Campaigns
Fractious Election Panel Backs Draft Rules For The Internet
by Randy Barrett
The Federal Election Commission (FEC) on Thursday approved proposed rules to govern online election-related communications but not without some sniping and griping.
The draft rules would give the writers of independent Web logs, or blogs, a substantial exemption from campaign-finance disclosure laws, and would leave most of the reporting requirements to campaigns and candidates who pay for Internet advertising.
During the somewhat tense hearing, commissioners were defensive, frustrated and bemused at times, but there was general consensus about the need to keep the proposed regulations as narrow as possible to avoid quashing politically related free speech online.
"We are not the speech police," Commissioner Ellen Weintraub said. "The FEC does not tell private citizens what they can or cannot say, on the Internet or elsewhere. We have taken a very restrained approach."
The rules are the result of a federal court order requiring the FEC to include Internet communications in the so-called McCain-Feingold campaign-finance law of 2002. FEC Chairman Scott Thomas hinted at the difficulty that the commission, which initially exempted the Internet from the law, had in crafting the rules.
"This is not an easy matter to fit into the legal framework we have," he said.
Commissioner Danny McDonald expressed frustration about the controversy surrounding the draft rules, which many had feared could create draconian reporting requirements for bloggers.
"Today the point is to try to generate comment from the public. You remember them?" McDonald asked his fellow commissioners. "You would think we are in the final hours of some major piece of legislation. We're not."
Commissioner Bradley Smith spent some time defending himself from criticisms over comments he made to News.com early this month that warned the rules could impose new restrictions on bloggers. The interview enflamed the blogging community and raised fears about the pending regulations.
"I don't think there's anything [in the article] that's all that controversial," Smith said.
He also said that while he supports the commission's efforts to leave most online election-related communication outside the draft rules, the decision likely will draw attacks from the courts and some members of Congress who feel more of the Internet should fall under the purview of the McCain-Feingold law.
"There are people who do not see the Internet as a force for good," Smith said.
Commissioner David Mason cast the single dissenting vote against adopting the proposal. He cautioned that regulation "follows the laws of physics": Once it gets going, it seldom stops. "I fear once we start down the road, it will be difficult to limit where we proceed," he said.
The commissioners also discussed whether Web sites that incorporate could automatically be subject to contribution disclosures and raised the issue of how to handle political ads distributed for free by bloggers sympathetic to a particular candidate.
"The document speaks for itself," Thomas said.
The draft rules will be open for public comment for 60 days. The FEC scheduled a hearing on the proposal for June 28.
Privacy
ACLU, Rep. Sanchez Urge Delay In Passenger Screening
by Sarah Lai Stirland
The top Democrat on a House Homeland Security subcommittee joined a leading civil-liberties organization Thursday in calling on the Bush administration to delay the summer launch of a system to screen airline passengers because they said the system is not ready.
The American Civil Liberties Union (ACLU) and Rep. Loretta Sanchez of California said they expect a report from the Government Accountability Office, which is scheduled to be released Monday, to say that the system being developed by the Transportation Security Administration (TSA) will not meet the criteria established for it under a fiscal 2005 appropriations law.
The law that funds the Homeland Security Department outlined 10 different criteria the screening program must meet before it receives the funding to become operational. The criteria include requirements that TSA establish a system to allow passengers to appeal decisions barring them from flying and to correct errors about themselves.
"From what I've heard, the TSA has not met the criteria," said Sanchez, the ranking Democrat on Homeland Security Subcommittee on Economic Security, Infrastructure Protection and Cybersecurity. "The criteria was supposed to be met before the TSA moved forward with the project."
Sanchez said she has received many complaints from her constituents who travel frequently and are constantly stopped by airport screeners, even after they are cleared the first time. One of her constituents was held for five hours, she said.
Sanchez and the ACLU issued their call because TSA said earlier this year that it plans to launch the system in conjunction with two airlines this August.
