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Telecom/IT Policy Highlights

Volume: 5.06
June 2005

Contents:
Overview
Policy / Legislative Activities
Regulatory Activities
Judicial Activities
Research / Reports
Items of Interest
Events
Newsletter Info
  • Overview

    During the summer, policymakers in Washington typically adopt a more “relaxed” work cycle consistent with a steamy, hot climate. This June was no exception, and the extant “agenda of the day” for telecommunications policymakers focuses on big-picture issues and the future of telecommunications regulation. House and Senate leaders are continuing to negotiate changes to the digital television (DTV) transition, a timeline for reconsideration of the Telecom Act, and a framework for competition between cable and telephone companies in broadband Internet and video services. Additionally of note, the Senate held a hearing to investigate identity theft, hearing testimony from the Federal Trade Commission.

    Perhaps the most important developments of the month came out of the Supreme Court, which released two important decisions on the last day of its 2004-05 term. In the Brand X case, the Court upheld an FCC ruling that classified cable broadband service as an “information service,” freeing it from common-carrier regulations under the Telecom Act. The Court also issued an opinion in MGM v. Grokster, in which it ruled that peer-to-peer file-sharing software makers can be held liable for users’ copyright infringement when they encourage illegal activity. A full discussion of both cases can be found below in the “Judicial Activities” section.

    The Federal Communications Commission (FCC) took an important step for the deaf and hard of hearing by moving forward on a rulemaking proceeding regarding hearing aid compatibility of wireless phones. The Commission also accelerated the timetable for the DTV transition by adjusting the dates when television equipment must be compatible with digital broadcasting.


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  • Policy / Legislative Activities

    Conflicting Bills Introduced on Local Government Broadband Efforts 06.23.05 – Senators Frank Lautenberg (D-NJ) and John McCain (R-AZ) introduced the “Community Broadband Act of 2005” [S. 1294] in the Senate on June 23, 2005. The act, if passed, would amend the Telecommunications Act of 1996 to forbid any state statute, regulation, or other legal requirement from prohibiting any public provider from offering telecommunications capabilities and services to private or public subscribers. Expressly written to “preserve and protect the ability of local governments to provide broadband capability and services,” the bill is designed as a response to legislation in fourteen states prohibiting the ability of municipalities to develop their own broadband systems and provide services to their residents. While the bill provides a degree of protection for local governments who seek to develop their own broadband services from state intervention preventing them from doing so, it does not allow local governments to infringe upon the rights of private competitors or abuse its authority as regulator.

    Countering the Lautenberg and McCain bill are efforts by Representative Pete Sessions (R-TX), who introduced the “Preserving Innovation in Telecom Act of 2005” [H.R. 2726] on May 26, 2005. The bill would prevent municipal governments from offering telecommunications, Internet, or cable services “except to remedy market failures by private enterprise to provide such services.” Sessions noted that he introduced the bill to “discourage local governments from wasting taxpayer funds on building duplicative infrastructure while at the same time encouraging private-sector companies to offer continually innovating service in underserved areas by removing the specter of government competition.”

    The debate over community broadband efforts continues to escalate. Supporters of local governments’ decisions to develop their own services note that these efforts are necessary to achieve President Bush’s goal of universally available broadband by 2007. Opponents of community broadband initiatives argue that tax-funded services should not be permitted to compete against existing commercial services. One unresolved issue in the debate regards those locations, especially in rural America, where broadband services are not yet available. In those municipalities where commercial broadband services exist, there has been a great deal of conflict over local governments’ attempts to establish public networks and services. Most prominent has been the case of Philadelphia, where the city government has proposed offering municipal broadband services. In late 2004, Pennsylvania Governor Ed Rendell slowed these endeavors when he signed into law legislation that would prevent further municipal broadband efforts. A notable concession contained in the law, however, allowed the City of Philadelphia to establish a city-run Wi-Fi network.
    [Source: Library of Congress, Associated Press]

