May 2013

SoftBank is readying a plan to allow the U.S. government an unusual level of influence over the operations of Sprint Nextel, a concession to ease security concerns raised by the proposed cross-border takeover.

SoftBank has agreed to give the federal government the right to approve one of the directors it names to Sprint's board. That director will be responsible for overseeing national security issues. People familiar with the matter said the government is also seeking the right to approve some of Sprint's equipment purchases and wants the removal of Chinese gear from a Sprint affiliate's network. While the U.S. government has a long history of imposing restrictions on the operations of telecom companies when foreign investors get involved, it is unusual for officials to exert such broad influence over how a company is run, people who follow such deals say. The negotiations shed new light on the government's growing concerns about foreign intrusion into U.S. telecommunications networks and its determination to limit access by Chinese equipment suppliers like Huawei Technologies Co.

[Commentary] In their first official summit, President Barack Obama and Chinese President Xi Jinping will meet next month in California and talk informally for two days, trying to hash out their differences. If the latest White House concern about China is on the table, the two men will spend a lot of time on intellectual property theft. Chinese leaders need to know the boomerang consequences of their tolerance of cybercrime. Many wrongdoers only shape up when they themselves feel the effects of a wrong. At the US-China summit in early June, President Obama needs to lay out the facts about this global problem. Sometimes a mirror is the best weapon.

When Barry Diller unveiled Aereo in February 2012, he said the startup allowing consumers to watch network television on digital devices would break the chains of a “closed cable-broadcast-satellite circle.” Not surprisingly, all of the major TV networks immediately sued. So Aereo turned to R. David Hosp and Michael Elkin to defend the company in court.

Hosp was picked because five years earlier, he persuaded an appeals court to overturn an injunction issued by Judge Denny Chin that had stopped Cablevision’s remote-storage DVR. Diller and Aereo’s leaders knew that the Cablevision ruling raised issues similar to those represented by Aereo and thus would be their best hope of beating the broadcasters. But Aereo’s success was less than assured. Even though the company prevailed at an initial stage by getting a judge to deny the broadcasters’ injunction request, when the case was appealed to the Second Circuit Court of appeals in New York, Aereo’s lawyers received unwelcome news.

Federal Communications Commission Chairwoman Mignon Clyburn announced a significant public-private effort to connect hundreds of thousands of Americans to high-speed broadband as a result of the second release of Phase I funds of the Connect America Fund. The fund will offer up to $485 million to expand fixed broadband in rural America.

The additional investment will leverage millions in additional private investment to quickly serve rural areas currently lacking access to high-speed broadband. This announcement marks the second tranche of Phase I funds to ensure that every American has access to broadband by the end of the decade. This additional investment comes as the FCC moves into Phase II of the Connect America Fund, created in the historic overhaul and reform of the FCC’s traditional universal service program for rural voice service. Phase II will provide ongoing annual support of $1.8 billion for both voice and broadband service, all without increasing growth in the fund. Any funding not accepted in Phase 1 will be used to connect unserved communities in Phase II. Total FCC investment in expansion and support of rural fixed and mobile broadband and voice through universal service is budgeted at $4.5 billion.