Sanchez said that unlike the civil-liberties advocates, she supports the screening but would prefer that TSA get the system right before it is launched. Otherwise, the system could waste time and money, while a botched system would strain an already overburdened department.
"I think that the screening programs are important," she said. "They are a way for us to help determine whether people should be on a flight. When they work well, they are going to be a very powerful tool ... for protecting the public."
If the administration does go forward with the program this summer, its decision would violate the law, said Timothy Sparapani, a legislative counsel for the ACLU.
Officials from Homeland Security did not return calls for comment by press time and GAO said it could not comment on the report until it is publicly issued Monday.
It is not clear whether the administration is pushing to go forward with Secure Flight. In its fiscal 2006 budget request, the administration said TSA should not go forward unless GAO verifies that the system meets conditions similar to those in the law.
Telecom
Industry Experts Disagree On Best Path To Improve FCC
by Drew Clark
Current telecommunications regulations are outdated, three experts agreed Thursday, but they differed on whether the FCC should be abolished or reformed.
"There is a reason that the FCC has been called 'Forever Captured by Corporations,'" said Tom Hazlett, senior fellow at the Manhattan Institute and the proponent of the abolition agenda.
"It is a very big problem to take the interest of the consuming public into account, particularly when it is so easy to create little pockets of monopoly and cross-subsidize favored groups," Hazlett said. He cited a fund designed to provide universal telecom service as an example of "a very costly policy that is very politically healthy" because it appeals to an influential rural constituency despite its harm to consumer welfare.
Philip Weiser, a professor at the University of Colorado, and Jonathan Nuechterlein, an attorney at Wilmer Cutler Pickering, agreed with many of Hazlett's critiques -- including his view of the universal service fund. But they said a reformed FCC is preferable to leaving telecom regulation in the hands of antitrust experts.
Nuechterlein said the FCC should be led by a single executive-branch administrator, much like the Environmental Protection Agency.
The trio challenged each other in a debate about "two alternative visions" for telecom deregulation hosted by the American Enterprise Institute and Brookings Institution.
In a paper urging "light touch" regulation by the FCC, Weiser and Nuechterlein criticized the agency over its implementation of the 1996 Telecommunications Act and offered several recommendations for depoliticizing the agency.
"The FCC failed to make clear the limitations" on requirements that the regional Bell operating companies share their lines with competitive rivals, Weiser said. "That led to a very painful downward spiral of legal uncertainty."
Hazlett's paper also critically reviewed the FCC's post-1996 regulations and said that only when the agency lifted some regulations on the Bells' high-speed Internet connections in February 2003 did investment in digital subscriber lines (DSL) for such service tick upward.
Attempts to get to telecom competition by forcing the Bells to share wires "hasn't worked, and it has collapsed of its weight," Hazlett said. The alternative is to promulgate "policies to encourage investment in hard assets" by eliminating existing regulations.
Weiser and Nuechterlein did not disagree with Hazlett on that general point, although Weiser said line-sharing with regard to DSL service helped deploy broadband in other countries and also made sense in the United States.
But unlike Hazlett, Weiser and Nuechterlein said it is better to have the FCC than leave its core tasks -- ensuring adequate telecom competition and allocating spectrum -- to the court system.
Nuechterlein said a reformed FCC should provide definitiveness, expertise, neutrality and humility. Definitiveness and neutrality have never been seen as the agency's strong points, he said, adding that "no one can remember quite a time when there is as much internecine intrigue as there is now at the FCC."
Telecom
AT&T Chief Touts Merger Plan, Discusses Telecom Policy
by Drew Clark
AT&T's decision to merge with SBC Communications was driven by changes in technology and regulation, AT&T's CEO said Thursday, adding that the new entity would lead to "healthy and sustainable competition" that benefits customers.
AT&T Chairman and CEO David Dorman said his company's merger proposal, as well as the likelihood that MCI will be acquired by a regional Bell company besides SBC, means that "undoubtedly we are going to see more competition."