    McCain and Lieberman Introduce SAVE LIVES Act of 2005 06.20.05 – Senator John McCain (R-AZ) and Senator Joseph Lieberman (D-CT) introduced the “Spectrum Availability for Emergency-Response and Law-Enforcement to Improve Vital Emergency Services Act” (S. 1268), also known as the “SAVE LIVES Act of 2005,” on the floor of the Senate on June 20, 2005. The act, if passed, will establish a definite termination date of January 1, 2009, for analog broadcasts, thus providing a deadline for television broadcasters to begin using the digital spectrum and return the analog spectrum currently assigned to them. The bill also addresses consumer education on the transition to digital television (DTV). In particular, it proposes that warning labels be required on analog televisions advising consumers of the transition, provides for brochures to educate consumers on the transition, and requests broadcasters to develop informational programs to inform consumers of the move to DTV. For those consumers still using analog televisions, the bill makes provision for analog-to-digital converters for those Americans who meet established criteria. The stated purpose of the bill, however, is the fulfillment of the 9-11 Commission’s request that Congress provide for “the expedited and increased assignment of radio spectrum for public safety purposes.” As the spectrum allocated to public safety agencies would not be available until the completion of the DTV transition, the bill seeks to expedite this transition by providing a definite deadline for this transition and facilitating the shift to DTV through educational campaigns, provisions for the recycling of old sets, etc.

    As noted in the September 2004 TIPH (4.08), the debate over the transition to DTV has been framed as a conflict between broadcasters and consumer advocates on one side, who argue against a government-imposed deadline for the transition, and public safety advocates on the other, who maintain that the analog television spectrum needs to be allotted to them as soon as possible so that they may continue to provide effective emergency service. The McCain/Lieberman bill may be interpreted as supporting the claims of public service agencies, as it declares that “the Nation’s public safety and welfare cannot be put off for ‘decades’ or ‘multiples of decades’. The Federal government should ensure that this spectrum is available for use by public safety organizations by January 1, 2009.” The bill may have been generated, in part, as a response to a markup session of the Commerce Committee, during which Senator Conrad Burns (R-MT) proposed a successful amendment instructing the FCC to delay the requirement for completing the DTV transition by 2007 if doing so would avoid “consumer disruption”. This action would essentially eliminate a firm DTV deadline. The proposed “SAVE LIVES Act” essentially restores a firm deadline, albeit a later one. Last month’s TIPH (5.05) noted a similar measure in the House of Representatives by House Energy and Commerce Committee Chairman Joe Barton (R-TX) to stipulate an exact deadline for the DTV transition.
    [Sources: Library of Congress, Senate Commerce Committee]

    Senate Panel Discusses Proposals to Combat Identity Theft 06.16.05 – The Senate Commerce Committee held a hearing to discuss solutions to the problem of identity theft and data stolen from companies such as ChoicePoint and Lexis-Nexis. All five members of the Federal Trade Commission (FTC) testified before the committee, raising awareness about the increasing use of “data brokers,” which sell personal information about individuals for purposes including debt collection, law enforcement, market research, and fraud prevention. These brokers are regulated by many pieces of legislation, including the Federal Trade Commission Act (FTC Act), which gives the FTC the authority to prosecute companies for unfair or deceptive practices. However, the FTC Commissioners recommended that Congress require data brokers to take measures to protect consumer data, and suggested that Congress carefully examine the use of Social Security numbers by data brokers, both private and public. Also testifying was Vermont Attorney General William H. Sorrell, who spoke on behalf of state Attorneys General. He recommended that any legislation Congress enacts not preempt more-protective state laws. A number of states, including Georgia, have recently enacted legislation aimed at protecting personal information. However, Congress often seeks to preempt state laws in the interests of creating a uniform national standard. [Source: Senate Commerce Committee]. For further information see: [http://commerce.senate.gov/hearings/witnesslist.cfm?id=1536].


