Inside the Beltway : October 2009

 

FCC Moves Toward Net Neutrality Guidelines with Unanimous Vote

The Federal Communications Commission voted unanimously Thursday to move forward with developing formal net neutrality regulations based on the principles announced last month by FCC chairman Julius Genachowski. The vote begins the process of debating the proposed rules before an official net neutrality policy is established.

The three Democratic commissioners voted in favor of the proposal, while the Republicans voted to move forward on discussions of it, but disagreed with some of its text. Click here to view the FCC's press release on the hearing.

“Net neutrality” refers to regulations that supplement or subordinate some existing telecommunications regulation, and prohibit certain kinds of disparate treatment of certain Internet users or messages. Generally speaking, the net neutrality debate pits Internet content providers, who mostly favor it, against Internet pipeline providers (such as cable and telephone companies), who mostly oppose it.

As an Association comprised of content providers, ABM supports government regulations that assure customers are able to receive non-discriminatory access to the lawful Internet content of their choice, in accord with the level of service to which they subscribe.

The Proposed Regulations
The operative text of the proposed regulations is pretty simple. First, providers of broadband Internet access services couldn’t prevent users from (1) sending or receiving lawful content, (2) running lawful applications or using the lawful services, or (3) connecting to and using lawful devices that do not harm the network.  Moreover, providers couldn’t interfere in competition among network providers, application providers, service providers, and content providers. They also will have to “treat lawful content, applications, and services in a nondiscriminatory manner.”  Finally, broadband providers will need to disclose their network management practices.

Notably, the preamble to each of these mandates includes the key phrase “subject to reasonable network management,” referring to practices that broadband providers use to reduce or mitigate network congestion, prevent transmission of unlawful content, and “address traffic that is unwanted by users or harmful.” The exemption for reasonable network management is meant to give broadband providers some flexibility in how they operate, given the need to avoid Internet traffic congestion, and address problem content like spam, child pornography, and copyright infringing materials. The scope of this key exemption is likely to be the key battleground going forward.

The proposed rules also contain exemptions for actions by broadband providers to address needs of law enforcement needs, emergency communications, public safety, and homeland security.

Four of the substantive proposed rules derive from earlier FCC issuances on net neutrality. Two, however, are new: the requirement for broadband providers to disclose their network management practices (which apparently is seen as needed to ensure that providers do not abuse their right of “reasonable network management”), and the non-discrimination command.

Non-discrimination has been one of Genachowski’s key concerns. In his statement last month, he warned that “the free and open Internet faces emerging and substantial challenges,” claiming that certain broadband providers have blocked certain kinds of traffic (like VoIP, Voice over Internet Protocol, traffic, which competes with traditional telephone lines), and have degraded the performance of peer-to-peer content distribution (which competes with cable television movie services).

“We have even seen one service provider deny users access to political content,” he stated. He added that the proposed rules are needed to preserve “a free and open Internet” and “the vibrant flow of information and ideas.”

Genachowski’s announcement last month focused renewed attention on the net neutrality issue. Some Republican lawmakers have expressed concern about the FCC's proposed regulations, fearing that they could hurt the Internet transmission industry and stifle technological innovation. President Obama’s chief technology officer, Aneesh Chopra, announced support for Genachowski’s concepts and direction. Some leading Internet companies, including Facebook and Twitter, expressed support of Genachowski. Most recently, and somewhat surprisingly, Verizon, a longtime opponent of net neutrality rules, joined with Google to announced support for the FCC rule-making process, apparently deciding that it will be better served by participating in the rule-making process than by criticizing it from the sidelines.

Click here to view the FCC’s notice of proposed rulemaking. Public comments on the proposal may be submitted until Thursday, January 14, 2010. The FCC has also created an Internet site, www.OpenInternet.gov, for discussion about net neutrality issues. 

  

Shield Law Further Stalled in the Senate

After failing to move out of mark-up in the Senate Judiciary Committee to the Senate floor last month, the Free Flow of Information Act (S. 448) was again hindered in the Senate, this time by the Obama administration.

President Obama delivered a severe blow to the Senate version of the reporter shield law earlier this month by opposing a provision of the bill that allows federal judges, in cases where the government is exempt, to decide whether it benefits the public to disclose a source or keep it confidential to ensure free flow of information.

Another mark-up session was scheduled in the Senate Judiciary Committee on October 15, but no action was taken. Without firm support from the Obama administration, the future of the bill in the Senate remains in question, and likely will not see the Senate floor in this Congress.

