May 2010

Apple to Face Inquiry About Online Music

Apparently, the Justice Department is examining Apple's tactics in the market for digital music, and its staff members have talked to major music labels and Internet music companies.

The antitrust inquiry is in the early stages and the conversations have revolved broadly around the dynamics of selling music online. But people briefed on the inquiries also said investigators had asked in particular about recent allegations that Apple used its dominant market position to persuade music labels to refuse to give the online retailer Amazon exclusive access to music about to be released.

Though the Justice Department's inquiry is preliminary, it represents additional evidence that Apple, once the perennial underdog in high tech, is now viewed by government regulators as a dominant company with considerable market power.

Game Consoles to Challenge Pay TV

Sony has agreed to offer on-demand access to HBO programming through its PlayStation 3, the latest example of a videogame-console maker aiming for a bigger role in the digital living room.

Sony and its chief competitors in the videogame-console market, Microsoft Corp. and Nintendo Co., have struck a series of distribution deals recently with leading media providers, including cable networks, major film studios, Netflix Inc. and Major League Baseball. The agreements position the console makers to challenge pay-TV service providers like cable and satellite companies. "The game console as a set-top box does have legs," said Ben Piper, analyst with market-research firm Strategy Analytics. "From a revenue perspective, it represents just a sliver at this point, but cable companies and other pay-TV operators would be ill-advised to ignore this as a threat." Owners of Playstation 3 consoles, known as PS3s, will be able to pay to download episodes from 11 HBO series, including "Big Love," "Curb Your Enthusiasm," and "Entourage," as soon as they become available for sale in the DVD format, roughly 11 months after premiering on the network. Sony plans to add new HBO material every Tuesday to expand the offering.

Space trash threatens satellites, Pentagon warns

Trash in space may bring commerce and communications on Earth to a halt unless policymakers and executives take steps to prevent satellite collisions with orbiting junk, according to a Pentagon report.

Potential crashes between satellites and debris -- refuse from old rockets, abandoned satellites and missile shrapnel -- are threatening the $250 billion space-services market providing financial communication, global-positioning navigation, international phone connections, Google Earth pictures, television signals and weather forecasts, the report says. Space is "increasingly congested and contested," said the Defense Department's interim U.S. Space Posture Review, which was sent to Congress in March and not publicly released. Scientists are warning that space collisions could set off an uncontrolled chain reaction that might make some orbits unusable for commercial or military satellites because they are too littered with debris. The February 2009 crash between a defunct Russian Cosmos satellite and an Iridium Communications Inc. satellite left 1,500 pieces of junk, each whizzing around the earth at 4.8 miles a second and each capable of destroying more satellites.

Republicans' new Web site not exactly what they hoped it would be

[Commentary] Republicans want to take over the House in the fall, but there's a problem: They don't have an agenda. So on May 25, they set out to resolve that shortcoming. They announced that they would solicit suggestions on the Internet, then have members of the public give the ideas a thumbs-up or a thumbs-down. Call it the "Dancing With the Stars" model of public policy.

Republicans were very pleased with their technological sophistication as they introduced the Web site, America Speaking Out, in a ceremony at the Newseum. Rep. Kevin McCarthy (R-CA), who created the program, said that to get software for the site, "I personally traveled to Washington state and discovered a Microsoft program that helped NASA map the moon." Using lunar software is appropriate, because the early responses to the Republicans' request for ideas are pretty far out.

Google tries its hand at influence in Washington

When someone as influential as Sen. John D. Rockefeller IV requests your presence at a hearing, Washington insiders know it's more of a summons than an invitation. So for two hours on the morning of April 29, Microsoft, Facebook, the Federal Trade Commission, and experts from academia, think tanks and privacy groups dutifully came to answer questions about children's online privacy. But another invitee, Google, the biggest online company of all, was a no-show.

Over the past year, Google's critics have expressed concern about the company's growing influence in Washington -- its close ties to the Obama administration and the millions it spends on lobbying. Last week, the nation's deputy chief technology officer, Andrew McLaughlin, was reprimanded for continuing to e-mail with his former Google colleagues about issues related to his White House duties. On the ground in the nation's capital, though, Google's reputation is more that of a scatterbrained graduate student than of a political operative.

Tribune proposes $14.9 million more in executive bonuses

Tribune Company plans to pay 35 of its top executives $14.9 million in additional 2009 bonuses, a court filing revealed late Monday, despite pointed opposition from several key constituents in the company's 17-month-old Chapter 11 bankruptcy case.

Tribune, which owns the Los Angeles Times, describes the bonuses as rewards for steering the company through Bankruptcy Court while generating total operating cash flow of $494 million in 2009. The payments, devised as two plans, would supplement $42.1 million in management incentive bonuses the court allowed Tribune to pay in February to about 670 managers, including most of the executives included in the most senior group. The two new plans also anticipate paying $1.3 million in discretionary bonuses to a group of 50 managers deemed to have made valuable contributions to the restructuring. None of those awards can exceed $65,000, the document said. The total of $58.3 million in bonuses represents $5 million less than the maximum the company could pay under the proposed plans, which are tied to management's exceeding performance targets. The company said several operating executives failed to meet their targets or exceed them by enough in 2009 to merit the highest rewards. Tribune's push to pay the bonuses, even though it is in bankruptcy and still facing declining revenue, has been controversial from the start.

Charges set to cost Times 90% of web readers

The Times and its sister paper, The Sunday Times, could lose more than 90 per cent of their online audience when they introduce charges to read their websites next month, research has found.