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  • Regulatory Activities

    Digital Television (DTV) Transition Accelerates 06.09.05 – The FCC issued a Report and Order and Further Notice of Proposed Rulemaking [FCC 05-122] denying requests from the Consumer Electronics Association (CEA) and the Consumer Electronics Retailers Association (CERC) to extend the Commission’s deadline by which 50 percent of mid-sized television receivers (25”-36”), both manufactured domestically and imported, must include integrated DTV tuners. In denying the industry’s request to eliminate the intermediate compliance deadline, the FCC argued that such an order “would delay the wider dissemination of DTV tuners in products of this size and would be inconsistent with its efforts to advance the DTV transition as rapidly as possible.” Further, the FCC took additional measures to accelerate the transition to DTV by moving up the date by which all mid-size television sets must include a built-in digital tuner. Originally, the FCC stated that all mid-sized televisions had to include built-in digital tuners no later than July 1, 2006. An earlier feasible date provided by the industry, however, prompted the Commission to move forward the deadline for compliance to March 1, 2006.

    In addition, the FCC issued a Notice of Proposed Rulemaking proposing moving up the date by which all televisions with screens 13” or larger and other television receiving devices (those without a screen, i.e. VCRs, DVD-Rs, etc.) have digital television tuners to “no later than December 31, 2006.” The current deadline is July 1, 2007. This proposed deadline would coincide with the official target date for the end of the transition to DTV and the termination of analog broadcast television transmissions. The Commission seeks public comment on its query regarding whether a DTV tuner requirement should apply to TV receivers smaller than 13”. A copy of the R&O and FNPRM may be found at [http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-05-121A1.txt].
    [Source: FCC]

    Efforts Begin to Implement the Commercial Spectrum Enhancement Act 06.14.05 – The FCC issued a Declaratory Ruling and Notice of Proposed Rulemaking [FCC 05-123] to initiate implementation of the 2004 “ Commercial Spectrum Enhancement Act” (CSEA) [Pub. L. 108-494]. The CSEA establishes a “Spectrum Relocation Fund” to reimburse those federal agencies operating on spectrum that has been reallocated from federal use to non-federal use, especially the 1710-1755 MHz portion of the Spectrum, which accounts for half of the Spectrum that the FCC plans to auction as early as June 2006 for Advanced Wireless Services (including “3G” services). The FCC’s ruling pertained to the interpretation of the “total cash proceeds” mentioned in the legislation—according to the CSEA, such an auction of the available frequencies “may not conclude if the total cash proceeds of the auction are less than 110 percent of the total estimated relocation costs of the federal users.” The FCC determined that “total cash proceeds” should be defined as “winning bids net of any applicable discounts,” such as small business bidding credits. In its Notice of Proposed Rulemaking, the FCC seeks comments regarding its proposed modifications designed to implement CSEA. See: [http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-05-123A1.txt].
    [Source: FCC]

    Hearing Aid-Compatible Digital Wireless Telephones Rule Change 06.21.05 – The FCC issued its Order on Reconsideration and Further Notice of Proposed Rulemaking [FCC 05-122] which reaffirmed its 2003 ruling on the development and sale of digital wireless telephones that are compatible with hearing aids and cochlear implants. In response to several petitions submitted in response to the FCC’s 2003 Hearing Aid Compatibility Order, the Commission addressed its earlier ruling regarding the minimum number of handset models “Tier I” wireless carriers (the five largest carriers) had to make available to consumers in 2005. The FCC revised its earlier ruling to order that Tier I wireless carriers must make available, by September 16, 2005, four hearing aid-compatible handset models, or alternatively, to ensure that 25 percent of the handset models offered are hearing aid-compatible. The FCC did not revise its earlier order that all wireless carriers must ensure that 50 percent of their handset models are compatible with hearing aids by February 18, 2008.

