Emerging Technologies Washington Update May 2019 #3

McGuireWoods Consulting

This Week: House passes disaster aid package for hurricane recovery in Puerto Rico, the Senate Commerce advanced two bills aimed at improving broadband access, The President signed an Executive Order on Securing the Information and Communications Technology and Services Supply Chain.

Week in Review

Last Friday, the House passed a disaster aid package 257-150 with support from over 30 Republicans as the Senate continues to debate funding for hurricane recovery in Puerto Rico. Senate Majority Leader McConnell (R-KY) said last week that he hopes to pass a bill before the Memorial Day recess, which starts at the end of next week. Elsewhere, McConnell continues to prioritize moving judicial and executive branch nominations. Notably, the Senate voted 52-45 this afternoon to confirm Jeffrey Rosen as Deputy Attorney General. The President sent the Senate nearly a dozen more nominations this week, including Jeffrey Byard’s nomination to be Administrator of the Federal Emergency Management Agency (FEMA).

On the other side of the Capitol, the House took up a package of healthcare-related legislation, including several bipartisan bills aimed at lowering prescription drug prices. Republicans criticized Democratic leadership for packaging the bipartisan bills with legislation aimed at curbing the Administration’s attempts to roll back the Affordable Care Act, however, eliminating any chance that the Senate will take them up in their current form.

Yesterday, the Senate Commerce marked up and advanced several pending measures, including two bills aimed at improving access to broadband, namely S. 1294, the Broadband Interagency Coordination Act, and S. 1289, the Measuring the Economic Impact of Broadband Act. After the markup, the Committee immediately proceeded to a confirmation hearing for Steve Dickson, the President’s nominee to serve as the next administrator of the Federal Aviation Administration (FAA).

On Wednesday, the White House launched wh.gov/techbias, which encourages Americans to submit experiences of alleged political bias on social media sites. Submissions must include name, age, citizenship, and contact information. The White House has not indicated what it plans to do with the information it receives, but submissions are contingent upon a user agreement that authorizes the government to use and share it "in perpetuity, throughout the world, and in all forms of media."

The President also signed an Executive Order (EO) on Wednesday on Securing the Information and Communications Technology and Services Supply Chain. White House Press Secretary Sarah Sanders said in a statement that “this Executive Order declares a national emergency a national emergency with respect to the threats against information and communications technology and services in the United States and delegates authority to the Secretary of Commerce to prohibit transactions posing an unacceptable risk to the national security of the United States or the security and safety of United States persons.” The EO followed a Senate Judiciary Committee hearing earlier this week during which lawmakers raised national security concerns associated with 5G deployment (see below for additional details).

Meanwhile, Deputy Assistant to the President for Technology Policy and Deputy U.S. Chief Technology Officer Michael Kratsios led the US delegation to the G7 Digital Ministerial Meeting in Paris this week, where international stakeholders discussed policies associated with emerging technologies. “Though we all bring unique policy perspectives to the table, one message is clear: Technological innovation is a powerful force for good in tackling humanity’s greatest challenges. The United States looks forward to continued conversations with international partners to advance the Industries of the Future,” said Kratsios. 

Looking Ahead

Tomorrow morning, the House Appropriations Subcommittee on Commerce, Science, Justice, and Related Agencies will mark up its FY20 bill, which proposes a $73.9 billion budget for the Department of Commerce, NTIA, NASA, and other agencies. 

With one week in Washington remaining before the Memorial Day recess, the Senate is expected to vote next week on a disaster aid package that has stalled for months over disagreement around funding levels for hurricane recovery in Puerto Rico. The President and congressional Democratic leadership will meet again on Wednesday to discuss a potential infrastructure package.

On June 12, the FTC will host the final installment of its series of hearings on Competition and Consumer Protection in the 21st Century at Creighton University School of Law in Omaha. The hearing will consist of a series of roundtables with state Attorneys General including Jeff Landry (LA), Doug Peterson (NE), Jason Ravnsborg (SD), and Herbert Slatery III (TN). Senior staff representing the attorneys general of Arizona, the District of Columbia, Iowa, Mississippi, New Jersey, Pennsylvania, Tennessee, Texas, Utah, Virginia, and Washington will also participate in discussions on issues related to consumer protection and antitrust.

On July 11, the FCC will host a summit on robocalls aimed at examining industry progress towards adopting Signature-based Handling of Asserted information using toKENs and Secure Telephone Identity Revisited (SHAKEN/STIR) caller ID authentication standards. Chairman Pai has called on voice service providers to adopt the new standards this year, though the Commission voted in July 2017 to move ahead with regulations if necessary.

5.9 GHz Band Reemerges as a Divisive Issue – Between Federal Agencies

Earlier this week, FCC Chairman Ajit Pai spoke at the WI-FI World Congress and underscored the importance of Wi-Fi to the communications ecosystem, noting “Wi-Fi carries more than half of the Internet’s traffic. It has arguably kept cellular networks afloat by reducing the traffic load on those networks. And as Wi-Fi has become more popular, so has the demand for more unlicensed spectrum to accommodate this traffic.” To address that need for more unlicensed spectrum, Chairman Pai indicated a willingness to consider various options, including a redesigned band plan and sharing options in the 5.9 GHz band that would provide an opportunity for Wi-Fi. Pai recognizes changes to 5.9 GHz are controversial, but also believes it would be irresponsible to “keep kicking the can.” Instead, he believes there should be a comprehensive proceeding on the band and a “sober assessment of the facts.” On Wednesday, however, the FCC announced that it will not take up a proceeding on reforms to the 5.9GHz band during its June Open Meeting at the request of Secretary of Transportation Elaine Chao as the Department continues to evaluate the band’s role in certain vehicle-to-vehicle communications technology.