"Competition between the Bells has long been either not occurring or occurring in a limited way," Dorman said at an American Enterprise Institute conference. "These mergers will drive another level of competition in business services. It is necessary and inevitable to deal with the post-bubble meltdown we have seen" in the telecom sector.
The proposed merger between AT&T and SBC is pending before the Justice Department's antitrust division and at the FCC. Dorman said that because AT&T exited the consumer business in July, there is no need to impose antitrust conditions on the merger, including any rules that might require SBC to offer its competitors access to its digital subscriber lines (DSL) to sell high-speed Internet service.
Dorman also criticized several decisions by former FCC Chairman Michael Powell, including those on broadband policy, Internet telephone service and the universal service fund that seeks to guarantee all Americans access to communications services.
"These are very important issues, and I hope that Chairman [Kevin] Martin, as he takes these up, will end the uncertainty in these areas," he said. President Bush named Martin FCC chairman on March 16, and he assumed the job March 18.
Dorman outlined the harsh business climate that AT&T has faced for the past four years. He also said the U.S. competitive environment benefited from the 1984 breakup of AT&T, but that the government should have separated the monopoly's equipment manufacturing and Bell labs division from telephone service, rather than creating an artificial division between long-distance and local telephone calls.
From 1996 to 2000, capital investment in the telecom sector soared to 40 percent annually, after decades of holding steady at 10 percent to 15 percent a year, Dorman said. "Nowhere was irrational exuberance [stronger] than in telecom," he said. That was followed by massive accounting fraud by Enron, Global Crossing, Tyco and WorldCom (now MCI), Dorman said.
During that "perfect storm, or nuclear winter, the capital spigot turned off almost completely," he said. And he added that such developments played out against the background of uncertainty where basic regulatory principles have flip-flopped repeatedly.
For example, Dorman said the federal rules about whether telecom companies must share broadband facilities remains unclear. He also said Powell's FCC rendered conflicting decisions on voice-over-Internet protocol (VoIP), favoring Vonage and Skype in two rulings but siding against AT&T "VoIP in the middle" when the agency said in April that it should not be classified as an "information service" free of regulation.
Dorman also said AT&T would appeal the FCC's February decision holding that the company's long-distance calling card is an interstate service subject to telecom fees.
Intellectual Property
Debate Intensifies Days Before Arguments Over File Sharing
by Danielle Belopotosky
Just days before the Supreme Court is set to hear arguments in a high-profile case involving file-sharing technology, supporters on both sides of the debate Thursday provided a preview of some of the issues likely to be discussed before the high court.
The court will hear oral arguments in MGM v. Grokster on March 29. The justices will weigh whether to uphold a 9th U.S. Circuit Court of Appeals decision that file-sharing software makers Grokster and StreamCast Networks are not responsible for copyright infringement by their users.
"This is not about if peer-to-peer technology is good or bad," David Israelite, president of the National Music Publishers' Association (NMPA), said during a panel discussion at the Washington Legal Foundation. Rather, it is about "if property rights should live in cyberspace."
"Is intellectual property different than physical property?" he asked. Some 85 million songs by artists and publishers that his association represents are removed from peer-to-peer (P2P) systems every day, he added.
Israelite said the case should be tested on whether the defendants' products are overwhelmingly used for infringement and whether the "viability of the business itself cannot survive" without infringing behavior. He said that more than 90 percent of the traffic on P2P sites involves unlawful activity.
Furthermore, Israelite argued that upholding the lower court's decision would stifle innovation, undermine the competitiveness of legitimate file-sharing services and hurt intellectual property rights around the world. "How can we ask other countries to enforce intellectual property laws if we don't do it here?" he asked.
But James Burger, an attorney at the Washington law firm of Dow, Lohnes & Albertson, who filed a friend-of-the-court brief on behalf of Intel, said that there is no way to predict how people will use technology and that the focus should be on bad behavior, not technology. "Go after the conduct, not the product," he said.