    Though the FCC recognized the commitment of carriers to include hearing aid compatibility information on “call-out cards” as part of handset displays in retail stores and ensure that both low-end and high-end hearing aid-compatible phones are available, the Commission upheld its requirement that hearing aid-compatible digital wireless phones also have prominent exterior labeling indicating the phone’s technical rating, as well contain more detailed information inside the packaging. The FCC also directed all carrier-owned and operated retail stores to provide live, in-store testing for consumers of their products. This rule, combined with encouraged “real world” testing periods and flexible return policies, would provide consumers with hearing aids with opportunities to select the telephones best suited for their needs.

    Finally, the FCC responded to petitions regarding appropriate standards by ruling that the American National Standards Institute (ANSI) standard, based on measurable performance rather than “build-to” production specifications, is the appropriate technical standard for hearing aid-compatible handsets. The FCC noted that it would review future or proposed future standards closely to ensure future sustainability under the hearing aid compatibility rules. Related to this commitment was the FCC’s mandate that carriers and manufacturers provide reports to the Commission to enable it to monitor deployment efforts and provide consumers with pertinent information in selecting the best available technologies. For a copy of the Order FCC 05-122 see: [http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-05-122A1.txt].
    [Source: FCC]


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  • Judicial Activities

    Peer-to-Peer Software Makers May Be Held Liable for Copyright Infrigement 06.27.05 - The Supreme Court issued a unanimous (9-0) decision holding that the distributors of software enabling individuals to share music and other files on the Internet could be found liable for violations of copyright law by individuals who use the software. MGM Studios v. Grokster [04-480], involves two companies, Grokster and StreamCast Networks, who distributed free peer-to-peer (P2P) file-sharing software that enables users to trade and share music, video, and other content over the Internet, most of which is copyrighted. The companies earned revenue by selling advertisements that are sent to users. Unlike Napster, an earlier file-sharing service shut down by the courts in 2001, neither Grokster nor StreamCast actually hosted copyrighted materials on servers or otherwise spread copyrighted files to users. Rather, all of the infringing activity took place by individual users without direct involvement by the companies.

    But MGM Studios, along with other copyright holders, sued Grokster and StreamCast, asserting that the companies "knowingly and intentionally distributed their software to enable users to infringe copyrighted works in violation of the Copyright Act." Even though they were not violating the Copyright Act themselves, MGM argued, Grokster and StreamCast were distributing software that encouraged individuals to violate the law, did nothing to stop or mitigate infringement they knew was occurring, and relied on that infringement to make money. Grokster and StreamCast, however, maintained that they could not be held liable for their users' infringement because their software had valid, noninfringing uses, and they had a right to distribute it because of those uses.

    The question before the Supreme Court, then, was "under what circumstances the distributor of a product capable of both lawful and unlawful use is liable for acts of copyright infringement by third parties using the product?" This question had last been addressed by the Court in 1984, when it heard Sony v. Universal City Studios, in which Universal, a major copyright holder, sued Sony over its Betamax video cassette recorder (VCR). Universal argued that Sony was violating copyright laws by distributing the VCR because the device could be used by individuals to illegally copy protected materials such as TV programs and films. The Court, however, rejected this claim because the VCR had "commercially significant non-infringing uses" such as time-shifting TV programs for later viewing. Sony, therefore, could not be held liable for users’ infringement simply because their device, the VCR, could be used to violate copyright law. Similarly, when lower courts reviewed this case, they applied the reasoning from the Sony opinion and dismissed MGM’s lawsuit, stating that because Grokster’s and StreamCast’s software had "substantially noninfringing uses" and because they did not have specific knowledge of infringing activities, they could not be sued for secondary copyright liability.

    The Supreme Court noted that this case was different from Sony v. Universal because unlike Sony and its VCR, Grokster and StreamCast actively encouraged its customers to break copyright laws. In the Court's opinion, Justice David Souter wrote, "We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties." The case will now be sent back to the Ninth Circuit court for a re-trial, in which Grokster and StreamCast will have to demonstrate that they did not have illegal objectives in distributing their software.

