March 2012

Sen McCain predicts "huge" U.S. campaign finance scandals

The U.S. campaign finance system is so heavily influenced by big-spending interest groups and wealthy individuals that it will take "huge scandals" to change it - and those scandals are looming, Sen John McCain (R-AZ) said.

He gave a blistering critique of U.S. Supreme Court justices over a 2010 ruling that lifted limits on political fundraising and spending by corporations, unions and other non-campaign groups by equating their rights to those of individual citizens. The decision led to the creation of "Super PACs," political action committees that have had outsized impacts on state and local political campaigns and are changing the face of the 2012 presidential election by dumping roughly $100 million into ads, most of which have attacked candidates.

Clearwire-Fueled Freebie Services Threaten AT&T, Verizon

AT&T and Verizon Wireless, working to wring more profit from their next-generation data networks, face a new obstacle: Smaller competitors are offering similar services for free.

FreedomPop, a company funded by Skype founder Niklas Zennstrom, will sell an iPhone case that gives consumers free access to 1 gigabyte of data from Clearwire Corp.’s 4G wireless network. Another Clearwire partner, United Online’s NetZero, is offering 200 megabytes a month for free for as long as 12 months -- so long as users buy a wireless modem, which can take the form of a small USB stick that plugs into the device. The freebie approach lets new carriers hook bargain-hunting customers -- with the aim of getting them to pay for extra bandwidth later -- while helping Clearwire recoup some of the billions of dollars spent building its network. For Verizon and AT&T, the top U.S. wireless carriers, the move threatens the combined $12.2 billion they took in from data last quarter.

CBS Heads to Upfront With Packaged-Goods-Specific Show Ratings

CBS is launching packaged-goods-specific ratings for the upcoming network upfronts, encouraging marketers in 20 categories to buy space based on how heavily audiences consume products rather than on traditional viewership measures. The strategy will help ad buyers see that even though "Blue Bloods," for example, fares relatively poorly with the traditional female 18-to-49-year-old demographic, it is among the best at delivering heavy buyers of nonalcoholic beverages.

"The programs will be ranked to look like a Nielsen rating," said David Poltrack, chief research officer at CBS Corp. "In terms of whether guarantees or negotiations are going to be based on that, that's ultimately for the market to test." The system relies on Nielsen Catalina Solutions Volumetrics, which combines data from Nielsen's TV ratings and online measurement panelists anonymously matched with their purchase data from loyalty-card programs run by Catalina Marketing. CBS began pilots using the Nielsen Catalina data last year. Purchase-based segments should prove more predictable than age-sex demographics, according to Mr. Poltrack, but it could be unwieldy to run an upfront market using a host of product-specific currencies.

FCC Announces Auction Experts to Advise on Incentive Auction Design and Implementation

The Federal Communications Commission announced the retention of leading experts in auction theory and implementation, one of its first significant steps to implement new incentive auction authority passed by Congress in late February. The advice of prize-winning auction and IT experts from Auctionomics, Power Auctions and MicroTech will serve as valuable input to the Commission as it moves forward to design and implement incentive auctions.

The experts have earned top prizes in their fields of economics. The team of auction experts is led by Auctionomics Chairman Paul Milgrom, the Ely Professor of Humanities and Sciences in the Department Economics at Stanford University, and a member of the National Academy of Sciences and the American Academy of Arts and Sciences. Milgrom is the recipient of Nemmers Prize in Economics for contributions dramatically expanding the understanding of the role of information and incentives in a variety of settings, including auctions, the theory of the firm, and oligopolistic markets. He is widely regarded as one of the foremost thinkers in auction theory and design, and he helped create the first FCC spectrum auction design, which has served as a blueprint for similar auctions worldwide.

Also with Auctionomics are Professors Jonathan Levin and Ilya Segal of Stanford University. Professor Levin is the Chair of the Department of Economics at Stanford, and a recipient of the John Bates Clark Medal as the economist under the age of forty who has made the most significant contribution to economic thought and knowledge. Ilya Segal is the Anderson Professor in the Humanities and Sciences at Stanford, and is a recipient of the Compass-Lexecon prize for the most significant contribution to the understanding and implementation of competition policy.

Power Auctions LLC is led by Lawrence Ausubel, a Professor of Economics at the University of Maryland. Professor Ausubel is a widely published author on auctions, industrial organization, and financial markets, and is a leading expert on efficient auction design. Power Auctions, based in Washington DC, has extensive experience in the design and implementation of high-profile auctions around the globe and currently provides spectrum auction design and software services to the Governments of Canada and Australia.
MicroTech, a leading technology and systems integrator for critical infrastructure and information technology solutions, will provide state-of-the-art security, systems development and implementation support directly tied to their cloud computing solutions.

FTC Charges That Security Flaws in RockYou Game Site Exposed 32 Million Email Addresses and Passwords

The operator of a social game site has agreed to settle charges that, while touting its security features, it failed to protect the privacy of its users, allowing hackers to access the personal information of 32 million users.

