, stated in a release that "we intend to vigorously contest this matter in court".

Watts said that "We are surprised and disappointed by today's action, particularly since we have met repeatedly with the Department of Justice and there was no indication from the DOJ that this action was being contemplated."

He argued that this merger would "Help solve our nation's spectrum exhaust situation and improve wireless service for millions", and "Allow AT&T to expand 4G LTE mobile broadband to another 55 million Americans", and would therefore "Result in billions of additional investment and tens of thousands of jobs". He concluded that "We remain confident that this merger is in the best interest of consumers and our country, and the facts will prevail in court."

Summary of Complaint. The complaint characterizes this as a 4 to 3 merger. It states that AT&T, Verizon, Sprint and T-Mobile USA "provide more than 90 percent of service connections to U.S. mobile wireless devices", and that "regional competitors often lack a nationwide data network, nationally recognized brands, significant nationwide spectrum holdings, and timely access to the most popular handsets".

The complaint alleges that the relevant product markets are "Mobile wireless telecommunications services" and "mobile wireless telecommunications services provided to enterprise and government customers".

The complaint also alleges that "local areas may be considered relevant geographic markets for mobile wireless telecommunications services". The complaint lists 97 local markets (cellular market areas or CMAs) "in which the transaction likely would substantially lessen competition for mobile wireless telecommunications services and each constitutes a relevant geographic market under Section 7 of the Clayton Act".

However, it adds that "it is appropriate to consider the competitive effects of the transaction at a national level". The complaint elaborates that "whereas CMAs are appropriate geographic markets from the perspective of individual consumer choice, from a seller's perspective, the Big Four carriers compete against each other on a nationwide basis and AT&T’s acquisition of T-Mobile will have nationwide competitive effects across local markets".

The complaint alleges that for enterprise and government customers, "the United States is a relevant geographic market".

The complaint further states that T-Mobile USA "places important competitive pressure on its three larger rivals, particularly in terms of pricing, a critically important aspect of competition. AT&T’s elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market."

It adds that "T-Mobile's investment in an advanced high-speed network and its innovations in technology and mobile wireless telecommunications services have provided, and continue to provide, consumers with significant value. Thus, unless this acquisition is enjoined, customers of mobile wireless telecommunications services likely will face higher prices, less product variety and innovation, and poorer quality services due to reduced incentives to invest than would exist absent the merger."

The complaint requests that "AT&T's proposed acquisition of T-Mobile be adjudged to violate Section 7 of the Clayton Act" and that the defendants "be permanently enjoined from and restrained from carrying out" the merger.

Statute. Section 7 of the Clayton Act provides, in part, that "No person engaged in commerce or in any activity affecting commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no person subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another person engaged also in commerce or in any activity affecting commerce, where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly."

James ColeStatements Regarding DOJ Action. James Cole (at right), the Deputy Attorney General, wrote in a statement that the DOJ took this action because "the combination of AT&T and T-Mobile would result in tens of millions of consumers all across the United States facing higher prices, fewer choices and lower quality products for their mobile wireless services."

Sharis Pozen, the acting Assistant Attorney General in charge of the DOJ's Antitrust Division, wrote in a statement that "T-Mobile has been an important source of competition among the national carriers through innovation and quality enhancements. For example, T-Mobile rolled-out the first nationwide high-speed data network using advanced HSPA+ technology and the first handset using the Android operating system. It has also been an important source of price competition in the industry. Unless this merger is blocked, competition and innovation in the mobile wireless market, in the form of low prices and innovative wireless handsets, operating systems, and calling plans, will be diminished -- and consumers will suffer."

Harold Feld of the Public Knowledge (PK) stated in a release that "Fighting this job-killing merger is the best Labor Day present anyone can give the American people. AT&T's effort to recreate 'Ma Cell' by holding rural broadband hostage and threatening American jobs deserves nothing but scorn. The FCC should move as quickly as possible to follow the lead of the Department of Justice and reject the merger."

