May 2010

House Backs Tax Increase for Venture Capital

The House of Representatives passed a bill that would raise the taxes that venture capitalists and other investment managers pay on carried interest — their share of the profits from a successful start-up investment. The Senate will vote on the bill after the Memorial Day recess.

The bill, which is called the American Jobs and Closing Tax Loopholes Act of 2010, would extend unemployment benefits and lending and tax relief for small businesses. But venture capitalists are upset about the provision that would raise taxes on their carried interest. A typical venture capital firm collects carried interest of 20 percent of the profits when a start-up company goes public or is acquired. Today, that is taxed at the capital gains rate of 15 percent. But the bill would require that 75 percent of investors' carried interest be taxed as ordinary income. Opponents of the change in taxation say that the capital gains tax rate rewards taking big, long-term risks on young companies. Proponents of the change say that because venture capitalists mostly invest other people's money, they do not need to be rewarded for taking investment risks.

House cybersecurity overhaul included in Defense authorization bill

An amendment to the Defense authorization bill, expected to pass in the House on Friday, would push through committee efforts to update information security requirements for agencies and establish a separate cybersecurity office in the White House.

The fiscal 2011 National Defense Authorization Act, which moved to the House floor on Thursday, includes an amendment that would speed passage of existing measures from the Oversight and Government Reform Committee to overhaul federal cybersecurity. "It was appropriate to attach this amendment to the Defense authorization bill because properly securing our cyber infrastructure is a national security issue," said Joy Fox, spokeswoman for Rep. Jim Langevin (D-RI), who offered the amendment with Rep. Diane Watson (D-CA). The amendment would mandate agency use of automated monitoring to assess cyber threats. It would involve a major overhaul of the 2002 Federal Information Security Management Act, which often is criticized for forcing IT staffs to spend too much time and too many resources reporting about compliance with certain security procedures. Agencies also would be expected to incorporate security requirements into contracts from the start. Other provisions in the amendment would establish a National Office of Cyberspace in the White House with budget authority over cybersecurity spending and governmentwide coordinating responsibilities, and codify posts of the federal cybersecurity coordinator, held by Howard Schmidt, and chief technology officer, who is Aneesh Chopra.

Facebook is the most popular website in the world, Google says

More people visited Facebook than any other website, Google announced this week after releasing its findings on the top 1,000 sites in the world.

Google ranked the sites based on unique visitors. Facebook welcomed 540 million unique visitors to its site in April, helping it reach a whopping 35% of all Web users. The company served 570 billion page views during the month, easily besting every other site on the Web. Google, which didn't include its own page views in the study, said Yahoo was the second-most-visited site in April. It captured 490 million unique visitors and served over 70 billion page views. In third place, Microsoft's Live.com domain welcomed 370 million unique visitors and served 39 billion page views. Wikipedia came in fourth with 310 million unique visitors and 7.9 billion page views. China-based search engine Baidu captured the eighth spot with 230 million unique visitors and 27 billion page views.

Apple TV to fight Google

One week after Google announced its bid for the hearts and eyes of America's TV viewers with Internet-based Google TV, its Silicon Valley rival is reportedly poised to overhaul its own offering, Apple TV.

The stakes are high. Whoever wins could play a leading role in one of the great technological transformations of recent memory by piping limitless video and other content from the Internet and television to the small screen. Americans spend several hours a day in front of their televisions, creating what some analysts estimate to be a $150-billion advertising market. "A generation from now, people simply won't believe how limited the world of linear programming was, the same way people under 30 today can't relate to 12 channels and a knob," said Jim Lanzone, chief executive of Clicker.com, an Internet TV programming guide. Nearly 40% of consumers said they wanted to connect their computers to their televisions to watch online video, according to a recent survey by Frank N. Magid Associates. Yet Internet television has remained largely a pipe dream for the brightest, richest technology companies, including Microsoft.

Tribune fails again to get Bankruptcy Court OK to begin plan vote

On May 28, Tribune Company failed for a second time to get court approval to begin polling creditors on its bankruptcy plan as lenders objected to the way the media company describes the reorganization.

The owner of the Chicago Tribune and Los Angeles Times newspapers and radio and television stations has proposed turning over its operations to holders of $8.7 billion dollars in senior loans, leaving little for other creditors who hold more than $3.6 billion in claims. Bankrupt companies must have court approval of a disclosure statement that is sent to creditors and describes the plan of reorganization they vote on.

Pakistan Court Orders Facebook Ban to Be Lifted

A Pakistani court ordered the government to lift a ban on Facebook, the world's No. 1 social networking service, 12 days after it blocked access to the website, according to a lawyer.

