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Editor's note: A reminder that this is Technology Daily's final edition. See below for further information.
Executive Branch
FTC Members Want More Power To Impose Civil Fines
by Andrew Noyes
A handful of senators are considering whether granting the FTC "civil-penalty authority" could bolster enforcement capabilities in the areas of data security, telephone records fraud and malicious, secretly installed computer programs.
Commissioner Jon Leibowitz told Technology Daily on Thursday that such a change, which could occur as part of an FTC reauthorization bill, would benefit the agency "in all that we do, not just in the cyber world." An agency reauthorization bill has not been enacted since 1996.
Currently, the FTC has trouble imposing lofty fines because it can only do so in cases where consumers experience financial harm or the individual or company being prosecuted has profited from illegal activity, he said. The proposed change in the agency's authority would bring the FTC in line with other law enforcement agencies, he said.
During remarks at an annual meeting of computer-security experts, Leibowitz cited several instances in which pernicious software purveyors have been slapped with FTC fines but subsequently found new avenues of bilking consumers.
FTC Chairman Deborah Platt Majoras made a similar pitch at an agency oversight hearing in April. Commissioner Thomas Rosch is reportedly on board, but Leibowitz said not all five commissioners feel the same. "We don't have unanimity or consensus on the issue," he said, declining to reveal where his other colleagues stand.
Senate Commerce Committee Chairman Daniel Inouye, D-Alaska; Judiciary Antitrust Subcommittee Chairman Herb Kohl, D-Wis.; and North Dakota Democrat Byron Dorgan are examining the issue, Leibowitz said.
A Senate Commerce Committee aide said FTC reauthorization legislation is in the "discussion phase" and members are pondering including civil-penalty authority "for Internet frauds and violations that are difficult to quantify, like spyware."
Lawmakers have sporadically debated the change for more than 30 years, and Congress has granted the FTC the authority "for every new statute it passes," Leibowitz said. Now is the time to update the underlying mandate that bans unfair or deceptive practices, he said.
"We're not talking about what the FCC does -- they can just announce a massive indecency fine," Leibowitz said. "We'd still have to go and appeal to a court."
Center for Democracy and Technology Deputy Director Ari Schwartz said he supports the change. He said last year's $1.5 million FTC settlement with the now-defunct Internet advertiser DirectRevenue "clearly didn't match the harm caused by the company."
Critics of the plan fear that the FTC may overreach if it gets more power, but Schwartz said the agency has a "good track record" in justifying its enforcement actions. He said a reauthorization bill with such a provision has a "good shot" at getting traction in the 110th Congress.
Santa Clara University technology law professor Eric Goldman questioned the idea of expanding FTC authority. "What's the problem that needs to be fixed?" he asked. On the adware front, the agency "has been able to do a great deal with the tools they've already got," he said.
As the conversation continues, former FTC Commissioner Terry Calvani added, "people who express views should be clear as to whether civil penalties would be generic, without regard for antitrust or consumer protection, or whether the change would apply only in the context of a specific kind of violation."
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Spectrum
FCC Expects Record Revenues For Wireless Spectrum
by David Hatch
The FCC expects to raise a record amount of revenue from an ongoing auction of wireless spectrum but has had difficulty attracting the minimum bid for frequencies requiring the construction of a nationwide public-safety network.
"It will probably exceed any other auction we've ever conducted in the past," FCC Chairman Kevin Martin said at a Thursday press briefing.
The minimum "reserve price" on the so-called D-block, which would benefit emergency responders but also has commercial applications, is $1.3 billion. Overall, the agency has raised $13.6 billion so far and expects to soon surpass its previous record of $13.8 billion. Martin said Congress had budgeted $10 billion from the sale of the airwaves, which are to be relinquished by broadcasters as they transition to digital signals.
The spectrum will provide competition to cable- and telecommunications-delivered high-speed Internet service, providing a possible "third pipe" into homes, the chairman said. It is unclear whether the winning bidders are new entrants or existing providers.
Martin also confirmed that a bidder has met the $4.6 billion minimum for the C-block, which requires licensees to open their airwaves to competing services and devices. "There is a bidder; they have met that reserve price," he said, explaining that agency rules designed to prevent collusion bar him from naming winners at this juncture.
The chairman noted that last summer, when the FCC decided to impose the conditions, concerns were raised that the frequencies would be devalued. The restrictions will foster more innovation and faster broadband speeds, he said, adding that base prices have been met for other blocks being auctioned.
"This demonstrates that the marketplace will support open networks in the future just as easily as it supported closed networks in the past," Ben Scott, director of the watchdog Free Press, said in a statement. "Finally, the American public will enjoy the benefits of more competition."