Craig Aaron, head of the Free Press, praised the DOJ's action in a release and added that "AT&T has already invested untold millions in lobbying and campaign contributions, and it is going to play every card in the deck to try to get this merger done."

FCC Review. The Federal Communications Commission (FCC), which is conducting a redundant antitrust merger review, has not yet made a determination.

FCC Chairman Julius Genachowski released a statement. He asserted that "Competition is an essential component of the FCC’s statutory public interest analysis, and although our process is not complete, the record before this agency also raises serious concerns about the impact of the proposed transaction on competition. Vibrant competition in wireless services is vital to innovation, investment, economic growth and job creation, and to drive our global leadership in mobile. Competition fosters consumer benefits, including more choices, better service and lower prices."

The FCC does not have authority under Section 7 of the Clayton Act. It invented its antitrust merger review process shortly after enactment of the Telecommunications Act of 1996 by leveraging its authority to approve license transfers incident to a merger.

Were the FCC to issue a final order that seeks to block the merger, AT&T might seek judicial review of that order on multiple grounds, including that the FCC lacks statutory authority to conduct antitrust merger reviews.

This case is USA v. AT&T, Inc., T-Mobile USA, Inc. and Deutsche Telekom AG, U.S. District Court for the District of Columbia.

People and Appointments

8/31. U.S. Trade Representative (USTR) Ron Kirk nominated Thomas Graham and John Greenwald to be members of the World Trade Organization's (WTO) Appellate Body. See, OUSTR release.

More News

8/31. The Wall Street Journal published a story titled "U.S. Probes Oracle Dealings". The Department of Justice (DOJ) and Securities and Exchange Commission (SEC) are investigating possible violations of the Foreign Corrupt Practices Act (FCPA), which is codified at 15 U.S.C. §§ 78dd-1, et seq., in connection with Oracle's dealings with governments in Africa.

8/31. In July the Senate Judiciary Committee (SJC) announced that its Subcommittee on Antitrust, Competition Policy and Consumer Rights will hold a hearing on September 21, 2011, titled "The Power of Google: Serving Consumers or Threatening Competition". The SJC has not yet released a witness list. On August 31, John Simpson of Consumer Watchdog sent a letter to Sen. Herb Kohl (D-WI) and Sen. Mike Lee (R-UT), the Chairman and ranking Republican of the Subcommittee, urging them "to call Google CEO Larry Page to testify", because of "Recent revelations that Page knew of and condoned Google's criminal violation of laws prohibiting the importation of drugs to U.S. consumers by Canadian pharmacies". Simpson wrote that this "raises real questions about how seriously Google and its executives take other legal responsibilities, including "competition and antitrust law". Simpson also asked the SJC to subpoena "emails and documents" from the Department of Justice's (DOJ) file on its investigation of Google's drug import advertising.

10th Circuit Rules in SCO Group v. Novell

8/30. The U.S. Court of Appeals (10thCir) issued an Order and Judgment in SCO Group v. Novell, a case regarding copyright ownership of early versions of the UNIX operating system.

The Court of Appeals affirmed the judgment of the U.S. District Court (DUtah) -- that Novell owned the copyrights, and that Novell retained rights in the licenses which included the right to prevent SCO from terminating a UNIX license issued before the transfer of UNIX to SCO.

Back in 1995, a predecessor of SCO acquired from Novell, under an Asset Purchase Agreement (APA), certain assets from Novell. The two also executed a Technology Licensing Agreement (TLA) granting Novell the right to use technology included in the transferred assets and derivatives. The meaning and consequences of this APA and TLA have been at issue in this action.

SCO Group (which was previously Caldera Systems, Inc.) began this long running litigation by filing a complaint against Novell in state court in 2004. SCO alleged slander of title. See, story titled "SCO Sues Novell for Slander of Title" in TLJ Daily E-Mail Alert No. 820, January 21, 2004. Novell removed the action to the U.S. District Court (DUtah). SCO amended its complaint, and Novell counterclaimed.

