NetAction Notes

Published by NetAction Issue No. 91 March 4, 2003
Repost where appropriate. See copyright information at end of message.


FCC Breathes Some Life into an "Unregulated Monopoly" of Bells
DRM: Digital Rights or Mandates?
Will The U.S. Be Counting or Ignoring Your Votes Electronically?
About NetAction Notes

Editor's Note: This issue of NetAction Notes was written by advisory board member Judi Clark.

FCC Breathes Some Life into an "Unregulated Monopoly" of Bells

On Feb. 20th, the FCC announced their plan (PDF news release) for the telephone and DSL-based broadband networks. In essence, the plan allows competition in local phone services, but denies all but the wish for meaningful competition in connectivity. The effect is that we are likely to have even fewer ISPs and less choice in broadband providers, more restrictions and less innovation in DSL service, and no real hope for faster (fiber) deployment.

Much of the controversy centers on Unbundled Network Elements (UNE) rules. Network elements are parts of the incumbent local exchange carriers' (called ILECs, or commonly known as the Baby Bells, or the Bells) communications network such as DSL premise services, line sharing, local number portability, local loops, and more. NetAction is working on a longer explanation of this situation. For now, we'll cover four main points of interest to our readers:

3-year phase out of line sharing

Following a 2002 court decision overturning prior UNE rules, the FCC now orders that if a market is not economically or operationally impaired, the ILECs don't have to share their local circuit switches (local to home phone lines), and the DSL-based CLECs (including ISPs like Covad and Earthlink) have three years to transition off.

Expanded role for states

Who decides if a market is economically or operationally impaired? Under the new plan, states do. Commissioner Kevin J. Martin, in his press statement about this Review, hailed,

"During my time at the Commission, I have witnessed first hand the helpful role that the states have played in our mutual goal of implementing the Telecommunications Act. I believe that the states are best positioned to make the highly fact intensive and local "impairment" determinations required by the Court of Appeals."

Commissioner Martin refers to the FCC guidelines and roadmaps for analyzing their markets, but Chairman Michael K. Powell expressed concern that the guidelines won't help.

Two consequences are clear: First, the states and PUCs are ill-funded and not entirely ready to properly deal with this sudden increase in responsibilities. Second, the implementation of standards and access will vary widely from state to state. Some PUCs are fully supportive of the current monopoly structure in their states (NJ, MA), while others (NY, PA) have gotten involved in governance which, at least in the short run, has raised rates--to the surprise of many consumers. Chairman Powell perhaps summed it up best when he said,

"The nation will now embark on 51 major state proceedings to evaluate what elements will be unbundled and made available to CLECs. These decisions will be litigated through 51 different federal district courts. These 51 cases will likely be decided in multiple waysósome upholding the state, some overturning the state and little chance of regulatory and legal harmony among them at the end of the day. These 51 district court cases are likely to be heard by 12 Federal Courts of Appealsódo we expect they will all rule similarly? If not, we will eventually be back in the Supreme Court of the United States to resolve any conflictsóthe same Court that vacated our excessively permissive unbundling regime in 1999. This process will take many years and will hardly be the quieting and stabilizing regime that was so craved by a rocky market."

Indeed. The legal battles have already begun. The Washington Post reported that:

"The major regional phone companies yesterday promised a court fight to overturn rules governing competition for local telephone service that were approved last week by the Federal Communications Commission."

"Two of the four former Bell companies, SBC Communications Inc. and BellSouth Corp. also renewed promises made after the vote that they would not invest in new, high-speed Internet networks unless the local telephone rules are scuttled."

The Bells are seeking a complete, unregulated monopoly. We at NetAction can't think of better way to discourage a lively, competitive telecommunications future!

Elimination or phasing out of ILEC unbundling requirements for fiber-related resources

Ostensibly to encourage the investment in and development of broadband (DSL and fiber-to-the-home) services, the FCC says that the fiber lines which ratepayers have long been funding don't have to be shared, and as fiber elements are incorporated into the copper network, these hybrid networks don't have to be shared either. One might reasonably ask how a DSL competitor will survive if they don't have access to a phone network. We have yet to see how the FCC defines "information services" and treats cable networks to know if any competition will remain.

Moreover, how unrealistic it is to assume that competitors will be willing or able to invest in building new infrastructure? It's not practical given the current economy, and it's competitively unfair. The Bells' investments have been subsidized by ratepayers, yet competitors are told they should be willing to make new investments to compete.

Likely impact on consumers, non-profits, and small businesses

The Office of Advocacy under the Small Business Administration, earlier this month, warned that such actions would have "a drastic effect on small businesses," especially competitive local carriers (CLECs). NetAction readers will remember our "Future of the Regional Bells" paper in which we examined the monopolistic abuses and consequent failure of competition to arise in such an environment. Furthermore, TeleTruth and others have pointed out that the ILECs have long charged ratepayers for broadband networks and services that we will never receive. State PUCs may well be staffing up, but it will not begin to equal the layoffs from CLECs, ISPs, and equipment manufacturers to come.

This situation could be worse: we don't have an entirely unregulated communications monopoly--yet! But give the Bells a little time. For example, SBC has already begun disconnecting user DSL services when they chose another local phone provider; tying services (a common monopoly strategy) is in their plans. And we saw above, they are once again trying to get their way through the courts.

We have learned over time that monopoly incumbents must be regulated more than new entrants if we want to encourage competition to take hold. (Examples: trucks vs. trains, cellular vs. landline telephones, digital broadcast satellite vs. cable...) Under the guise of promoting competition, the FCC is enabling the telecommunications industry to tread water or drown. Bottom line: We can expect to get less in terms of services and choices, and expect to pay more for it.

