USTR Issues Two Important IP Reports

Piracy of intellectual property (IP) remains a major global problem, and it is important that the United States, along with governments around the world, maintain – and in many cases – strengthen efforts to combat such illegal conduct.

To that end, two reports released by the United States Trade Representative in connection with #WorldIPDay on April 26 contribute to an understanding of the scale of the piracy problem and the need to take measures to combat it. pertaining to global intellectual property rights in advance of World IP Day, which is celebrated on April 26. The USTR’s 2018 "Out-of-Cycle Review of Notorious Markets Report" identifies markets around the world that engage in and facilitate copyright piracy. And USTR's "Special 301 Report" is an annual review of the state of IP rights protection and enforcement globally.

Pasted in below is the statement of MPAA Chairman and CEO Charles Rivkin regarding the release of the two USTR reports:

“The film and television industry is a community of millions of creators and innovators whose daily work in the business and art of storytelling entertains and inspires audiences worldwide. In the United States alone, the industry employs 2.6 million Americans and contributes hundreds of thousands of dollars into local economies every day. The industry also generates a trade surplus with every major economy across the globe, producing a $10.3 billion aggregate surplus. Ahead of World IP Day tomorrow, the USTR rightfully shines a light on the foreign threats to our creative economy, specifically around online content theft.

“The Notorious Markets report makes it clear how criminals are profiting on the backs of American workers in our creative economy. In addition, the Special 301 report underscores this Administration’s commitment to protecting those workers’ intellectual property from those threats. 

“Today’s reports highlight the global nature of piracy and demonstrate that all governments need to do their part in protecting intellectual property, fostering legitimate commerce, and protecting creators. We applaud Ambassador Lighthizer and the USTR staff for doing their part in recognizing some of the most critical challenges and committing to address them. We look forward to continuing our work with them to protect intellectual property rights and grow our creative economy.”

Policymakers should be committed to protecting IP rights every day, of course. But surely World IP Day should be an occasion to recommit to that end."

The Metaphysics of Video Competition

Do you want another example – aside from possibly resolving the long-running "net neutrality" controversy – of why the Communications Act needs to be updated, if not completely overhauled?

Okay, I've got one for you.

If you're a regular reader of this space, or even a halfway regular one, you know that Section 623 of the Communications Act exempts cable operators from rate regulation by state or local franchise authorities (LFAs) if the cable system is subject to "effective competition." What's more, the "no regulation" provision is contained in a subsection titled "Preference for Competition." I bet you can't find very many other "Preference for Competition" subtitles in the U.S. Code.

Section 623(l) contains definitions of "effective competition" that the Federal Communications Commission must apply in making a finding as to whether effective competition exists. In 2015, the Commission established a national presumption in favor of an "effective competition" finding, reversing the then-existing presumption against such a finding. I didn't agree with many of the FCC's actions under then-Chairman Tom Wheeler's leadership, but I had no hesitation commending this one, and often.

The FCC's decision still permitted franchising authorities to file certifications claiming to rebut that presumption. Which brings us to the point I wish to make regarding competition in the video marketplace.

In September 2018, Charter Communications, Inc., filed a felicitously-styled "Petition for Determination of Effective Competition" seeking a determination from the FCC that it faces “effective competition” in certain franchise areas in Massachusetts and in Kauai, Hawaii. Charter asserted that in each of these franchise areas it is subject to effective competition under the so-called "Local Exchange Carrier Test" (LEC Test) because of the availability of AT&T’s DIRECTV NOW streaming service, which offers customers access to at least 65 channels of live television, cloud DVR services, and, in the majority of areas, additional local broadcast channels.

 

So, here is the "LEC Test" as set forth in Section 623:

"a local exchange carrier or its affiliate (or any multichannel video programming distributor using the facilities of such carrier or its affiliate) offers video programming services directly to subscribers by any means (other than direct-to-home satellite services) in the franchise area of an unaffiliated cable operator which is providing cable service in that franchise area, but only if the video programming services so offered in that area are comparable to the video programming services provided by the unaffiliated cable operator in that area."