"Facebook assured the court no blasphemous material will be available to users in Pakistan," Chaudhry Zulfiqar, the lawyer who asked the court to block Facebook. The Lahore High Court ordered the ban on Facebook on May 20 and blocked Google Inc.'s YouTube video service a day later. The Pakistan Telecommunication Authority also blocked 450 Web links for carrying objectionable material. The ban began after a Facebook user started a competition asking participants to draw sketches of Muhammad, the Prophet of Islam. Creating images of the Prophet is prohibited in Islam. Managers at Facebook had corresponded with U.S. special envoy Richard Holbrooke, Zulfiqar said, without providing details of the correspondence.

June 12 Deadline for Wireless Microphones

To avoid interference to public safety communications and next generation commercial services, users of wireless microphones operating in the 700 MHz Band must retune or replace their equipment by June 12, 2010.

This action helps complete an important component of the DTV Transition by clearing the 700 MHz band and enabling the rollout of communications services for public safety and the deployment of next generation 4G wireless devices for consumers. To ensure individuals and groups currently using unauthorized devices in the 700 MHz band had ample time to move to appropriate frequencies, the FCC provided a transition period until June 12, 2010, one year from the DTV Transition. During this period, the Commission has been engaging in an aggressive consumer outreach plan to educate consumers who previously purchased wireless microphone systems and other related devices that utilized the 700 MHz band. As part of this outreach, the FCC now reminds individuals and groups using these devices in the 700 MHz band, either on a licensed on unlicensed basis, to cease operations by the June 12, 2010, deadline. The FCC also reminds users of certain low power auxiliary stations (such as wireless intercoms and cueing equipment used in the entertainment industry) to stop operations by June 12, 2010, on any of the frequencies in the 700 MHz. Because any operation in violation of these rules creates a danger of interference to important radio communications, users who operate wireless devices in violation of these rules may be subject to monetary forfeitures, seizure of the radio equipment, or criminal sanctions.

FTC Extends Enforcement Deadline for Identity Theft Red Flags Rule

At the request of several Members of Congress, the Federal Trade Commission is further delaying enforcement of the "Red Flags" Rule through December 31, 2010, while Congress considers legislation that would affect the scope of entities covered by the Rule.

The announcement and the release of an Enforcement Policy Statement do not affect other federal agencies' enforcement of the original November 1, 2008 deadline for institutions subject to their oversight to be in compliance.

"Congress needs to fix the unintended consequences of the legislation establishing the Red Flags Rule - and to fix this problem quickly. We appreciate the efforts of Congressmen Barney Frank and John Adler for getting a clarifying measure passed in the House, and hope action in the Senate will be swift," FTC Chairman Jon Leibowitz said. "As an agency we're charged with enforcing the law, and endless extensions delay enforcement." The Rule was developed under the Fair and Accurate Credit Transactions Act, in which Congress directed the FTC and other agencies to develop regulations requiring "creditors" and "financial institutions" to address the risk of identity theft. The resulting Red Flags Rule requires all such entities that have "covered accounts" to develop and implement written identity theft prevention programs to help identify, detect, and respond to patterns, practices, or specific activities - known as "red flags" - that could indicate identity theft.

Internet democracy at stake in Google/Viacom lawsuit?

eBay, Facebook, Yahoo, and Ask.com owner IAC/Interactive may compete with Google for users, views and ad clicks, but the four know which side their bread is buttered on when it comes to digital copyright law. That's why they've rushed to Google's side this week to defend their rival in a massive copyright infringement lawsuit launched by Viacom.

Viacom's interpretation of the Digital Millennium Copyright Act (DMCA) "would slow development of the Internet by making the hosting of user generated content an activity fraught with legal peril," eBay et al warned the court hearing the case in an amici brief. "The threat of ruinous liability would mean that other companies and services might never get off the ground in the first place." And that, in turn, would "retard the development of the Internet and electronic commerce and inhibit the growth and development of user-centric online models that, day after day, make the Internet and the world more democratic."

The Pending Obsolescence of Handset Penetration Rates

With the U.S. mobile penetration rate nearing 100 percent, it's no surprise that we're seeing plenty of stories about how we're approaching (or already at) a saturation point. But I'm beginning to wonder exactly where that saturation point is -- and how much longer "handset penetration" matters at all as the mobile industry expands to a wide variety of gadgets that aren't phones. So instead of arguing about what kind of handset penetration rates we should expect to see in the U.S., we should be talking about the penetration rate of connected devices — and how much higher that will be than mere phone usage.

Benton

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