He argued that the test should be whether a technology offers a "substantial non-infringing use." The fact is, Burger said, "peer-to-peer technology is easily traceable," thus, punishable. While he said he opposes unlicensed distribution of copyright material, there was "no verdict" in the lower court and it should be returned to that court.
Alan Davidson, the associate director at the Center for Democracy and Technology, said the court must decide the narrow question of whether a product can be enjoined for infringement -- and not whether companies are subject to secondary liability for the illegal behavior of their consumers.
Davidson, whose group filed a friend-of-the-court brief "in support of neither side" in the Grokster dispute, agreed with Burger that the case should be remanded to the lower court to explore whether any other areas of the case might constitute secondary liability.
In the meantime, Davidson said, "we are in a prohibition era." People want to be able to download music, videos and television shows from the Internet, but it is prohibited. He added that Congress might be best equipped to handle the issue.
States
Idaho Telecom Bill Tops Tech-Related Action In States
by Chloe Albanesius
State lawmakers have been working on a number of technology-related measures this month, including passage Monday of an Idaho Senate bill that would lift price controls on the state's telephone service providers.
A vote on the bill, H. 224, was tied after an initial vote. In response, Lt. Gov. Jim Risch was called to break the deadlock. His vote in support of the measure now sends it to Republican Gov. Dirk Kempthorne for his signature.
The bill was drafted by Qwest Communications International, the state's largest phone provider. Specifically, it would give the public utilities commission oversight of a company for three years after its deregulation and would allow the commission two additional years of regulation if deemed necessary.
Qwest's rates for traditional residential service would increase about 10 percent per year for the next five years but would not top $24.10 by 2010, the Idaho Statesman reports.
In Texas, meanwhile, lawmakers last week amended a bill that would have banned city-owned networks like broadband or wireless. Following complaints from constituents, the measure, H.B. 789, was changed so that it would only ban cities from providing phone service.
Industry watchdogs warn, however, that dominant providers like SBC Communications could push amendments to strike that provision or attach language to similar bills like H.B. 2637.
Ohio Gov. Bob Taft, a Republican, on Monday signed legislation allowing the state's Industrial Commission to independently enter into telecom and computer-services contracts. Under the measure, H.B. 65, the agency would receive about $60 million for such endeavors in fiscal 2006 and fiscal 2007.
In Kentucky, GOP Gov. Ernie Fletcher on Friday signed a bill, S.B. 106, that enhances the penalty against those who use the Internet to solicit sex from minors. It also makes it a felony to knowingly communicate with a police officer who is posing as a child.
In its final month of legislative action, the Washington state legislature joined many other states in considering a ban on cellular phone use while driving without the use of hands-free devices. The House passed such a bill, S.B. 5160, last week, and a public hearing on the measure is scheduled for Thursday in the Senate.
A separate bill, H.B. 1466, would allow motorcycle drivers to turn left at traffic lights at intersections where lights are triggered by heavier cars idling over sensors embedded in the roads. The House passed the measure March 11.
A Senate committee on Wednesday also considered a House-passed bill, H.B. 1168, that would allow residents to import prescription drugs from Canadian pharmacies licensed by the state.
Today's Feature:
State Roundup
Colorado Gov. Bill Owens last week announced that the state has hired Deloitte Consulting to audit the Colorado Benefits Management System, which is aimed at providing users with better access to public assistance and medical services.
Every Thursday, read the State Roundup by Chloe Albanesius
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E-briefs
Security: A coalition of firefighters, police officers and other emergency "first responders" on Thursday estimated that the federal government would shortchange their homeland security needs by $100 billion over the next three years. "Congressional and administration promises ... for full funding for first-responder needs ... appear to be rhetoric," read the report issued by the First Response Coalition. The group said during a teleconference that it would urge Congress to "honor its promises" and increase the amount of funding President Bush requested in his fiscal 2006 budget proposal. Bush requested $600 million less in grant funding for next year than first responders received this year. They said Congress should allocate funding to create a communications system that would enable first responders nationwide to talk to each other in emergencies. The group also called on Congress and the administration to free airwaves for public-safety communications.