Following cross motions for summary judgment, the District Court issued a Memorandum Decision and Order on August 10, 2007. See, story titled "District Court Rules Novell Owns UNIX Copyrights" in TLJ Daily E-Mail Alert No. 1,621, August 13, 2007.

SCO appealed. See, August 24, 2009 opinion [55 pages in PDF] in SCO Group v. Novell, 578 F.3d 1201, affirming in part, reversing in part, and remanding for trial on remaining issues.

After remand, and trial in March of 2010, the District Court's judgment provided that Novell owned the copyrights, and that Novell retained rights in the licenses which included the right to prevent SCO from terminating a UNIX license issued before the transfer of UNIX to SCO.

SCO brought the present appeal. The Court of Appeals affirmed.

The Court of Appeals also wrote that "This order and judgment is an unpublished decision, not binding precedent."

Michael Jacobs of the law firm of Morrison & Foerster represented Novell in this action.

This case is The SCO Group, Inc. v. Novell, Inc., U.S. Court of Appeals for the 10th Circuit, App. Ct. No. 10-4122, an appeal from the U.S. District Court for the District of Utah, D.C. No. 2:04-CV-00139-TS. Judges O'Brien, Seymour and Holmes presided.

SCO also filed a separate complaint against IBM in 2003 alleging that IBM wrongfully included UNIX code in Linux products. That case is still pending. Novell publicly disputed SCO's claims in that dispute, which resulted SCO filing suit in the present action against Novell for slander of title.

For more on the history of these cases and disputes, see stories titled "SCO Group Delivers Notice to IBM of Termination of UNIX License Agreement" in TLJ Daily E-Mail Alert No. 718, August 14, 2007; "SCO And Novell Continue Argument Over Rights in UNIX Operating System" in TLJ Daily E-Mail Alert No. 676, June 9, 2003; "Novell Asserts Intellectual Property Rights in UNIX Technology" and "German Software Group Threatens to Sue SCO Over Linux Claims", in TLJ Daily E-Mail Alert No. 670, May 30, 2003; and "Microsoft Licenses Technology at Issue in Caldera v. IBM", in TLJ Daily E-Mail Alert No. 669, May 29, 2003.

Attorney General Holder Addresses D Block

8/30. Attorney General Eric Holder gave a speech at the Technologies for Critical Incident Preparedness Conference and Exposition in National Harbor, Maryland, in which he advocated creation of a public safety broadband network.

Eric HolderHolder (at right) said that "we've been able to work in partnership with the White House and the Departments of Homeland Security and Commerce to open a series of discussions concerning the public safety broadband network and the future of the D-Block."

He added that "we will continue to advocate for meaningful, affordable access to radio spectrum when and where you need it. And -- for as long as it takes -- we'll continue to bring policymakers together with leaders from law enforcement, the broader public safety community, and the telecommunications industry to make sure you have access to the resources you need."

People and Appointments

8/30. President Obama congratulated Yoshihiko Noda on his election as Japan's next prime minister. Obama wrote in a statement that "The relationship between the United States and Japan is based on common interests and common values, and I look forward to working with Prime Minister Noda to tackle the broad range of economic and security issues that require our attention."

More News

8/30. The U.S. Patent and Trademark Office (USPTO) announced in a release that it has designated of Davenport Public Library in the state of Iowa as a Patent and Trademark Resource Center (PTRC). The USPTO stated that "As the 81st library in the nationwide network, Davenport marks Iowa's return to the PTRC program and serves as the first center geared away from the ``paper depository´´ concept towards electronic access and training for patent and trademark information."

8/30. Intel Corporation announced in a release that it has formed a wholly owned subsidiary, Intel Federal LLC, and that Dave Patterson is its President.

Copyright Office Issues Section 302 Report

8/29. The Copyright Office (CO) released its report [168 pages in PDF] on possible mechanisms, methods, and recommendations for phasing out the statutory licensing requirements set forth in 17 U.S.C. §§ 111, 119, and 122.