The Senate legislation is similar to the House bill (which passed the House in March) and protects journalists and reporters from having to disclose their confidential sources, except in matters of criminal investigations or when the identity of a confidential source is deemed essential to settling a civil court matter. In both cases, all other reasonable sources and measures would have to be tried before turning to the confidential source. Both the House and Senate bills also contain exceptions pertaining to national security and acts of terrorism.

Currently, 49 states offer some type of reporter shield laws, but there is not yet any federal legislation. ABM has been and will continue to be active in the passage of the reporter shield law, and will keep you updated on the bill’s action in the Senate.

  

USPS Confirms: No Rate Increase for 2010

Good news for ABM members: Postmaster General Jack Potter announced on October 15 that there will be no rate increase for market-dominant products (including First-Class Mail, Standard Mail, Periodicals, and single-piece Parcel Post) for the 2010 calendar year. The decision comes on the heels of the Postal Service’s recent financial struggles in today’s tough economic climate.

“This is the right decision at the right time for the right reason.  Promoting the value of mail and encouraging its continued use is essential for jobs, the economy, and the future of both the Postal Service and the mailing industry,” said Potter in a statement to Postal Service customers.

The Postal Service is currently considering changes in pricing for its competitive products (Priority Mail, Express Mail, Parcel Select, and most international products), and is expected to announce a decision in November.

David Straus, ABM’s Washington counsel and postal expert, has advised ABM members who have budgeted for a small rate increase for next year to eliminate any increase from their budgets.

ABM members should be aware, however, that the Postal Service’s new “droop test” for flats, which takes effect in January, could cause some publications to experience a significant increase in postal charges. If you have any questions on how the droop test may affect your publications, contact David Straus at dstraus@thompsoncoburn.com or 202-585-6921.

  

New FTC Guidelines Require Bloggers to
Disclose Information on Endorsements

ABM member bloggers, take notice: New media, including blogs, will face increased scrutiny as a result of new guidelines on endorsements and testimonials issued by the Federal Trade Commission. The FTC completed a three-year review of its advertising endorsement guidelines this month, with revised guidelines that especially address new media practices.

The FTC has long expressed concern about celebrity and consumer endorsements and testimonials in advertising, because of the trust consumers put in them. This month’s action revised guidelines originally issued in 1980, and expanded them to cover new media and several other situations.

The new guidelines specifically address the use of blogs and other new media in word-of-mouth advertising campaigns, and whether such activities are viewed as endorsements subject to the FTC act, which outlaws unfair trade practices. The guidelines differentiate between situations where the blogger acts on his or her own, and those in which he or she acts on behalf of someone offering products or services (the “advertiser” in the FTC’s parlance). Statements made independently (as when a blogger purchases a product with his own money and reviews it) aren’t considered endorsements. Statements made “on behalf of” an advertiser (as when a blogger is paid to speak by the advertiser) would be. However, “on behalf of” doesn’t necessarily require that the advertiser controls the blogger; advertisers can sometimes be liable for entanglement with a blogger even when they don’t control the him or her.

Middle-ground situations where the connection between the advertiser and the blogger is fuzzy present the greatest difficulty. The FTC statement acknowledges that circumstances can vary tremendously, and cases will have to be decided individually. The rule used hypothetical situations to provide some guidance in this area. In one illustration, the FTC drew distinctions between a blogger’s review of a pet product depending on whether the blogger paid for the product, got it free through a coupon program, or got it free in a program meant to encourage reviews. The first two situations aren’t considered advertising endorsements, but the last one is.

The new guidelines also cover a number of situations besides blogging. For example, they address circumstances in which product reviews by an employee would (or would not) be considered covered endorsements. They clarify, and somewhat expand, the liability of celebrities who endorse products. And, they eliminate an exemption in the old guidelines, for endorsements that are explicitly identified as involving non-typical experiences.

ABM members who would like more detailed advice on the guidelines should consult ABM’s media counsel, Mark Sableman, of Thompson Coburn LLP, at msableman@thompsoncoburn.com.

  

Congress Introduces Bill to Eliminate Tax Deductibility
of Retail Pharmaceutical Ads

Senators Al Franken (D-Minn.), Sheldon Whitehouse (D-RI) and Sherrod Brown (D-Ohio) have just introduced legislation that, if enacted, would eliminate the federal tax deduction for prescription drug advertising and marketing expenses. 

Similar legislation has been introduced in previous Congressional sessions, but it has never been close to passage. There are rumors, however, that these senators also intend to introduce this legislation as an amendment to any omnibus healthcare legislation that makes its way to the Senate floor. The new bill, S. 1763 (the "Protecting Americans from Drug Marketing Act"), will certainly be opposed by the pharmaceutical and advertising industries. 

