June 20, 2013 (Has Record Seizure Chilled Sources?)
BENTON'S COMMUNICATIONS-RELATED HEADLINES for THURSDAY, JUNE 20, 2013
The NSA Versus the Global Internet: How Online Surveillance Could Impact Internet Governance – at Brookings http://benton.org/calendar/2013-06-20/
GOVERNMENT & COMMUNICATIONS
AP Chief: DOJ Record Seizure Has Chilled Sources
Silicon Valley and Spy Agency Bound by Strengthening Web
President Obama: ‘Lives have been saved’ by NSA surveillance programs [links to web]
Which Tech Company Does the NSA Use Most? - analysis
Google: 'We're not in cahoots' with NSA [links to web]
Prying Private Eyes - NYTimes editorial [links to web]
America cedes moral high ground on cyber spying - analysis [links to web]
FBI’s Robert Mueller: Feds need broader surveillance powers [links to web]
US eyes prosecution of foreign cyber thieves [links to web]
Open Data Going Global - press release
PRIVACY
Clear your cache: Websites store personal data on your Web browser
Firefox Web browser to move ahead with ‘Do Not Track’ option
France threatens Google with privacy fines [links to web]
Don’t Let Privacy Concerns Stifle Innovation - CEA op-ed [links to web]
INTERNET/BROADBAND
Web Companies Pay for Internet Fast Lane
Netflix Sought Direct Connection at Cable Firms
Unbalanced Peering, and the Real Story Behind the Verizon/Cogent Dispute - press release
ISPs Should Do The Job They Are Hired to Do - analysis
Sizing Up Big Data, Broadening Beyond the Internet
WIRELESS/SPECTRUM
CUB: Illinois smartphone users overpaying by $1.4B a year [links to web]
The Hard Work of Relationships for Sprint - analysis [links to web]
TELECOM
Verizon's Wireless 'Voice Link' as a Replacement of the Wires? The Downgrading and Disconnecting of America's Communications Networks - op-ed
TELEVISION/RADIO
Public Knowledge: Broadcasters Should Be Free From Content Regulations
Fox to FCC: Get Out of Indecency Regulation
Senators Ask FCC Chairwoman Clyburn to Issue NPRM on Sports Blackout Rule
Time Warner Cable Sued For Passing Lakers-Dodgers Costs On To Customers
Sports Summit: Panelists Say Sports On TV Is Worth Every Penny
MMTC Says FCC Fees Can Be Barrier to Broadcast Diversity
CONTENT
Apple e-book antitrust trial to wrap up [links to web]
The Apple e-book antitrust trial: Enter Barnes & Noble
Apple and Netflix Dominate Online Video
Parents divided on monitoring their kids' Internet use [links to web]
Sizing Up Big Data, Broadening Beyond the Internet
EDUCATION
Los Angeles school board OKs $30 million for Apple iPads [links to web]
Online Classes Fuel a Campus Debate [links to web]
HEALTH
Family Caregivers are Wired for Health - research [links to web]
POLICYMAKERS
FCC nominee Wheeler is more wonk than water-carrier - analysis
COMPANY NEWS
The truth about Google's stock split
General Electric Adds to Its ‘Industrial Internet’ [links to web]
The Obama Campaign’s Digital Masterminds Cash In [links to web]
STORIES FROM ABROAD
France threatens Google with privacy fines [links to web]
Ofcom to probe BSkyB over sports channel supply [links to web]
More people willing to pay for online news [links to web]
GOVERNMENT & COMMUNICATIONS
SEIZURE CHILLED SOURCES
[SOURCE: Broadcasting&Cable, AUTHOR: John Eggerton]
AP President Gary Pruitt says the US government's secret seizure of AP phone records has thrown a scare into some of the iconic news outlet's sources, as well as those of other journalists. He also outlined five things AP wants the government to do to prevent a repeat of what he said was an overbroad sweep that violated both the First Amendment and the Department of Justice’s own subpoena rules: 1) DOJ should recognize the right of the press to advance notice and a chance to weigh in before its records are taken; 2) judicial oversight; 3) update DOJ guidelines that were created before the Internet; 4) a federal shield law "with teeth in it"; and 5) DOJ must formally acknowledge that it will not prosecute any reporter for doing their job.