    The Supreme Court’s Sony Betamax ruling was extremely important for the technology industry because it gave them assurance that they would not be held liable for consumers who chose to use their products illegally. In his concurring opinion in Grokster, Justice Stephen Breyer described the Sony rule as “strongly technology protecting....[it] shelters VCRs, typewriters, tape recorders, photocopiers, computers, cassette players, compact disc burners, digital video recorders, MP3 players, Internet search engines, and peer-to-peer software." But the Court’s opinion in Grokster clarifies that the Sony rule only protects the technology itself—not the companies who may promote it with unlawful motives. Thus, the Grokster case does not signal the death of peer-to-peer computing, although it may wipe out the companies who profited from it. The decision is available (PDF) at [http://www.supremecourtus.gov/opinions/04pdf/04-480.pdf].
    [Source: U.S. Supreme Court]

    Supreme Court Rules that Cable Operators Not Required to Give Access to Rivals 06.27.05 – The Supreme Court brought certainty to an unsettled regulatory climate when it ruled that broadband cable modem services must be kept free from common-carrier obligations in accordance with FCC regulations. The Court ruled 6-3 in the consolidated cases NCTA v. Brand X [04-277] and FCC v. Brand X [04-281] that the FCC has the authority to classify cable broadband as an “information service” instead of as a “telecommunications service” under the Telecom Act, which it did in a Declaratory Ruling [FCC 02-77] in 2002. That ruling had been called into question by the Ninth Circuit Court of Appeals, which had previously decided that cable broadband should be considered in part to be a “telecommunications service.” But the Supreme Court decided in this case that even if the Court of Appeals was correct in its interpretation of the Telecom Act, the FCC was acting within its power to decide the issue differently. The ruling thus upholds the FCC’s three-year-old declaration that cable companies do not have to allow outside Internet service providers (ISPs) to have access to their networks. The Supreme Court’s ruling removes a cloud of regulatory uncertainty in the cable industry that had existed through several years of litigation. As a result, cable companies claim they will have increased incentive to invest in their network capacity, since they will not have to worry about leasing those networks to competitors. Telephone companies, on the other hand, remain obligated to open their lines, although this could change with subsequent FCC rulings and/or changes in the Telecommunications Act.

    The ruling calls into question the long-term viability of ISPs that do not operate their own networks. Internet services are increasingly being bundled with telephone, and multimedia services which place ISPs such as Brand X and Earthlink at a competitive disadvantage. Further, several Commissioners have indicated a willingness to loosen the regulations that require telephone companies to share their DSL lines with competitors, which would result in cable and phone companies being well-placed to offer increased broadband services, creating a duopoly of broadband providers in most markets. A policy framework to address this scenario has not been established, but the Supreme Court’s ruling in Brand X gives the FCC more leeway to create one. The Court’s opinion can be found (PDF) at [http://www.supremecourtus.gov/opinions/04pdf/04-277.pdf].
    [Source: U.S. Supreme Court, FCC]


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  • Research / Reports

    NCTA Releases White Paper on Pay-Video Marketplace 06.07.05 – The National Cable & Telecommunications Association (NCTA) released a White Paper, “Working Toward a Deregulated Video Marketplace.” The paper was issued after an address by NCTA president & CEO Kyle McSlarrow to the Washington Metropolitan Cable Club on the current state of the video services market. McSlarrow emphasized three main principles: a reliance on market forces wherever possible with minimal economic regulation, recognition of socially important objectives such as universal service, and equal treatment of services, regardless of the provider. The White Paper outlines NCTA’s vision for the future of video market regulation. This vision includes a number of positions favorable to incumbent cable providers, such as a commitment to making services available to all residents of a community, something that local cable franchise agreements already require. Additionally, the White Paper addresses topics such as taxation and fees, uniform federal standards, and accommodating non-facilities-based providers. The White Paper can be found at: [http://www.ncta.com/press/press.cfm?PRid=605&showArticles=ok].
    [Source: NCTA]