The report recommends that the Congress set a date for the phase out and eventual repeal of the distant signal licenses, but put off to "a later time" repeal of the local signal licenses.

This report was required by Section 302 of  S 3333 [LOC | WW], the "Satellite Television Extension and Localism Act of 2010", or "STELA", which is now Public Law No. 111-175.

The main provisions of the STELA extended the term of the § 119 satellite distant signal statutory license for five years, and modified the § 111 cable statutory license and the § 122 satellite local into local statutory license.

The STELA also addressed the phantom signal problem in the cable license, and provided incentives for satellite television service providers to provide local broadcast programming in all 210 markets in the US. See, story titled "Obama Signs Satellite TV Bill" in TLJ Daily E-Mail Alert No. 2,089, May 28, 2010.

The CO issued a Notice of Inquiry (NOI) on March 3, 2011. See, story titled "Copyright Office Issues STELA Notice of Inquiry" in TLJ Daily E-Mail Alert No. 2,203, March 11, 2011. See also, CO web page with hyperlinks to the 17 initial comments received by the CO, and web page with hyperlinks to the 9 reply comments. The CO also held a hearing on June 10.

Section 302 requires the CO to submit to the Congress within 18 months of enactment a report containing "proposed mechanisms, methods, and recommendations on how to implement a phase-out of the statutory licensing requirements set forth in sections 111, 119, and 122 of title 17, United States Code, by making such sections inapplicable to the secondary transmission of a performance or display of a work embodied in a primary transmission of a broadcast station that is authorized to license the same secondary transmission directly with respect to all of the performances and displays embodied in such primary transmission".

The statute also requires that the report include "any recommendations for alternative means to implement a timely and effective phase-out of the statutory licensing requirements" of these sections, and "any recommendations for legislative or administrative actions as may be appropriate to achieve such a phase-out".

The just released report states that "statutory licensing ... is an artificial construct created in an earlier era. Copyright owners should be permitted to develop marketplace licensing options to replace the provisions of Sections 111, 119 and 122, working with broadcasters, cable operators and satellite carriers, and other licensees, taking into account consumer demands."

It finds that "Business models based on sublicensing, collective licensing and/or direct licensing are largely undeveloped in the broadcast retransmission context, but are feasible alternatives that could emerge in a variety of innovative ways."

It also finds that "The concepts of sublicensing, direct licensing, and collective licensing do not represent the entire universe of possibilities, are not mutually exclusive, and will not remain static. Business models may emerge that incorporate these concepts in part or in combination, and technology will continuously inform the practices of both licensors and licensees."

It recommends that the Congress "announce a date-specific trigger for the phase-out and eventual repeal of the distant-signal licenses, but should leave repeal of the local-signal licenses to a later time. This approach would provide stakeholders with an opportunity to test new business models with the least likely disruption to consumers, and give Congress the advantage of drawing on that experience when considering when and how to address the local-signal licenses."

The report continues that "Before determining the date-specific trigger and transition period for the phase-out of the distant-signal licenses, Congress should evaluate the concerns of stakeholders who operate with limited resources in the broadcast programming distribution chain and evaluate to determine whether special consideration is advisable."

Also, "In selecting the sunset date for the distant-signal licenses, Congress should build in a sufficient transition period, during which cable operators and satellite carriers should be instructed to negotiate with broadcast stations for carriage of the programming on the broadcast signal in cases where said broadcast stations have obtained the rights necessary to retransmit all of the content carried on its signal (provided, however, the broadcast station forgoes its mandatory carriage rights under the must-carry and carry-one carry-all provisions of the Communications Act)." (Parentheses in original.)

Finally, the report states that "Although the statutory licenses at issue are codified in copyright law, they do not operate in a vacuum. Instead, they interact with equally complex provisions of communications law and related regulations. The Copyright Office recommends that Congress consider and, as appropriate, address these provisions in tandem with the recommendations described in this report."