benton.org/node/154230 | Broadcasting&Cable
Share: Twitter | Facebook
back to top
SILICON VALLEY AND NSA
[SOURCE: New York Times, AUTHOR: James Risen, Nick Wingfield]
When Max Kelly, the chief security officer for Facebook, left the social media company in 2010, he did not go to Google, Twitter or a similar Silicon Valley concern. Instead the man who was responsible for protecting the personal information of Facebook’s more than one billion users from outside attacks went to work for another giant institution that manages and analyzes large pools of data: the National Security Agency. Kelly’s move to the spy agency, which has not previously been reported, underscores the increasingly deep connections between Silicon Valley and the agency and the degree to which they are now in the same business. Both hunt for ways to collect, analyze and exploit large pools of data about millions of Americans. The only difference is that the NSA does it for intelligence, and Silicon Valley does it to make money. The disclosure of the spy agency’s program called Prism, which is said to collect the e-mails and other Web activity of foreigners using major Internet companies like Google, Yahoo and Facebook, has prompted the companies to deny that the agency has direct access to their computers, even as they acknowledge complying with secret NSA court orders for specific data. Yet technology experts and former intelligence officials say the convergence between Silicon Valley and the NSA and the rise of data mining — both as an industry and as a crucial intelligence tool — have created a more complex reality.
benton.org/node/154253 | New York Times
Share: Twitter | Facebook
back to top
WHICH TECH COMPANY DOES THE NSA USE MOST?
[SOURCE: The Atlantic, AUTHOR: Rebecca Greenfield]
Of the nine companies supposedly working with the government on PRISM, six and a half — Yahoo, Facebook, Microsoft (which may or may not include Skype), Apple, and Google/YouTube (sort of) — have disclosed the number of government requests they get including the secret FISA court ones, giving us an idea of which tech company the government turns to most often. Only AOL and PalTalk have stayed mum. Of course, the numbers, only give us part of the story. The government deal required that the techies report a lump figure of all government requests — both FISA and otherwise. Because of that stipulation, Google has refused to participate — so we only know the non-FISA numbers from its annual transparency report. It's not ideal, but we are starting to get an idea of how much data the government asks of these organizations.
benton.org/node/154221 | Atlantic, The
Share: Twitter | Facebook
back to top
OPEN DATA GOING GLOBAL
[SOURCE: The White House, AUTHOR: Nick Sinai, Marina Martin]
Open Data took another leap forward at this week’s G8 Summit in Long Erne, Northern Ireland, as member countries signed an Open Data Charter to spur the release and use of government-held data to advance economic opportunity, spur innovation, and increase accountability around the world. The Open Data Charter outlines principles that member countries—the US, UK, France, Canada, Germany, Russia, Italy, and Japan–will act on, including an expectation that all government data will be published openly by default, and that signatories will work to increase the quality, quantity, and re-use of released data. The G8 Open Data charter builds upon recent historic steps the US has taken domestically. On May 9, 2013, President Obama signed Executive Order 13462, Making Open and Machine Readable the New Default for Government Information, directing efforts to make government-held data more accessible to the public and to entrepreneurs and others as fuel for innovation and economic growth.
benton.org/node/154232 | White House, The
Share: Twitter | Facebook
back to top
PRIVACY
WEBSITES STORE PERSONAL DATA
[SOURCE: Los Angeles Times, AUTHOR: Paresh Dave]
Sensitive financial and healthcare information is stored on Web browsers, making it easily accessible to hackers, a new analysis has found. Web browsers – Chrome, Firefox, Safari and Internet Explorer – often save images and other content on a user's hard drive, so that the content does not need to be downloaded again the next time a user visits the same website. This makes pages load faster. Though websites generally try to block sensitive data from being saved, Baltimore-based security consulting firm Independent Security Evaluators says that many websites are using methods that no longer work. “Non-technical users likely believe that if, after visiting a site and viewing personal data, they logout and close their browsers, that their data will be safe,” ISE said. “Our findings prove this assumption incorrect in 70% of the cases tested.” ADP, Verizon Wireless, Scottrade, Geico, Equifax, PayPal and Allstate were among the websites that saved items such as prescription information, utility bills, check images and credit reports. A hacker could use the information not only in identity theft schemes, but also in gaining access to a user's account. All told, 21 of 30 websites tested by ISE had failed to use the correct technique to block sensitive transmissions from being stored on a computer or smartphone.