In its petition, Charter states:

"The LEC Test is satisfied if a LEC affiliate offers a comparable video programming service by any means (other than direct-to-home satellite service) in areas that substantially overlap with the cable system’s franchise area. DIRECTV NOW meets each requirement of the LEC Test. It is a non-satellite video programming service offered by DIRECTV, LLC (“DIRECTV”), an affiliate of AT&T. It is offered throughout the Franchise Areas to any household with an Internet connection, which is available to virtually 100 percent of Charter’s customers in these areas. AT&T has marketed DIRECTV NOW extensively, and residents are well aware of this competing service. Finally, DIRECTV NOW meets the Commission’s definition of a “comparable” video programming service, with at least 12 channels of non-broadcast programming."

On its face, Charter's reading of the statute and its contention regarding the existence of "effective competition" is persuasive. Nevertheless, when I perused the docket, admittedly only casually, I saw that the Massachusetts and Hawaii franchising authorities put forward several different reasons why the DIRECTV NOW streaming offering, even though available to nearly all of the residents in the subject localities, doesn't satisfy the "LEC Test" requirement.

You can go through the docket if you like to examine back-and-forth arguments. If you do, you'll see that they are mostly based on dissecting the techno-functional constructs that are built into the LEC Test definition. These arguments – tending heavily towards the metaphysical – have to do with contending characterizations of the meaning of "facilities" used to deliver the streaming service, whether they are "physical" facilities or not, whether DIRECTV NOW is offered "directly" or "indirectly" to customers, what "by any means" means, whether AT&T is or is not a LEC, and the like.

By the way, when I say the arguments tend towards the metaphysical, I mean metaphysical in the very same sense that I did when I wrote what became my widely-circulated "The Metaphysics of VoIP" piecein 2004. I submit that, fifteen years later, it's still a worthwhile read if you want to appreciate why we need a Communications Act overhaul that doesn't tie regulation to techno-functional constructs.

In other words, in the present case, in doing their best to pick apart the statutory definition in order to retain their rate regulation authority, Massachusetts and Hawaii discuss almost everything but what ought to be the most relevant question: Does the availability of the DIRECTV NOW streaming service, which offers customers access to at least 65 channels of live television, cloud DVR services, and additional local broadcast channels, constitute effective competition and provide customers with an alternative multichannel video service choice if they are dissatisfied with Charter's offering?

To repeat, I find Charter's reading of the statute as it relates to the "LEC Test" persuasive. In any event, at the least, it is within the realm of the Commission's interpretative discretion to the extent the provision is ambiguous. Recall Chevon deference. And recall the "Preference for Competition" subtitle in Section 623.

But the point I wish to make is more fundamental. This one "effective competition" determination proceeding demonstrates yet again why Congress needs to update the Communications Act. Whatever Congress may have been thinking when it adopted the "effective competition" provision in 1992, it certainly didn’t have in mind today's myriad – and still proliferating – Internet video streaming services. I need not name them all here or say more here about their competitive impact.

Whatever the outcome of the proceeding in which Charter is now engaged to free itself from rate regulation of its cable service, I submit that the present competitiveness of the video marketplace – in which cable operators, satellite companies, over-the-air broadcasters, wireless providers, and Internet streaming services all compete – cries out for Congress to take deregulatory action. It doesn't make sense today for the FCC to be required to parse analog age techno-functional constructs embedded in legacy Communications Act definitions to determine whether regulatory relief should be granted.

A good place at least to start considering an update of the Communications Act video provisions is Rep. Steve Scalise's deregulatory "Next Generation Television Marketplace Act," first introduced in 2011. The bill made sense then and it makes even more sense now, when the video marketplace is much more competitive today than it was eight years ago. When Rep. Scalise reintroduced the bill under the same name in July 2018, I wrote about it here in a Washington Times piece. In any updating of the Communications Act, Congress should require that regulation be tied to assessments of competition and consumer harm -- not to abstruse techno-functional definitions that give rise to metaphysical argumentation divorced from marketplace reality.