Groups Complain to FCC About BART's Interruption of Wireless Service

8/29. The Public Knowledge (PK), Center for Democracy and Technology (CDT), Electronic Frontier Foundation (EFF), Media Access Project (MAP) and other interest groups filed a petition [20 pages in PDF] with the Federal Communications Commission (FCC) regarding the Bay Area Rapid Transit's (BART) interruption of access to CMRS networks on August 11, 2011.

See also, story titled "BART Cuts Off Cell Phone Service" in TLJ Daily E-Mail Alert No. 2,289, August 14, 2011.

These groups ask the FCC to issue a declaratory ruling that the shutdown by the BART violated the federal Communications Act.

However, the groups also broadly request a declaratory ruling that "local law enforcement has no authority to suspend or deny CMRS, or to order CMRS providers to suspend or deny service, absent a properly obtained order from the Commission, a state commission of appropriate jurisdiction, or a court of law with appropriate jurisdiction".

The petition states that "Because any impairment of CMRS impacts both critical issues of public safety and important principles of free expression, the Commission must act swiftly to clarify that local authorities may not turn off wireless networks before other local jurisdictions seek to replicate the actions of BART."

The petition offers this analysis. "While BART’s source of authority for its actions is currently unclear, it can only shut off service pursuant to one of three theories: as a network operator or agent of a network operator, as an agent of state or local government exercising police power, or as a private actor. In each case, however, such a shutoff conflicts with the law. As a network operator, it would be subject to Section 214(a), which prohibits discontinuing or impairing service without prior authorization from the Commission. As a government agent exercising police power, BART would be in conflict with existing case law, which prohibits disruption of telecommunications networks on mere suspicion of illegal activity and grants the FCC authority to exercise its preemptive power consistent with the law. As a private party, BART would be in violation of Section 333, which prohibits any person from willfully interfering with any station licensed or otherwise authorized under the Act."

The above cited 47 U.S.C. § 214(a)(3) provides in part that "No carrier shall discontinue, reduce, or impair service to a community, or part of a community, unless and until there shall first have been obtained from the Commission a certificate that neither the present nor future public convenience and necessity will be adversely affected thereby; except that the Commission may, upon appropriate request being made, authorize temporary or emergency discontinuance, reduction, or impairment of service, or partial discontinuance, reduction, or impairment of service, without regard to the provisions of this section".

The above referenced "case law" on police powers includes a California state case, People v. Brophy, 120 P.2d 946, decided by an intermediate appellate court almost seventy years ago. It also includes Pike v. Southern Bell, 81 So. 2d 254, a 1955 Alabama Supreme Court case.

The above cited 47 U.S.C. § 333 provides in full that "No person shall willfully or maliciously interfere with or cause interference to any radio communications of any station licensed or authorized by or under this chapter or operated by the United States Government."

USPTO Seeks Comments on Proposal to Dispose of Scanned Papers After One Year

8/29. The U.S. Patent and Trademark Office (USPTO) published a notice in the Federal Register (FR) requesting comments regarding "establishing a one-year retention period that begins on September 1, 2011, for papers scanned into IFW or SCORE prior to September 1, 2011; or a paper's submission date, for papers scanned into IFW or SCORE on or after September 1, 2011."

This notice adds that "After the expiration of the one-year retention period ... the USPTO would dispose of the paper unless, within sufficient time prior to disposal of the paper, the relevant patent applicant, patent owner, or reexamination party files a bona fide request to correct the electronic record of the paper in IFW or SCORE, and the request remains outstanding at the time disposal of the paper would have otherwise occurred."

The deadline to submit comments is October 28, 2011. See, FR, Vol. 76, No. 167, Monday, August 29, 2011, at Pages 53667-53670.

US and PRC Cooperate in Online Child Porn Investigation

8/29. A grand jury of the U.S. District Court (SDNY) returned an indictment that charges Yong Wang of Queens, New York, with one count of advertising in connection with the sexual exploitation of children, one count of distributing child pornography (CP), and one count of reproducing CP for distribution, in connection with his operation of Chinese language CP web sites.