    Telephone Subscribership Continues to Decline 05.25.05 – The FCC’s Wireline Competition Bureau (WCB) released its latest version of Telephone Subscribership in the United States. According to the report, Census Bureau figures reveal that 92.4 percent of Americans subscribed to telephone service in March 2005. This figure reflects a decrease of 1.1 percent since November 2004, the last period examined in the survey. More important, the percentage of American households with telephones has consistently declined since March 2003, falling 3.1 percent from 95.5 percent penetration to the current level of 92.4 percent. Regarding the 1.1 percent decrease between November 2004 and March 2005, the WCB noted that the decrease was “statistically significant.” The report also provides statistics on telephone subscribership by state, race, household size, and other demographic factors. A copy of the WCB’s report is available at [http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/IAD/subs0305.pdf].
    [Source: FCC]


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  • Items of Interest

    Attwell Delivers Speech on Promoting Broadband Development in Rural America 06.07.05 – On June 7, 2005, Meredith Attwell, Senior Policy Advisor to the Assistant Secretary for Communications Information, NTIA, Department of Commerce, gave a speech entitled “Promoting Broadband Deployment in Rural America,” at the Southeastern Association of Regulatory Utility Commissioners (SEARUC) 2005 Annual Conference. Attwell discussed the Bush Administration’s policy of tax relief to provide businesses with strong incentives to invest in broadband technology and foster its development. In addition, the speech noted efforts to reduce unnecessary regulation of broadband services and improve access to rights-of-way. Finally, Attwell highlighted the efforts of the Commerce Department’s Economic Development Administration (EDA) and Department of Agriculture’s Rural Development/Rural Utilities Service (RUS) to support rural broadband deployment. Attwell’s PowerPoint presentation can be viewed online at:
    [http://www.ntia.doc.gov/ntiahome/speeches/2005/MAttwell_SEARUC_06072005_files/frame.htm].
    [Source: NTIA]


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  • Events

    NTIA to Host Wireless Security Forum 07.20.05 – The National Telecommunications and Information Administration (NTIA) will host a public wireless security forum titled “Pharmers and Spimmers, Hackers and Bluejackers: Combatting Wireless Security Threats,” on July 20, 2005. The meeting will last from 9:00 a.m. to 1:00 p.m., and will be held at the U.S. Department of Commerce Auditorium, 1401 Constitution Avenue, N.W., Washington, D.C. The conference will consist of two panels. The first will discuss possible threats and security issues related to new mobile devices (Wi-Fi, smart cellphone, WiMax, mesh networks), and the second will address solutions to the problems identified in the first panel. For more information see: [http://www.ntia.doc.gov/ntiahome/frnotices/2005/wiresec_07222005.htm].
    [Source: NTIA]

    State Science and Technology Institute to Hold Annual Conference in Atlanta 10.19-21.05 – The State Science and Technology Institute (SSTI), a national nonprofit organization dedicated to encouraging economic development through science and technology, will hold its 9th annual conference in Atlanta, Georgia, on October 19-21, 2005. The event will feature workshops and seminars on topics such as commercializing innovations from universities, improving entrepreneurial assistance and research grants, national innovation policy, and increasing access to risk capital. BellSouth Chairman and CEO Duane Ackerman will deliver a keynote address. For information and registration details, see [http://www.ssti.org/conference05.htm].
    [Source: SSTI]


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  • Newsletter Info

    Center for Advanced Communications Policy
    Telecom/IT Policy Highlights Volume 5.06
    June 2005
    Alan Bakowski, Editor

    Telecom/IT Policy Highlights presents legislative, regulatory, legal, and other items of interest pertinent to information, telecommunications, and related technology policy and research. For additional information regarding the information provided in this report, or if there are newsworthy items that should be included in future editions, please contact , Research Specialist, or , Assoc. Director of Research.