A coalition of consumer advocates, including the Consumer Federation of America, Consumers Union, Free Press and Public Knowledge, applauded the developments but complained that a minimum price should not have been set for such critical airwaves. The wireless venture Frontline, backed by former FCC chief Reed Hundt, planned to vie for the D-block before it abruptly went out of business.
"I'm still optimistic" about the D-block, Martin said, emphasizing that the bidding has transpired for only a week and will continue for several more rounds.
The FCC would re-auction the D-block with similar conditions if the reserve isn't met. But it would have dropped consumer-friendly conditions on other blocks if minimum bids had not been reached.
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Budget
Science Officials Make The Case For R&D Money
by Heather Greenfield
When President Bush proposes his research and development budget Monday, he is expected once again to ask Congress to double such funding at key science agencies as part of his American competitiveness initiative. He signed legislation in August authorizing the funds, but Congress failed to actually appropriate the money that would fulfill that goal in its comprehensive budget bill last month.
Since then, physics professor and American Physical Society lobbyist Michael Lubell has met with lawmakers to teach a principle critical to the innovation economy and his students' future -- cause and effect. He has been explaining that cutbacks to science programs will leave 500 scientists at the national laboratories without jobs and prompt the furlough of another 500. He said the cuts have a ripple effect, making students wary of majoring in mathematics and science.
Government scientific research has resulted in everyday items from global positioning systems to the Internet and provides what Lubell and Robert Boege, executive director for the Alliance for Science and Technology Research in America, call the "seed corn" of innovation that drives the economy.
Lubell and Boege are among those asking for $300 million to $350 million for R&D efforts to be added to an economic stimulus package being debated in the Senate. So far, Congress has stuck to promises not to load the bill with any longer-term repairs for the economy.
But Lubell and Boege are optimistic that funding for three critical science programs could be restored as part of a Defense Department supplemental funding bill expected to move in March.
The programs include $150 million that the United States pledged as part of an international fusion research project known as ITER that is now under construction in France, $50 million to keep the International Linear Collider alive, and $150 million to keep staff and equipment to run the Department of Energy's synchrotron light-source facilities.
Pharmaceutical companies and computer chip makers use the synchrotron equipment to check products. But with existing backups for time on the machines, Lubell worries that industry will take that research overseas and scientists will move if the U.S. labs are closed for a year.
Support to restore at least $100 million in funding for ITER already is gaining traction, according to Lubell. In addition to the damaged reputation of going back on a signed international agreement to fund ITER, it would result in a $500 million penalty. "The White House understands that, the State Department understands that and DOE understands that," Lubell said, and they are pressing Congress for the funding.
Boege said if the nation does not invest in basic research, "it will continue to see patents erode." He said he is hopeful about emergency spending for the three items and possibly for the National Science Foundation, which is faced with cutting 1,000 research grants.
Both Boege and Lubell said the cuts impacting future competitiveness could be mitigated with a fraction of the overall federal budget. For those who didn't study math, Lubell noted that the $300 million in emergency spending is 1/1000th of the $3 trillion federal budget.
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Education
Speaker Pelosi Touts Instructional Technologies
by Aliya Sternstein
A proposal to give students and teachers greater access to instructional technologies could become law this year if lawmakers adhere to 2008 priorities recently set forth by House Speaker Nancy Pelosi.
In remarking on the Democratic perspective of the state of the union on Friday, Pelosi, D-Calif., said: "For education, we will chart a new direction where innovation not only begins in the classroom but where innovation will also change the classroom and the way children learn."
She added that the nation must "invest in more innovation so that the students of today will be prepared for the jobs of tomorrow here at home."
A bill, H.R. 2449, would authorize funding for schools serving disadvantaged and low-income students to purchase computers, software and other technology. The legislation is now pending in the House Education and Labor Early Childhood, Elementary and Secondary Education Subcommittee.
The bill's sponsors say they want the measure rolled into the upcoming renewal of an education law known as the No Child Left Behind Act.
For the past several years, Bush has proposed cuts to an educational technology program established under that law. The program awards state grants for high-tech equipment, curriculum development and teacher training to ensure that students become technologically literate.
Education and Labor Committee Chairman George Miller, D-Calif., and many members of the committee "strongly support" elements of the program, committee spokeswoman Rachel Racusen said.
This week, Pelosi spokesman Drew Hammill said the Speaker's statement on Friday referred to long-range goals, not any specific bill.
Language similar to the text of H.R. 2449 appeared in a discussion draft of legislation to reauthorize No Child Left Behind that began circulating last fall. But the draft does not reflect the committee's latest work because members have been working with the education community to gather feedback and address concerns, a Democratic committee aide said.
The aide added that all draft proposals, including the instructional technology provision, remain under consideration. The measure also was included in the Senate's draft reauthorization legislation.