The Office of the U.S. Attorney (OUSA) for the Southern District of New York (SDNY) stated in a release that "All of the websites were in Chinese and advertised to Chinese-speaking individuals in China, the United States, and elsewhere", and that the defendant and his servers were located in the US.

The OUSA stated that the U.S. Federal Bureau of Investigation (FBI) investigated this case, with "extensive cooperation and assistance" from the People's Republic of China's (PRC) Ministry of Public Security.

Preet Bharara, the USA/SDNY, stated in the release that the defendant "allegedly exploited the global reach of the Internet to develop an international customer base", and that "we are committed to shutting down child pornography websites and working with our law enforcement partners across the globe to prosecute and punish those responsible".

People and Appointments

8/29. Yoshihiko Noda was selected leader of the Democratic Party of Japan, and Prime Minister of Japan.

8/29. President Obama announced his intent to nominate Alan Krueger as a member of the Council of Economic Advisers (CEA), and to designate him as CEA Chairman. He is a labor economist and professor at Princeton University. See, White House news office release.

More News

8/29. The Federal Trade Commission (FTC) published a notice in the Federal Register (FR) that announces, describes, recites, and sets the effective date (October 1, 2011) for, its rules changes raising the fees charged to entities accessing the National Do Not Call Registry. This notice states that "The revised rule increases the annual fee for access to the Registry for each area code of data from $55 to $56 per area code; increases the fee per area code of data during the second six months of an entity's annual subscription period from $27 to $28; and increases the maximum amount that will be charged to any single entity for accessing area codes of data from $15,058 to $15,503." See, FR, Vol. 76, No. 167, Monday, August 29, 2011, at Pages 53636-53638.

8/29. The U.S.-China Economic and Security Review Commission published a notice in the Federal Register (FR) announcing the dates, times and locations of public meetings to consider drafts of material for its 2011 Annual Report to Congress. The topics to be considered in these meeting include "intellectual property protection and its 5-year plan, technology transfers, and outsourcing", and "China's foreign and regional activities and relationships, including those pertaining to Taiwan and Hong Kong". The meetings will be held on September 14-15, October 6-7, and October 17-18. The Commission is scheduled to release the report on November 16. See, FR, Vol. 76, No. 167, Monday, August 29, 2011, at Pages 53717-53718.

FCC and Others Release Statements on Hurricane and Communications

8/28. Federal Communications Commission (FCC) Chairman Julius Genachowski released a statement regarding Hurricane Irene.

He wrote that "current reports indicate no 9-1-1 center is without service, and we have received no reports of public safety communications outages. Overall, broadcast and radio are largely unaffected, though in North Carolina a significant number of cable customers are out of service."

He also used this opportunity to advocate several of his policy goals, "including getting an interoperable mobile broadband public safety network funded and built".

Sen. John Rockefeller (D-WV) and Sen. Kay Hutchison (R-TX) sent a letter to Genachowski on August 26 in which they wrote that "Because first responders still do not have a nationwide wireless broadband network of their own, they must rely on these same commercial networks if they hope to access any mobile data services, such as text messaging and emails. Despite being six years from the devastation caused by Hurricane Katrina and ten years from the tragic events of 9/11, we still do not have an interoperable wireless broadband network for public safety.  We must not allow any more potentially life-threatening disasters to occur before our nation's first responders get the interoperable public safety communications system they need to keep us safe."

Genachowski also advocated "launching PLAN nationwide, a new mobile alerting system which would provide a ``fast-track´´ for emergency alerts around network congestion; and accelerating the move to Next Gen 911 so that people can send text, video or photos to 9-1-1 in times of emergency."