Telecom: A House committee chairman on Thursday admonished the Treasury Department to abandon plans to manage its telecommunications system on its own and to instead rely on services provided by the General Services Administration, the government's central buying agency. A spokesman for Government Reform Committee Chairman Tom Davis, R-Va., issued a statement saying "it is now time for Treasury to put aside" its plans. Davis decried "stovepipe infrastructures" that cannot communicate across jurisdictions "and that do not facilitate the government's pressing need for secure, efficient and cost-effective movement of information." Davis previously has chastised Treasury publicly for moving forward with its Treasury Communications Enterprise, a $1 billion contract to manage the largest secure civilian network in the government. Treasury awarded the contract to AT&T in December. Davis wants the work to be done as part of GSA's broader Networx telecom contract. His latest move puts the Treasury contract's future in doubt.
Telecom: The American Antitrust Institute (AAI) and its allies warned Thursday that AT&T's planned merger with SBC Communications and MCI's proposed combination with Verizon Communications would hurt small competitors and solidify the stranglehold that industry giants have on the market. "These mergers might satisfy Wall Street, but they will hurt Main Street," said Kenneth DeGraff, a policy analyst with the watchdog Consumers Union. The institute, which accepts some corporate donations but not from telecom interests, would prefer that MCI merge with Verizon's rival, Qwest Communications International. Such a deal would be more "geographically diffuse" and less concentrated in the business telephone market, said Jonathan Rubin, a research fellow at AAI. Consumers Union opposes any merger involving MCI but thinks a deal with Qwest would raise fewer problems. XO Communications, a Virginia-based communications provider, has aligned with five other small Bell competitors to oppose the deals, CEO Carl Grivner said.
Lobbying: The Heritage Foundation next week plans to announce it is spinning off its online forum Townhall.com to give the Web site a freer hand in organizing grassroots lobbying activity and act as a conservative answer to MeetUp.org, which has been used to organize support for some Democrats and other causes, CongressDaily reports. "Townhall.com has 1.5 million readers per month, making it one of the highest-ranking political news and opinion sites," Townhall.com president Lobbying said in a statement. "Our real strength [is] the nearly 300,000 and growing registered activists." By breaking off from the Heritage Foundation, Townhall.com will no longer fall under 501(c)4 IRS rules that limited the site to education activities. Townhall.com first became available over the Internet in 1995. Conservative activists hope to counter the success that Democratic National Committee Chairman Howard Dean had in organizing supporters via the Internet for his 2004 presidential campaign.
Cyber Security: The Securities and Exchange Commission (SEC) does not have effective controls to protect financial and sensitive data in its information system, the Government Accountability Office (GAO) said in a report released Wednesday. GAO found that the agency has not implemented proper electronic-access controls, including user accounts and passwords, network security, and monitoring of its critical systems. "As a result, sensitive data, including payroll and financial transactions, personnel data, regulatory" and other information were vulnerable to "unauthorized disclosure, modification or loss, possibly without detection." The government watchdog recommended that the SEC's chief information officer address the deficiencies by developing and fully implementing an agency-wide security system. In conjunction with the report, GAO issued a confidential report further outlining the security weaknesses and recommendations. The SEC said it agreed with the recommendations and has started to address them.
Security: Rep. Edward Markey, D-Mass., Thursday slammed the Nuclear Regulatory Commission (NRC) for allowing illegal aliens who obtained documentation by using fake Social Security numbers to work as contract painters at nuclear facilities. "Commission regulations are supposed to ensure that the individuals who are able to access nuclear facilities are subject to appropriate background and security checks, but they clearly did not work in this case," Markey, a member of the House Homeland Security Committee, said in a statement. In a letter to the commission, he called on the NRC to provide information about its investigation into the issue and details on its documentation and verification requirements. An NRC spokesman said the agency regards the breach "as a serious matter." Even before Markey sent his letter, the NRC notified plants around the country to be on alert for illegal aliens employed by contractors, the spokesman said.
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