A staffer for one of the original bill's sponsors said that the provision is now dependent on enactment of No Child Left Behind. Bill sponsors, as well as committee Democrats and Republicans, said they are unaware of any criticism of the provision.
A GOP aide noted that many schools have taken advantage of existing funds to equip their facilities with hardware and software, but teachers need additional training before integrating technologies into the classroom. Support for training could be authorized through either renewal of No Child Left Behind or other existing programs, the aide added.
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Telecom
Bid To Revamp Universal Service Sidesteps Key Issue
by David Hatch
A series of FCC announcements this week on revamping the universal service fund did not resolve the thorniest issue hanging over it: whether to impose a cap.
The idea of reining in the fund, which is designed to make telecommunications and Internet connections more affordable in rural and low-income areas, has become a regulatory third rail for its chief proponent, FCC Chairman Kevin Martin.
A Federal-State Joint Board on Universal Service tentatively concluded in May that a ceiling on the fund is needed, triggering outrage on Capitol Hill from rural lawmakers worried about the impact on their constituents while drawing applause from conservatives who say the program is bloated.
Wireless carriers, which would be directly impacted, also are strongly opposed to a cap. The threshold would target mobile providers and other "competitive carriers" that receive USF support in markets already served by dominant wireline companies.
To sidestep the controversy, the agency has conditioned a spate of wireless industry deals with interim caps, a move that has frozen at least 50 percent of USF support to eligible mobile carriers at 2007 levels.
Martin and fellow Republican FCC member Deborah Taylor Tate support a cap, but the chairman has been unable to muster a third vote among the remaining commissioners -- a Republican and two Democrats.
The agency will have to take a stand by May 1 because it must act on decisions from the joint board within a year, sources said. There is speculation that the FCC will further dodge the matter, perhaps declaring that an industry-wide threshold is not needed now that several merged entities have agreed to one.
The U.S. Telecom Association and Verizon Communications issued statements lamenting the lack of a cap.
"The FCC has yet to act on the crucial first step to comprehensive reform -- a temporary cap on the skyrocketing level of subsidies paid to rural wireless carriers," Verizon lobbyist Tom Tauke wrote. "Imposing an interim cap would be a very clear first step in long-term reform," USTA President and CEO Walter B. McCormick Jr. added.
The FCC announced late Tuesday that it is seeking further comment on the matter. It also proposed rules for reverse auctions, which award funding to carriers agreeing to receive the smallest subsidies. And it recommended eliminating a rule that permitted competitive carriers with low infrastructure costs to receive the same support as incumbents with higher costs.
Stuart Polikoff, director of government relations at the Organization for the Promotion and Advancement of Small Telecommunications Companies, had a mixed reaction, expressing opposition to auctions but endorsing other planned changes.
"At least the Democrats on the commission are not enamored about the auctions, which makes us feel much better," he said.
"We are very encouraged that the FCC has released these three documents and that they've started the ball rolling on comprehensive reform," said Joshua Seidemann, the director of regulatory policy at the Independent Telephone and Telecommunications Alliance, whose members include Embarq and Qwest Communications International. His group generally opposes reverse auctions.
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E-Government
E-Voting Questions Linger As Super Tuesday Nears
by Michael Martinez
Nearly half the country will head to the polls next week to cast their ballots in presidential primaries despite lingering concerns about the reliability of some voting machines.
Some of the most significant states on the Super Tuesday calendar will conduct their contests on machines that experts and activists have labeled as suspect.
California, a crucial state in both the Democratic and Republican races, has been a key player in the debate over the security of e-voting machines throughout the past year. Secretary of State Debra Bowen forced several of the state's largest jurisdictions last year to scrap voting systems she found to be unacceptable and adopt new ones.
New York, meanwhile, is still replacing antiquated lever-style machines. The Empire State has been among the slowest in the country to make changes required by the 2002 law passed in response to the disastrous 2000 presidential election. Voting officials there do not expect to have new devices in place until 2009.
There already have been minor voting disruptions in the presidential race. Democratic candidate Dennis Kucinich, who recently withdrew from the contest, demanded a recount of New Hampshire's Jan. 8 primary, which was conducted on optical scanners that produced paper voting receipts. New Hampshire officials said they did not find any problems with the primary.
Some Florida counties on Tuesday struggled with technical glitches in their registration systems during the Republican primary. Secretary of State Kurt Browning said the hiccups were compounded by high voter turnout but did not affect the results.
Earlier this month, there were scattered reports in South Carolina of voting machines not turning on correctly. Poll workers in some counties provided paper ballots during the GOP primary.
Doug Chapin, the executive director of Electionline.org, said it is important to note that none of the glitches have been blamed on touch-screen machines. "We haven't seen so far some of the widespread kinds of problems that worried people," Chapin said. "Touch screens haven't seemed to have posed a problem."