Report Finds Streaming Piracy Poses Cybersecurity Dangers to Consumers

The Digital Citizens Alliance has just published an important investigative report titled "Fishing in the Piracy Stream: How the Dark Web of Entertainment is Exposing Consumers to Harm." The report calls needed attention to the cybersecurity dangers posed to users of illicit streaming devices (ISDs) and piracy apps designed to stream pirated movies, TV episodes, and live video programming content via the Internet. As the report observes, many downloadable piracy apps and apps that are pre-installed in ISDs contain malware. The malware steals user names and passwords, scans user networks, and uploads user data without their knowledge. 

The report's findings are further described in Digital Citizens' press release.

Cybersecurity dangers posed by ISDs and piracy apps were a focus point in the US Trade Representative's 2017 Notorious Markets Report, which I blogged about here. Free State Foundation President Randolph May and I also touched on the problems posed by ISDs and stream-ripping sites and the need for stronger measures to combat them in our Perspectives from FSF Scholars paper, "Modernizing Criminal Copyright Law to Combat Online Piracy."

SpaceX's Curious Request for 'Special Temporary Authority'

I'm sure Elon Musk knows more right now about the inner workings of electric cars than I could hope to learn in a decade – even if I applied myself. And he may have been forced to learn more than I have thus far about the rules and regulations of the Securities and Exchange Commission – or what he has referred to in a tweet as the "Shortseller Enrichment Commission." And this only days after he settled fraud charges the agency had lodged against him!

And given Musk's involvement with his SpaceX project, among all his other projects, he almost certainly knows more than I do about the technical and operational aspects of the constellation of low-orbit non-geostationary satellites that SpaceX is seeking the Federal Communications Commission's permission to launch.

But, having been involved in communications law and policy for forty years, including having served as Associate General Counsel of the FCC, I do know a considerable amount about FCC procedure and practice. So, it caught my eye when I read recently in the trade press that SpaceX is asking the FCC to grant it "special temporary authority" (an "STA") to initiate communications between its Ku−band gateway earth stations and the first tranche of non-geostationary low-orbit satellites that SpaceX proclaims it now plans to launch in May. The problem is, SpaceX's proposed low-orbit satellite system is presently the subject of a contested license "modification" application that remains pending before the Commission.

Based on the Commission's rules, and my own experience, grants of STAs are by no means routine. Indeed, on the contrary, the showing required to obtain one is high. Were it otherwise, this would have the effect of eviscerating the Commission's underlying licensing rules which, after all, were adopted in the first place to ensure license applicants comply with particular substantive requirements that the agency deems important.

The standard for granting "special temporary authority" is high not only because it is common sense for it to be so, but because the Communications Act requires it. Section 30(f) of the Communications Act provides that the FCC cannot grant an STA request unless it "finds that there are extraordinary circumstances requiring temporary operations in the public interest and that delay in the institution of such temporary operations would seriously prejudice the public interest." The Commission's rules, 47 C.F.R. § 25.120, of course, essentially mirror the high bar for an STA set forth in the Communications Act.

I understand that Elon Musk is a man perpetually in a hurry and that he is likely unsympathetic to government process inconsistent with his "hurriedness." This is not always a bad thing. But with regard to the SpaceX STA request, in light of the high bar in the Communications Act and the agency's own rules, there appear to be good reasons for the Commission to be skeptical. SpaceX's license "modification" application is subject to opposition on the basis that the SpaceX license proposal creates interference to other communications systems and raises other technical/operational questions. I have no idea at all about the merits of these concerns and offer no opinion on them. But it does appear, as WorldVu Satellite's "OneWeb" charges in an opposition to the STA, that SpaceX may be seeking to abuse, or at least misuse, the STA process by creating an artificial "deadline" that is entirely of its own making.

In other words, so far as it appears, no "extraordinary circumstances" unrelated to SpaceX's own wishes exist that require grant of the STA. And, so far as it appears, there has been no showing the public interest will be seriously prejudiced by allowing the Commission to first resolve concerns raised in connection with the pending modification application. It would be odd if the "extraordinary circumstances" standard could be met by the applicant simply advising the Commission that it plans to launch at a time of its own choosing. And the fact that satellites, once launched, aren't likely to be subject to a Commission "recall to Earth" order is an additional reason for Commission skepticism regarding the STA.