ABM has previously opposed any legislative attempt to limit the tax deductibility of any or all advertising, and this new effort will be taken up at the ABM Government Affairs Committee and Board of Directors meetings on November 3.

  

Justice Department Rejects Proposed Google Book Project Settlement,
Renegotiations Begin

The Google Book scanning project lawsuit took another major turn recently as the parties involved began renegotiating the proposed class action settlement after the U.S. Department of Justice objected to the original settlement plan. The Justice Department stated that the original proposed settlement threatened to give Google improper powers to increase book prices and discourage competition. However, it stressed in its mid-September objections filed in federal court that a renegotiated settlement compliant with U.S. copyright and antitrust laws was possible.

As a result of the Justice Department’s objections, the parties to the case - Google, the Author’s Guild, Association of American Publishers, and others – decided to work with the government to resolve its concerns. The court then postponed its hearing, scheduled for October 7, during which it was to consider the more than 400 submissions (most of them critical) that had been filed with comments on the proposed settlement. 

“The current settlement agreement raises significant issues, as demonstrated not only by the number of objections, but also by the fact that the objectors include countries, states, nonprofit organizations, and prominent authors and law professors. Clearly, fair concerns have been raised," wrote Judge Denny Chin.

Put simply, the settlement that was first announced last year, and that has generated intense scrutiny throughout the publishing world, is now essentially dead. As Judge Chin stated, “it does not appear that the current settlement will be the operative one.”

Google and the defendants are currently working on an amended version of the settlement, which is due to be submitted to the court on November 7.

It is unclear where the new negotiations will take the settlement. However, because the Justice Department’s objections focused on competition issues, especially with respect to so-called “orphan works” (in-copyright books for which the copyright owner cannot readily be found), any revisions are likely to focus on that issue. The revisions would most likely give other digital publishers equivalent rights to those orphan works that the original settlement would have given Google to copy and use.

Ironically, while the original settlement was criticized by some as using the class-action process to essentially create new provisions to the copyright law, a revised settlement could go even farther in that direction, at least with respect to orphan works.

It is also not clear how the renewed negotiations will affect other issues besides the competition issues raised by the Justice Department. Many consumer groups raised privacy concerns with respect to the settlement because of the information Google could compile about viewership of digital works. In addition, other nations, including Germany and France, have raised concerns about the international effect of the settlement.

 

  

ABM's Washington Experts Take Attendees
Inside the Beltway at the Executive Forum 

In just two weeks, this November 3 & 4, ABM’s all-new 2009 Executive Forum is coming to 7 World Trade Center in New York City with a powerful agenda, an impressive line-up of industry thought leaders to provide attendees with real answers for today as well as real solutions for tomorrow, and two days of valuable networking opportunities.

During Tuesday’s interactive session, “Politics, Policy and Your Pocketbook,” ABM’s Washington experts will discuss the hot-button issues, such as behavioral advertising and the postal crisis, facing the b-to-b industry today, and how they will affect your company and your bottom line.

Speakers include: ABM’s Washington counsel, David Straus and Mark Sableman, both partners at Thompson Coburn; ABM’s lobbyist, Tom Carpenter, VP of Wexler & Walker; and Cindy Braddon, VP of government affairs at The McGraw-Hill Companies and chair of ABM’s Information Policy Committee.

Moderated by Hugh Roome, president of Scholastic International and ABM’s Government Affairs Committee chair, the session will include opportunities for asking your most important questions, with answers straight from the experts.

The government affairs session joins an impressive agenda at this year’s conference. Among the speakers already confirmed are Steven Brill, Co-Founder, Journalism Online; Thomas Haas, CMO, Siemens; Michael Mandel, Chief Economist, BusinessWeek; and Rick Segal, Chief Executive, North America/Global Practice Leader, B-to-B, Gyro:HSR. Click here to view the full agenda.

For attendees outside the New York City area, we have provided a list of hotels near 7 World Trade Center at a variety of different price points, and we encourage you to consult the list as you plan your trip. Please call the hotel directly to make your reservation.

Interested in sponsoring this event? Contact Jane O’Connor at (212) 784-6367 or at j.oconnor@abmmail.com for available opportunities.

ABM's 2009 Executive Forum is sponsored by Aequor Technologies, Atlantic City Convention & Visitors Authority, Booz & Company, BPA Worldwide, BtoB Media Business, CDS Global, The Jordan, Edmiston Group, Inc., Readex Research, SRDS, and Worldcolor.  

 

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