Gordon Smith, head of the National Association of Broadbasters (NAB), stated in a release on August 29 that broadcasters "did a remarkable job this weekend keeping citizens informed during Hurricane Irene. While cellphone, electricity and cable system outages were occurring up and down the East Coast, broadcasters were a trusted resource that millions of Americans relied upon for accurate information. Our stations used a combination of 'boots on the ground' reporting and social media to keep citizens informed, proving our contention that broadcasting and broadband are complimentary services. As we work with policymakers on a broadband policy that best serves local communities across the U.S., NAB will continue to make the case that no technology can replace broadcasting's 'one-to-everyone' lifeline role in an emergency."

Verizon Wireless announced in a release on August 28 that "As power outages and recovery efforts continue along the coast in the aftermath of devastating storms Saturday, Verizon Wireless has charging stations at all retail stores in North Carolina ... Residents without working cell phones can make calls free of charge from the company’s pool of working handsets. Additionally, battery charging stations will be set up to allow customers to charge their cell phones and smartphones."

10th Circuit Rules in UNE Dispute

8/26. The U.S. Court of Appeals (10thCir) issued its opinion [18 pages in PDF] in Qwest v. Colorado PUC, a case regarding the duty of incumbent local exchange carriers (ILECs) to provide unbundled of network elements (UNEs) under 47 U.S.C. § 251 and the Federal Communications Commission's (FCC) rules.

Summary. Section 251 was enacted as part of the Telecommunications Act of 1996. The statute requires ILECs to provide leased access to network elements to competing carriers at reasonable rates, and directs the FCC to write implementing rules. However, it took the FCC almost a decade to write rules that could survive judicial review. The statute also directs the FCC to consider whether the failure to provide access to such network elements would impair CLECs ability to provide services. Consequently, the FCC's rules relieve ILECs of the duty to provide access to UNEs if the number of business lines in a local exchange reaches a certain threshold. This case is a dispute over the meaning of the rules' definition of "business line", and hence, whether Qwest must provide CLECs leased access to network elements in the relevant areas.

Statute and Rules. Subsection 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."

Subsection 251(d)(2) addresses FCC implementing rules. "In determining what network elements should be made available for purposes of subsection (c)(3) of this section, the Commission shall consider, at a minimum, whether -- (A) access to such network elements as are proprietary in nature is necessary; and (B) 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."

Under the FCC's rules, ILECs are relieved of the obligation to provide access to unbundled network elements (UNEs) if, among other circumstances, the number of business lines in a local exchange reaches a certain threshold.

The FCC reasoned that when the number of business lines reaches a specified threshold, competitive local exchange carriers (CLECs) that operate in the area served by the wire center are deemed to be economically capable of deploying their own high-capacity loops and transport facilities. That is, they are no longer impaired without access to those UNEs at cost-based rates.

The present dispute turns on the meaning of "business line". The FCC rules, at 47 C.F.R. § 51.5, provide that "A business line is an incumbent LEC-owned switched access line used to serve a business customer, whether by the incumbent LEC itself or by a competitive LEC that leases the line from the incumbent LEC. The number of business lines in a wire center shall equal the sum of all incumbent LEC business switched access lines, plus the sum of all UNE loops connected to that wire center, including UNE loops provisioned in combination with other unbundled elements."

Dispute In This Case. Qwest Communications (now CenturyLink) is the ILEC in this dispute. Cbeyond is the CLEC. They dispute which UNE loops are included in a wire center's business line count. Qwest argues that the business line count includes all UNE loops connected to a wire center. Cbeyond and the Colorado Public Utilities Commission (CPUC) argue that the business line count includes only UNE loops that serve business customers and that are connected to switches.

The CPUC determined that the business line count includes only those UNE loops that served business customers and were connected to switches. This resulted in an impairment finding, and imposition of unbundling obligations on Qwest with respect to high capacity loops and transport at certain of Qwest wire centers.

Qwest filed a complaint in the U.S. District Court (DColo) against the CPUC seeking declaratory and injunctive relief. The District Court held that "non-business UNE loops are part of the business line count but non-switched UNE loops are not."