DRM: Digital Rights or Mandates?

The Berkeley Center for Law and Technology recently co-sponsored a conference on Digital Rights Management (DRM). DRM refers to the way in which electronic forms of intellectual property, such as music, books and software, are protected under US copyright law. It's a hot-button issue because anything in a digital format is easy to copy. DRM technologies also undermine longstanding "fair use" provisions of copyright law, preventing people from making a back-up copy or allowing writers to quote briefly from someone else's work. This is an old problem in new shoes; or rather in new and improved copy-protected CDs, DVDs, PVRs and HDTVs, and more.

DRM comes in several popular forms: technology, legislative, and social practices (or lack thereof). You've probably heard of the Napster music sharing service--it catalyzed certain content interests. This movement is now ostensibly to prevent piracy through limiting access or rights to digital content. The debate has really stepped up given dramatic and clear demands and acts of various players. A few examples are in order.

In 1998, Congress passed the Digital Millennium Copyright Act (DMCA) creating two new intellectual property rights: a set of anti-circumvention rules, and protection for copyright management information. Anti-circumvention rules make it illegal to bypass technical protection measures (the black marker or electrical tape on the edge of certain protected CDs, for example, is illegal). Copyright management information includes the copyright notice, copyright holder's name, title, author, and other information about the work (song, movie, software, etc.), which you are not to remove or change. (The specifics of the DMCA are under 17 U.S.C. 1201-1205, DMCA section:

The DMCA's rules are complex, but have certain specified exceptions (in and of themselves controversial). Results have already reached the courts in cases involving Real Networks, Sony and several others; covering topics like non-proprietary add-ons for proprietary games, or moving content from a protected format to a different format (DeCSS). More controversial, however, are the unintended consequences of the DMCA: using the it for anti-competitive purposes such as cases involving printer cartridges (Lexmark v Static Controls) or garage door openers (Chamberlain v Skylink). (More on DMCA's unintended consequences, including info on these cases:

Last year, the "Hollings Bill" (aka "the Consumer Broadband and Digital Television Promotion Act", or Senate Bill 2048) would have required installation of "security measures" (hardware or software technology that prevents copying) in all electronic and media devices, would have made it illegal to manufacture non-protected devices, and illegal for users to remove or alter the protections and security measures. This draconian measure was not widely supported by Congress and thankfully did not pass.

Currently in the U.S. Legislature are bills that further compromise or seek to protect some of our valued rights. Of special note are the Broadcast Flag initiative (prohibiting digital recording of and protecting TV content from unauthorized redistribution, see below for a link) and the Digital Transmission Content Protection (specifying copy protection encryption for Firewire, soon other transmission technologies). The FCC is also looking at involvement with the Broadcast Flag. Various standards-setting bodies are busy talking about how to implement protection, limits, or access (through watermarks, ebooks, rights languages, etc). Technology companies are also in the debate following the Hollings Bill.

In this debate, consumer protections are largely taking a back seat. Of note are the Boucher-Doolittle Bill (HR 107, would require labelling of copy-protected devices and reforms some of the DMCA) and the Lofgren-Honda Bill (HR 5522, protecting fair use, back-up copies, first sale rights, and reforms DMCA).

Not surprisingly, the debate is polarized by extremes: everything or nothing is to be protected. The largest content interests (music and movie industries, book and journal publishers, software makers) lobby Congress with their pocketbooks and concerns about the billions of dollars being lost--not just in the U.S. but around the world. Perhaps also not surprisingly, the US is encouraging several European and other nations to adopt legal strategies similar to ours.

Uncomfortable yet? You should be. Your voice is probably not part of the debate. Here's what NetAction suggests:

  1. Pick something that interests you (CDs? sharing? making a back-up copy? your new HDTV?). Learn more about it. Talk with your friends about it. Encourage them to learn more too.

    A few of the many resources to help you understand these issues:

  2. Fill the world with alternative licensing options. Creative Commons may be helpful in outlining and implementing your choices, as they have several pre-written examples to choose from. Tell others too.

  3. Write to your representatives. Explain that you're concerned that your voice isn't being heard, and tell them as briefly and plainly as possible what you'd like them to do. Keep fair use? Allow copying for personal use?

    California Representative Zoe Lofgren noted in her keynote address that politicians are largely guessing at what people want in the absence of public comment. She and others who have raised concerns about DRM are a very small minority fighting a flood of lobbying dollars to a woefully uninformed Congress. Lofgren said it would be helpful if people wrote to express their views.

One final note: if you do nothing at all, you will certainly get what others want. In the absence of a vox poluli, other squeaky wheels (especially those with abundant lobbying dollars) will be guiding our technology path.

Will The U.S. Be Counting or Ignoring Your Votes Electronically?

The Association for Computing Machinery (ACM) recently published a Frequently Asked Questions about electronic voting systems that deserves your attention. ACM, comprised of computing professionals from academia, industry and government, offers unbiased technical expertise to assist policy makers in the development of computing and information technology policy. The gist of the FAQ, as noted by co-author David Dill, is:

"Do not be seduced by the apparent convenience of "touch-screen voting" machines, or the "gee whiz" factor that accompanies flashy new technology. Using these machines is tantamount to handing complete control of vote counting to a private company, with no independent checks or audits. These machines represent a serious threat to democracy. Much better alternatives are available for upgrading voting equipment."

The bottom line, says ACM, is that electronic voting machines must provide a voter-verifiable audit trail. Why are we talking about this now? Many states are buying these systems in large numbers, and will be using them in upcoming elections, whether the machines and processes are ready or not.

You can find the FAQ at and more information, announcements, statements from several noted computer professionals, and news updates at: ACM's website is at, their public policy work is at

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