None of this is to say that SpaceX's proposal – or other similar ambitious proposals for low-orbit non-geostationary satellite systems – ultimately will not be found to be meritorious. They propose to offer new alternatives for delivering broadband services to America, including rural America, and around the world. Surely, additional broadband services offered on different technological platforms are to be desired if the proposals are feasible from a technical, operational, and economic perspective.

But the larger point – and the reason the SpaceX proposal caught my attention – is that, at the end of the day, adherence to the Communications Act's requirements and the Commission's own rules matters. This is especially true, of course, when it comes to procedural vehicles such as rule "waivers" or grants of "special temporary authority." The Commission must take care in considering requests like these that it does not act in a way that establishes precedents that have the effect of eviscerating its underlying rules or of diminishing the integrity of its processes.

New Intercarrier Agreement to Implement Anti-Robocall Safeguards

On April 17, T-Mobile and Comcast announced the launch of “cross-network robocalling protection built on STIR/SHAKEN standards” and their partnering to provide caller ID verification and alert voice subscribers to illegal robocalls and scammers. As announced by the two providers and as described in press reports, T-Mobile and Comcast are beginning to authenticate calls between their networks.

 

T-Mobile is now operating CallerVerified, its implementation of SHAKEN/STIR protocol, in a number of its devices and with more devices to be added. Later this year Comcast Xfinity Voice home subscribers will see caller ID verification messages. Comcast previously announced a similar partnership with AT&T, and T-Mobile expects to reach similar arrangements with AT&T and Verizon in the very near future.

On legislative efforts to combat illegal and unwanted calls, see my April 15 blog post: "TRACED Act Would Help Protect Consumers From Illegal Robocalls."

FCC to Vote on Reallocating More Spectrum for 5G Services

In an April 17 FCC Blog post, Chairman Ajit Pai announced a new proposal to reallocate more spectrum for next-generation wireless services:

In addition, we’ll also move forward with yet another item to free up spectrum for wireless services. The President’s Fiscal Year 2020 budget — which “propos[es] legislative changes . . . that pertain to the FCC” and that “are designed to improve spectrum management and represent sound economic policy” — calls on the Commission to "either auction or use fee authority to assign spectrum frequencies between 1675–1680 megahertz for flexible use by 2020, subject to sharing arrangements with Federal weather satellites.” I agree with opening this spectrum for commercial use so that’s exactly what I intend to do. So today, as the first step down that path, I’m circulating a proposal to reallocate spectrum in the 1675–1680 MHz band for shared use between incumbent federal operations and new, non-federal fixed or mobile operations.

A TRDaily report quoted Ligado Networks Board Chairman Ivan Seidenberg, who commended the proposal’s potential benefits: “[I]f combined with other available frequencies, it could unleash 40 MHz of vital lower mid-band spectrum to serve mission-critical industrial Internet of Things and other emerging 5G applications.”

Reallocating 1675–1680 MHz for shared federal and non-federal commercial use, as Chairman Pai proposes, will help supply wireless infrastructure needs and further U.S. competitiveness in the global race to 5G. The creditworthy proposal is on the FCC’s agenda for its upcoming public meeting on May 9.

DOJ Antitrust Division May Be Off-Base on T-Mobile/Sprint Merger

Here is a MEDIA ADVISORY that I distributed a short while ago:

The following statement may be attributed to Free State Foundation President Randolph May:

"I was disappointed to read the report in today’s Wall Street Journal that the T-Mobile-Sprint merger may be encountering resistance from the Department of Justice’s Antitrust Division. If this is true, it is problematic because I fear that the Antitrust Division may be relying on an outdated static view of the relevant market rather than one that reflects today’s market dynamics. The T-Mobile/Sprint combination will likely make the wireless market even more competitive by creating a stronger third place competitor behind Verizon and AT&T. Increasingly, it looks like a standalone Sprint will play a diminishing role as a competitive check. 

But I fear the DOJ staff may be making a more fundamental mistake by not appreciating the extent to which wireless companies now compete in a larger broadband market that includes both wireline and wireless companies using various technology platforms. Clearly, wireless and wireline broadband services increasingly are substitutable — including for streaming video services at an exponentially growing rate — and 5G deployment will only accelerate this convergence trend that has uprooted the old legacy market definitions.