Both Qwest and Cbeyond appealed. The FCC filed an amicus curiae brief [32 pages in PDF] in which it argued that both non-business and non-switched UNE loops are part of the business line count.

Holding of Court of Appeals. First, the Court of Appeals considered whether the number of business lines in a wire center includes UNE loops that serve non-business customers.

The Court concluded that 47 C.F.R. § 51.5 "plainly states that all UNE loops count towards the number of business lines in a wire center". It added, "We hold that a UNE loop is included in the business line count regardless of whether it is used to serve a business or non-business customer."

Second, the Court considered whether the number of business lines in a wire center includes only UNE loops connecting end-user customers with ILEC offices for switched services.

The Court concluded that "the regulation is ambiguous". But, "Because the FCC's interpretation is not plainly erroneous or inconsistent with the language of the regulation, we must defer to the FCC's position and hold that the business line count includes UNE loops that are not connected to switches."

Thus, the Court of Appeals held that "The district court's ruling that the business line count includes nonbusiness UNE loops is AFFIRMED, and the district court's ruling that the business line count does not include non-switched UNE loops is REVERSED."

This case is Qwest Corporation v. Colorado Public Utilities Commission, et al., U.S. Court of Appeals for the10th Circuit, App. Ct. Nos. 10-1187 & 10-1212, an appeal from the U.S. District Court for the District of Colorado, D.C. No. 1:08-CV-02653-RPM. Judge Briscoe wrote the opinion of the Court of Appeals, in which Judges Seymour and Lucero joined.

Bernanke Addresses Economic Growth and Technology

8/26. Ben Bernanke, Chairman of the Federal Reserve Board, gave a speech in Jackson Hole, Wyoming, titled "The Near- and Longer-Term Prospects for the U.S. Economy".

He stated that "although important problems certainly exist, the growth fundamentals of the United States do not appear to have been permanently altered by the shocks of the past four years. It may take some time, but we can reasonably expect to see a return to growth rates and employment levels consistent with those underlying fundamentals."

Ben BernankeBernanke (at left) said that the US "remains a technological leader, with many of the world's leading research universities and the highest spending on research and development of any nation."

He predicted that "Businesses will continue to invest in new capital, adopt new technologies, and build on the productivity gains of the past several years."

He also recommended that "policymakers must work to promote macroeconomic and financial stability; adopt effective tax, trade, and regulatory policies; foster the development of a skilled workforce; encourage productive investment, both private and public; and provide appropriate support for research and development and for the adoption of new technologies."

FCC Writes AT&T Regarding Antitrust Merger Review

8/26. Rick Kaplan, Chief of the Federal Communications Commission's (FCC) Wireless Telecommunications Bureau (WTB), sent at letter to AT&T's counsel in the FCC's proceeding regarding the merger of AT&T and T-Mobile USA, stating that "we are restarting the informal clock effective today. As such, today, August 26, 2011, is Day 83 under the time clock".

Kaplan elaborated that "By letter dated July 20, 2011", the WTB "advise you that it was stopping the Commission's informal 180-day clock in view of AT&T's announcement that it had developed and would be submitting new models to bolster its arguments concerning the size of the efficiencies made possible by the merger as weighed against the potential anti-competitive effects."

Since then, "AT&T has submitted the models and subsequently updated one of them". Kaplan stated that "We have now received AT&T's answers to our specific questions as well as AT&T's confirmation that it believes our record is complete with respect to the models. Our understanding is that, unless specifically prompted by a request from the Commission or the Department of Justice, AT&T will not be submitting any further revisions to the models".

Gigi Sohn, head of the Public Knowledge (PK), stated in a release that "We are glad the Commission has decided that AT&T has had more than enough chances to make its case, and is restarting the clock on the merits. Now that AT&T has conceded that it has played its last card, it is time for the FCC and the DoJ to bring this proceeding to a close by rejecting the merger."

Go to News from August 21-25, 2011.