National Labor Relations Board Decides that Uber Drivers are Independent Contractors

This week, the National Labor Relations Board (NLRB) released an April 16 Advice Memorandum from the NLRB’s Associate General Counsel concluding that UberX and Uber Black drivers are independent contractors, not employees, as a group of Uber drivers contended. The Memorandum applied the common law agency test, which sets out ten factors from the Restatement (Second) of Agency, using as “an important animating principle” whether the position presents opportunities and risks inherent in entrepreneurialism. In the shared-ride context, the Board also considers the extent of the company’s control over the manner and means by which drivers conduct business and the relationship between the company’s compensation the amount of fares collected. The Memorandum found that Uber drivers “had significant entrepreneurial opportunity by virtue of their near complete control of their cars and work schedules, together with freedom to choose log-in locations and to work for competitors of Uber.”   This finding outweighed any factor suggesting employee status, such as the fact that Uber drivers perform a service that essentially is Uber’s and that Uber sets pricing.

Lawmakers Express National Security Concerns with 5G Deployment

This week, the Senate Judiciary Committee convened a hearing entitled “5G: National Security Concerns, Intellectual Property Issues, and the Impact on Competition and Innovation” during which officials from the Departments of Homeland Security and State, as well as several academics and think tank representatives, testified. While acknowledging the potential of the telecommunications technology, Committee members raised a number of security concerns with 5G deployment. “5G technology provides the capacity to exert pressure or control over our telecommunications infrastructure. It provides capacity to maliciously modify or steal information and it provides capacity to conduct undetected espionage,” Senate Judiciary Committee Ranking Member Dianne Feinstein (D-CA) stated in her opening remarks.

Coinciding with the hearing, Senator Blackburn (R-TN), a member of both the Senate Judiciary and Commerce Committees, introduced the Sharing Urgent, Potentially Problematic Locations that Yield Communications Hazards in American Internet Networks (SUPPLY CHAIN) Act, legislation directing the Department of Commerce to work with other agencies to develop and implement a strategy to evaluate telecom supply chain security.

At the same time, Senate Commerce, Science, and Transportation Committee Chairman Wicker (R-MS) and Communications, Technology, Innovation, and the Internet Subcommittee Chairman Thune (R-SD) wrote a letter to FCC Chairman Pai on the economic importance of “winning the race to 5G” and encouraging the Commission to expedite the availability of mid-band spectrum in the 3.7-4.2 GHz band to support 5G deployment. During a House Energy and Commerce FCC oversight hearing on Wednesday, FCC Commissioner O’Rielly also underscored the need to identify and repurpose government-allocated mid-band spectrum for commercial use. He noted the FCC is prioritizing reallocation efforts within the 3.7-4.2 GHz band, or the C-band. Chairman Pai and Commissioners Rosenworcel and Starks agreed on the need for a larger discussion regarding the use and distribution of C-band spectrum.

DOT Seeks Nominations for New Lithium Battery Safety Advisory Committee

In furtherance of an announcement last week by Transportation Secretary Elaine Chao, the Pipeline and Hazardous Materials Safety Administration (PHMSA) published a notice in the Federal Register this week to formally begin seeking nominations for members of the Lithium Battery Safety Advisory Committee, a Federal Advisory Committee established to comply with subsection 333(d) of the FAA Reauthorization Act of 2018.  The committee will consist of manufacturers, marketers, passenger and cargo air service providers, shippers, and pilots and employees of air service providers, among others. PHMSA prefers members serving in executive level leadership positions. Nominations must be submitted by June 4.

Supreme Court Ruling Allows App Store Antitrust Class Action to Move Forward

On Tuesday, the United States Supreme Court ruled that consumers who purchase an app from the Apple App Store may sue Apple alleging violations of the Sherman and Clayton Acts. Apple Inc. v Pepper (May 13, 2019). The Court split 5-4 with Justice Kavanaugh writing for the majority and Justice Gorsuch writing the dissent. The decision was not a ruling on the merits of the antitrust law claims, but only on who may sue, which turned on how to apply Illinois Brick Co. v. Illinois (1977). The majority read that decision to create a “bright-line rule” that only direct purchasers may sue alleging monopolization, and that it is “undisputed that the iPhone owners bought the apps directly from Apple.” The Court concluded, “There is no intermediary in the distribution chain between Apple and the consumer...The iPhone owners pay the alleged overcharge directly to Apple. The absence of an intermediary is dispositive.”

The dissent agreed with Apple’s argument that a consumer may sue only app developers, which set the price of the app. The dissent stated that the consumers bought the apps “from third-party app developers...in Apple’s retail Internet App Store, at prices set by the developers.” Justice Gorsuch stated that the majority’s bright-line rule is “easily manipulated,” adding, “To evade the Court’s test, all Apple must do is amend its contracts. Instead of collecting payments for apps sold in the App Store and remitting the balance (less its commission) to developers, Apple can simply specify that consumers’ payment will flow the other way: directly to the developers, who will then remit commissions to Apple.”

The case now goes back to the District Court for a trial on the merits.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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