The Federal Trade Commission also alleged in its complaint against RockYou that RockYou violated the Children's Online Privacy Protection Act Rule (COPPA Rule) in collecting information from approximately 179,000 children. The proposed FTC settlement order with the company bars future deceptive claims by the company regarding privacy and data security, requires it to implement and maintain a data security program, bars future violations of the COPPA Rule, and requires it to pay a $250,000 civil penalty to settle the COPPA charges. The case against RockYou is part of the FTC's ongoing effort to make sure companies live up to the privacy promises they make to consumers, and that kids' information isn't collected or shared online without their parents' consent. According to the FTC complaint, RockYou operated a website that allowed consumers to play games and use other applications. Many consumers used the site to assemble slide shows from their photos, using a caption capability and music supplied by the site. To save their slide shows, consumers had to enter their email address and email password. The FTC's COPPA Rule requires that website operators notify parents and obtain their consent before they collect, use, or disclose personal information from children under 13. The Rule also requires that website operators post a privacy policy that is clear, understandable, and complete. The FTC alleged that RockYou knowingly collected approximately 179,000 children's email addresses and associated passwords during registration – without their parents' consent – and enabled children to create personal profiles and post personal information on slide shows that could be shared online. The company asked for kids' date of birth, and so accepted registrations from kids under 13. In addition, the company's security failures put users' including children's personal information at risk, according to the FTC.

The FTC charged that RockYou violated the COPPA Rule by:

not spelling out its collection, use and disclosure policy for children's information;
not obtaining verifiable parental consent before collecting children's personal information; and
not maintaining reasonable procedures, such as encryption to protect the confidentiality, security, and integrity of personal information collected from children.

Committee Finds Efforts to Secure Nation’s Information Technology Systems Inadequate

The House Commerce Subcommittee on Oversight and Investigations continued its hearing series examining current cyber threats and vulnerabilities to our nation’s infrastructure. The hearing entitled, “IT Supply Chain Security: Review of Government and Industry Efforts” assessed potential threats and vulnerabilities to federal information technology (IT) systems and examined the steps a number of agencies have taken to address and minimize IT supply chain related security risks. In February 2011, the Director of National Intelligence noted that there has been a dramatic increase in cyber activity targeting U.S. computers and systems, including more than tripling of the volume of malicious software since 2009.

The Corporation for Public Broadcasting Awards Grant to NPR for Foreign News Coverage

The Corporation for Public Broadcasting (CPB) announced a $500,000 grant to National Public Radio to support continued foreign news reporting from some of the world’s most challenging regions in the Middle East, Africa and Asia.

NPR’s foreign correspondents are on the front lines, reporting on historic events – from the uprisings in the Middle East and North Africa to the earthquake and ensuing tsunami and nuclear crisis in Japan. Foreign coverage requires considerably more investment than domestic coverage in the form of travel, equipment, technical support and local staff, such as translators and expeditors. Safe housing, security training and protective equipment are standard safeguards for reporters and bureau staff. A series of on-going, major international events this past year has put a strain on NPR’s resources. The grant from CPB will help support journalists and producers stationed across five key NPR foreign bureaus - Jerusalem, Cairo, Beirut, Shanghai and Beijing. The funding will enable these journalists to continue reporting feature stories for broadcast, web and mobile platforms. NPR currently maintains 17 foreign news bureaus around the world – more than any other broadcast news organization in the United States—plus three U.S.-based correspondents who cover foreign affairs and travel frequently. In recent years, the organization opened a new bureau in Islamabad, Pakistan, making it one of the few news organizations with bureaus in Iraq, Afghanistan and Pakistan.

RIAA: Consumers are shelling out for subscription music

Subscription music services saw revenue increase 13.5 percent last year, while the number of the sector's paying customers climbed 18 percent.

That's according to the Recording Industry Association of America, which yesterday released year-end music shipment statistics for 2011. The RIAA reported that subscription revenue went from $212 million in 2010 to $241 million last year. The number of users rose from 1.5 million to 1.8 million during the same period. Translation: Spotify, Rhapsody, and to a far lesser extent the other subscription music services appear to be grabbing market share. Members of some well-known bands or their managers have criticized these services recently and have declined to distribute through them for allegedly failing to adequately compensate artists. The services have defended themselves by asking for a little patience.

Why does Apple care so much about SIM cards anyway?

[Commentary] Why does Apple care about SIM card design at all? Its interest in smaller SIM cards is certainly related to design and usability — a SIM card that’s 60 percent smaller than the current micro-SIM can mean a smaller, slimmer smartphone. And in a power-hungry device like an iPad, the space leftover from a smaller SIM could go to larger batteries or other components. But there’s more in it for Apple.

If it’s able to control the SIM card in phones, it holds more sway over the subscriber. My colleague Stacey Higginbotham has covered this extensively, and was first with evidence that Apple is aiming to cut out the carriers eventually with even tinier embeddable SIM cards made by Gemalto. If they succeed in embedding these cards, iPhone or iPad buyers could buy the device direct from Apple and simultaneously choose the carrier they want to use, and Apple could activate service right at the point of purchase. It also means easier roaming on other networks. Yes, carriers would have to allow Apple devices to operate on their networks, so Apple has to have support from some of them to pull this off. And that doesn’t seem to be happening in the immediate future.

What book publishers should learn from Harry Potter

After months of anticipation, the e-book versions of author J.K. Rowling’s phenomenally successful Harry Potter series are now available through Rowling’s Pottermore online unit and Rowling has chosen to do a number of interesting things with her e-books, including releasing them without digital-rights management restrictions.

Obviously, the success of the Potter series has given Rowling the ability to effectively dictate terms to just about anyone, even a powerhouse like Amazon, but there are still lessons that other book publishers should take from what she is doing. One of the encouraging things about the Pottermore launch is that the books will be available on virtually every platform simultaneously, including the Sony Reader, the Nook from Barnes & Noble, the Kindle and Google’s e-book service (which is part of Google Play). And in keeping with Pottermore’s status as a standalone digital bookstore in its own right, users will be able to buy the books from the Rowling site and then send them to whichever platform they wish.

Benton

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