The Antitrust Division made a mistake in the AT&T/Time Warner case in not taking a realistic view of recent marketplace changes that should have alleviated its supposed competitive concerns. I hope it doesn’t make the same mistake with T-Mobile/Sprint because it is hung up on applying an outdated view of the marketplace dynamics."

TRACED Act Would Help Protect Consumers From Illegal Robocalls

Americans are being bombarded by illegal robocalls and spoofed calls from scammers. A bill approved unanimously by the Senate Commerce Committee on April 2, if ultimately enacted, would offer welcome help. The TRACED Act would sharpen the FCC's authority to penalize bad actors. If it becomes law, the Act also would ensure that voice providers implement new technologies to protect consumers from unwanted and fraudulent calls. 

A December 2018 order by the FCC stated that Americans received an estimated 30 billion robocalls in 2017. The problem has been growing. According to YouMail's Robocall Index, American consumers received 5.2 billion robocalls in March 2019 alone. Not all robocalls are illegal, as many Americans benefit from doctor's appointment reminders and school closure notifications. But an extraordinarily high number of mass-scale autodialed calls are unauthorized and violate Section 227 of the Communications Act. 

Additionally, scammers have engaged in "spoofing" or mass manipulation of caller ID information in order to deceive consumers about the origin of incoming calls, thereby facilitating fraud schemes. A Senate Report accompanying the RAY BAUM's Act of 2018 cited survey findings that "spoofing fraud affected 17.6 million Americans" over a 12 month period, "with that fraudulent activity costing them $8.6 billion." The cited survey was from 2014, and most believe that the frequency of spoofing and extent of losses caused by spoofing has climbed higher. 

Enter the TRACED Act, short for the "Telephone Robocall Abuse Criminal Enforcement and Deterrence Act." If the TRACED Act becomes law, it would bolster the FCC's authority to combat robocalls and spoofed calls. 

Importantly, the TRACED Act would direct the FCC to require voice providers to implement new SHAKEN/STIR technologies to authenticate caller ID information and thereby prevent spoofed calls and also block illegal robocalls. (The acronyms stand for "Signature-based Handling of Asserted information using toKENs" and "Secure Telephone Identity Revisited.") The Commission would be required to implement this directive for robocalls within 18 months of the Act becoming law and within 12 months for spoofed calls. The Commission would be empowered to adopt certain safe harbors that would shield voice providers from civil liability for pro-actively blocking calls using the SHAKEN/STIR system. 

Furthermore, the TRACED Act would establish a federal inter-agency task force headed by the FCC to consider opportunities and obstacles to combatting robocalls and spoofing. The working group would include federal agencies such as the Department of Justice, the Department of Homeland Security, and the Federal Trade Commission. State enforcement authorities would also be working group participants. Broader agency participation may be helpful because a high number of robocalling and spoofing schemes originate overseas. Under the Act, the interagency group would be required to send a report to Congress detailing prosecutions for robocalling and spoofing and identifying continuing obstacles to better protection for consumers. 

To its credit, the FCC already has proposed to implement anti-spoofing provisions contained in the RAY BAUM's Act of 2018. In February, the Commission issued its first Report on Robocalls, outlining the challenges and its ongoing initiatives to combat them. And in November 2018, Chairman Ajit Pai demanded major voice service providers adopt the SHAKEN/STIR system for call authentication by this year. 

Under the TRACED Act, the FCC also would have increased authority to penalize robocallers and spoofers that intentionally violate Section 227's "autodialing" with fines of up to $10,000 per violation. Of course, the Commission already has authority to pursue alleged autodialers with fines of up to $500 per violation. To date, robocalling and other autodialing activities also have prompted a swath of class action civil lawsuits that can include treble damage awards. But Commission authority to pursue heightened sanctions may help stop bad actors, provided the FCC adopts a clearer and narrower definition of prohibited "autodialing" under existing law. (Free State Foundation President Randolph May and I address that definitional issue in a February 2019 Perspectives from FSF Scholars paper.) 

A broad-based bipartisan consensus has emerged in support of the TRACED Act. The Senate Commerce Committee's 26-0 vote of approval for S.151 ought to encourage the full Senate to take up and pass the bill. Furthermore, the Senate Subcommittee on Communications, Technology, Innovation, and the Internet held a hearing on the Act on April 11. A companion bill, H.R. 1602, has been introduced House of Representatives.