Rep. Rush Holt, D-N.J., has offered legislation that would authorize reimbursing states that want to install paper-based systems before the November election. He said there is still more than enough time for states to upgrade to verifiable devices.
There is considerable resistance in certain states, however, to making such a switch. In Ohio, which will hold its primary March 4, the American Civil Liberties Union this week asked for a federal injunction to block the installation of new machines in Cuyahoga County. The ACLU has argued that touch-screen machines are more accessible for voters.
Ohio Secretary of State Jennifer Brunner has pushed counties there to dump touch screens in favor of optical scanners.
Chapin also noted that an unusually large influx of absentee ballots may affect the tallies of Super Tuesday primaries. "It'll be very interesting to see how long it takes for some of these votes to be counted," he said.
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Security
Officials Seek Smooth Transition To Border Rules
by Chris Strohm
Homeland Security Secretary Michael Chertoff touted the implementation of new border security rules Thursday, even as more lawmakers voiced criticism that the rules might cause delays and that they appear to violate the law.
Chertoff said compliance with requirements that U.S. and Canadian citizens ages 19 and older present documents proving their identities and citizenship in order to enter the United States has been high at the northern border and moderate at the southern border. The requirements are part of the Western Hemisphere Travel Initiative.
Perhaps trying to mute criticism from lawmakers and state officials, the department is not fully enforcing the rules yet, Chertoff said. Instead, border agents are giving travelers who do not have the correct documents a warning and still letting them into the country without delay.
"We're going to be measured and smooth at how we implement this but we're moving in the direction of more security at the ports of entry," Chertoff told reporters.
He said travelers without the proper documents eventually will be delayed and undergo secondary screening as border agents determine their citizenship. Stiffer enforcement could begin in as little as two weeks, but the exact timing will depend "on the facts we gather everyday," he said.
As of midday Thursday, however, no significant delays or backlogs were reported. "We're monitoring it practically by the hour and we're going to do this as smoothly as humanly possible," he said. "We recognize we still need time to ease people into this."
Lawmakers have been skeptical that the rules can be fully implemented without problems. Indeed, 33 House lawmakers and 19 senators -- Democrats and Republicans alike -- sent Chertoff letters in recent days urging him to halt implementation of the rules.
They said the department's action appears to violate a recently enacted law that prohibits the Western Hemisphere Travel Initiative from being implemented until June 2009.
"We find it troubling that the [department] is trying to move forward in the interim with a plan to require proof of citizenship at the border prior to the successful implementation of a secure alternative to a passport," senators wrote in their letter. "The new interim procedures are a recipe for long lines at our nation's border crossings and reduced flow of commerce with no clear increase in security."
House lawmakers added: "A recent Government Accountability Office report found that Customs and Border Protection, the agency charged with enforcing this new mandate, is lacking in resources, suffering from severe understaffing, and is simply unable to review and verify the influx of required documents without significantly increasing wait times and crippling legitimate trade and travel."
Chertoff maintains that the rules do not violate the recently enacted law, and fall under the department's existing authority and discretion.
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Today's Feature:
State Roundup
Lawmakers on Capitol Hill were not the only ones this week focused on revitalizing the economy. Michigan Gov. Jennifer Granholm called on the Legislature Tuesday to concentrate on resuscitating the state's competitiveness in the global economy.
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E-briefs
Intellectual Property: The Federal Circuit Court of Appeals on Thursday sided with TiVo, a maker of digital video recorders, and with a lower court that had ruled that the Dish Network infringed on TiVo's software patent. The appeals court overturned the ruling that the satellite broadcaster, formerly known as EchoStar Communications, infringed on hardware elements of the TiVo patent. But the appeals judges also said the software claim is sufficient to uphold the lower court's $89.6 million award to TiVo. TiVo issued a statement saying the firm is "extremely pleased" with the unanimous ruling, which was "confirmation of the value of TiVo's [intellectual property] portfolio."
Dear Reader:
After nine years of publication, National Journal's Technology Daily bids farewell today.
In announcing this decision recently, we noted that National Journal Group is moving to increase technology-related coverage throughout all of its publications. In particular, National Journal's CongressDaily -- our twice daily publication for Capitol Hill insiders -- will be adding staff for this purpose.
And, beginning next Monday, Feb. 4, the online edition of CongressDaily will contain a new, continuously updated section that will include stories of interest to the technology sector in one convenient place. This section will also be home to several of the weekly features that have appeared regularly in Technology Daily over the years.
If you are interested in a trial subscription to CongressDaily, please call 800-424-2921 or e-mail us at memberships@nationaljournal.com.
With best regards,
Lou Peck
Editor In Chief
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President -- John Fox Sullivan, 202-739-8468
Editor in Chief -- Louis Peck, 202-739-8481
Editor -- K. Daniel Glover (bio)
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