The study, to be published on Wednesday by Wiggin, a media law firm, came as News International's newspapers unveiled their redesigned websites before the first big test of charging consumers for online news. In a survey of 1,592 people in the UK this month by Entertainment Media Research, more than 90 per cent said they were unwilling to pay £1 a day or £2 a week, the pricing planned by the Times newspapers, to access a range of news websites. More people said they would rather pay for BBC online news than the nine newspaper sites they were questioned on. Asked about TimesOnline, the newspaper's existing website, 9 per cent said they would pay.

FCC Launches Media Ownership Rules Review

The Federal Communications Commission (FCC) released a Notice of Inquiry (NOI) as part of the 2010 quadrennial review of its media ownership rules.

The NOI [MB Docket No 09-182] initiates a fresh look at the current rules to determine whether they promote the Commission's goals of competition, localism, and diversity. The responses to the questions asked in the NOI will help the Commission define the analytical framework for the review of its media ownership rules, further refine the scope of the proceeding, and provide insight on how media ownership structure will affect the accomplishment of the Commission's public interest goals today and into the future.

The NOI specifically asks for input on a number of issues, including:

Whether the current rules continue to foster competition, localism, and diversity;
How to define, measure, and promote competition, localism, and diversity and how ownership structure affects these goals; and
How to weigh these public interest goals if they conflict with each other.

The NOI also asks whether and how to use bright line rules, adopt a case-by-case approach, or adopt a broad cross-media approach to media ownership if the Commission determines the current rules no longer serve the public interest goals. The NOI additionally seeks comment on the costs and benefits of outlet-specific rules, as compared to rules that apply to all media together, and how the Commission's Broadband Plan may bear on its review.

"We live in an ever-changing media world, but the core public interest goals are the same," said Chairman Genachowski. "The Commission is committed to fostering a strong and independent broadcast media that provides Americans with multiple and diverse sources of news, public affairs, and entertainment programming. The input we seek in this proceeding will help ensure that our media ownership rules continue to protect consumer interests in today's marketplace."

FCC Commissioner Michael Copps said, "Our country urgently needs a media that is reflective of our diverse communities and interests. While minorities currently comprise roughly 34% of the nation's population, they own only 3.15% of full-power commercial TV stations. And, while women make up 51% of the population, they only own 5.87% of full power commercial TV stations. These numbers are appalling. If a central tenet of our FCC mandate is to promote diversity in the media, which it is, then we need diverse ownership policies to help that happen. Anyone who actually thinks that who owns the media doesn't significantly affect how our country is being informed is not paying attention. Shortchanging ownership diversity is shortchanging our civic dialogue."

"The Commission has known since at least the time of its 2002 ownership review," said FCC Commissioner Robert McDowell, "that the Internet would have a profound effect on the media landscape, yet for various reasons the agency has been unable to fully adapt its regulations to the new realities. This time, I hope, we will get it right. Burdensome rules that have remained essentially intact for more than a decade should not be allowed to continue impeding, or potentially impeding, the ability of broadcasters and newspapers to survive and thrive in the digital era. It is not at all clear, of course, that relaxation or elimination of the existing rules necessarily will lead to a major wave of ownership consolidation. Many have predicted - and a question in the NOI suggests - that updating our regulations may be meaningless because traditional media owners now would prefer to spend their time and precious resources on new, unregulated online outlets rather than acquire any more of the heavily regulated ones. Yet even should this prediction to prove true, it is no reason for the Commission to continue to cling to inaction. We have a statutory obligation to eliminate unnecessary mandates and bring our regulations into line with the modern marketplace."

GOP Responds to Call to Update Communications Act

In response to the May 24 call of by leading Democrats in the House and the Senate to update the Communications Act, Sen Kay Bailey Hutchison (R-TX) said, "Congressional action to update the Communications Act is a clear signal to Chairman Genachowski to stand down on his recently announced plans to reclassify broadband services. Instead of an antiquated regulatory scheme imposed by the FCC, Congress will work to develop a legal and regulatory framework appropriate for our modern communications market. Our nation has experienced robust investment and innovation in the telecommunications sector, and is a global leader in online content and applications because our country does not have a burdensome regulatory environment. Congress is stepping in to address this issue because without our intervention, the FCC's proposed regulations could stifle future investment in broadband services."

Sen John Ensign (R-NV) urged the Federal Communications Commission to abandon its proposal to redefine broadband as a telecommunications service. "Much of our communications law is based on 19th-century railroad regulation, and the last significant update, 14 years ago, barely mentioned the Internet," Sen Ensign said. With the announcement by commerce committee chairmen to revisit the laws, "the FCC should abandon its misguided attempt to upend settled and successful Internet policy by reclassifying broadband service as a common carrier."

DHS official stresses cybersecurity is industry's responsibility

Contractors that fail to live up to security requirements in federal technology contracts should be held accountable, even if the vulnerabilities originated in products or capabilities provided by suppliers, a top Homeland Security Department official said.

In most business situations, "if we have a contractual arrangement and you fail [to meet the requirements], I have legal recourse," said Richard Marshall, director of global cybersecurity management at DHS. "Why wouldn't the same be true when the supply chain [is involved]? I'm buying a product from you, and you represent that it's a product with the following characteristics. If you fail, I have a right to sue you." He noted a number of examples where failures in the supply chain led to serious security implications, including a wave of hard drives infected with viruses that infiltrated the U.S. market from Asia in 2007 and a recent case in which thumb drives were shipped preinstalled with malicious software, eventually leading to the Defense Department imposing a temporary ban on the storage devices. "Buy from an authorized vendor and make sure that vendor has purchased from an authorized vendor," Marshall advised.

Benton

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