On the merits, the TRACED Act is sound. To better combat robocallers and caller ID fraudsters, the 116th Congress should give the TRACED Act prompt consideration.

Just Released: Two New Videos from FSF's Telecom Policy Conference

Two more videos have been released for the Free State Foundation's Eleventh Annual Telecom Policy Conference. 

The first newly-released video includes a conversation on communications policy between FCC Commission Michael O'Rielly and former Congressman Tom Tauke.

The other newly-released video is of the Conference's closing keynote address, delivered by Federal Trade Commission Chairman Joseph Simons. 

FSF's Eleventh Annual Telecom Policy Conference was held on March 26 at the National Press Club. The theme for this year's Conference was "Internet Providers and Platforms: Getting Law and Policy Right." The Conference panels and keynote addresses addressed timely communications law and policy topics such as net neutrality regulation, privacy regulation, 5G networks, spectrum policy, universal service, the proper roles of the FCC, FTC, and Department of Justice, as well as the role of states in overseeing Internet service providers and platforms such as Google and Facebook. 

Be sure to check out both videos, available online here and here. 

AT&T Offers Tools to Stop Robcalls and Spoofed Calls

At its public policy blog, AT&T Communications Chief Legal Officer Bruce Byrd recounts AT&T's efforts to combat robcalls that he highlighted at a Department of Justice-hosted forum on tech-enabled fraud. In addition to automatic network labeling and blocking of unwanted and illegal calls, AT&T offers free and "PLUS" versions of its AT&T Mobile Security apps, and its AT&T Call Protect app provides even more security features. Digital Phone Call Protect is a service available for landline phones. Mr. Byrd's blog post also pointed to AT&T's ongoing work with other vice providers, such as Comcast, in testing SHAKEN/STIR caller ID verification to detect and stop calls from fraudulent or "spoofed" phone numbers. 

As industry efforts to combat robocalls and spoofing continue, and as Congress and the FCC consider next steps in addressing these important consumer protection issues, consumers should be aware of the types of tools that are currently or will soon be available to reduce robocalls and spoofed calls.

Research Report: U.S. Tied with China in Global 5G Readiness

Research firm Analysys Mason just released its report "Global Race to 5G – Update." Analysys Mason observes that in 2018 the FCC adopted important reforms and the U.S. improved its 5G readiness. Its report concludes that the U.S. is now tied with China for the top position in global 5G readiness. Also, the report finds: "[T]here is still more to be done to ensure that the US retains its leading position, and we have found that a key short-term goal for the US to maintain its leading position is improving the availability of mid- band spectrum." Mid-band spectrum is identified as being critically important for 5G services. Thus, increased availability of mid-band spectrum is a key near-term public policy goal for the U.S. to maintain its leading position. To get an up-to-date grasp on the status of the global race to 5G, read Analsys Mason's insightful report.

MultiChannel News Coverage of #FSFConf11

MultiChannel News published Gary Arlen's excellent overview of several issues that were discussed at the Free State Foundation's Eleventh Annual Telecom Policy Conference (#FSFConf11) on March 26. 

His report touches on points made by Conference panelists and speakers on matters such as technological convergence, privacy, infrastructure deployment, and broadband Internet network management practices. 

The last sentence of Mr. Arlen's report in Multichannel News is apt: "[FTC Chairman Joseph] Simon's remarks summarized an underlying theme of the FSF conference: the growing recognition that converging technologies and overlapping services require a new approach to regulatory policies.” 

Videos Released! DOJ's Andrew Finch and NTIA's David Redl at #FSFConf11

The theme of the Free State Foundation's Eleventh Annual Telecom Policy Conference (#FSFConf11) was "Internet Providers and Platforms: Getting Law and Policy Right." Two keynote addresses delivered at the Conference on March 26 are now available for viewing online. 

Video of the Conference's opening keynote address, delivered by Andrew Finch, Principal Deputy Assistant Attorney General of the Department of Justice's Antitrust Division is available here.

Additionally, video of the Conference keynote address by Assistant Secretary of Commerce and NTIA Administrator David Redl is available here.