benton.org/node/154228 | Los Angeles Times
Share: Twitter | Facebook
back to top
FIREFOX BROWSER’S DO NOT TRACK
[SOURCE: Washington Post, AUTHOR: Craig Timberg]
The maker of the popular Firefox browser is moving ahead with plans to block the most common forms of Internet tracking, allowing hundreds of millions of users to limit who watches their movements across the Web. The decision comes despite intense resistance from advertising groups, which have argued that tracking is essential to delivering well-targeted, lucrative ads that pay for many popular Internet services. When Firefox’s maker, Mozilla, first publicly suggested in February that it might limit blocking, one advertising executive called it “a nuclear first strike” against the industry. Widespread release of the blocking technology remains months away, but Mozilla officials spoke confidently about the growing sophistication of tools they are building to limit the placement of “cookies” in users’ browsers.
benton.org/node/154218 | Washington Post
Share: Twitter | Facebook
back to top
INTERNET/BROADBAND
WEB COMPANIES PAY FOR INTERNET FAST LANE
[SOURCE: Wall Street Journal, AUTHOR: Shalini Ramachandran, Drew FitzGerald]
Streaming video on the Web can be a bumpy experience: The video can slow or stop altogether. To avoid these problems, Netflix, the biggest online video outlet, has been trying to install special equipment directly connected to the networks of Internet access providers. But the yearlong effort hasn't got very far with the major U.S. cable and phone companies. A big reason: some of them have asked Netflix to pay for that access. People close to the company say it doesn't want to set a precedent for itself, although it is in talks with broadband providers about compromise solutions. The standoff highlights a quiet but momentous shift in the relationship between major Web content companies and Internet access providers in the past several years. And at the heart of the debate is an increasingly pressing question: Who is responsible for the Internet's growing costs? According to people familiar with the matter, many Internet content companies -- including Facebook, Google and Microsoft -- have been paying major providers, such as Comcast, Verizon Communications and AT&T, for connections to get faster and smoother access into their networks.
benton.org/node/154259 | Wall Street Journal
Share: Twitter | Facebook
back to top
NETFLIX SOUGHT DIRECT CONNECTION
[SOURCE: Wall Street Journal, AUTHOR: Shalini Ramachandran, Drew FitzGerald]
Netflix’s impasse with cable operators was sparked by its request to put its own servers directly inside their data centers. It was a proposition that makes big cable firms uncomfortable, executives and analysts say, because it could open the prospect of other content companies asking for the same thing. The streaming video service has reached deals to directly connect its specialized technology—which it is offering free of charge—with hundreds of providers around the world. These include smaller U.S. operators like Google Fiber, Cablevision and Cox Communications. But it hasn't come to any agreement with the biggest U.S. companies in the industry—Comcast, Time Warner Cable, AT&T, or Verizon, which between them controlled 62% of the nation's broadband marketplace at the end of 2012, according to SNL Kagan data.
benton.org/node/154258 | Wall Street Journal
Share: Twitter | Facebook
back to top
UNBALANCED PEERING
[SOURCE: Verizon, AUTHOR: David Young]
An article appeared earlier this week at GigaOm, in which the authors “blame Verizon” for failing to accommodate the growing volume of traffic coming from Cogent Communications, another bandwidth provider. Unfortunately, GigaOm didn’t have the full story. The authors accurately describe settlement-free peering as “essentially an arrangement between two bandwidth providers where they send and receive traffic from each other for free.” It goes on to say: “the logic is that the data sent from one network to another is reciprocated.” What the article doesn’t say, however, is that Cogent is not compliant with one of the basic and long-standing requirements for most settlement-free peering arrangements: that traffic between the providers be roughly in balance. When the traffic loads are not symmetric, the provider with the heavier load typically pays the other for transit. This isn’t a story about Netflix, or about Verizon “letting” anybody’s traffic deteriorate. This is a fairly boring story about a bandwidth provider that is unhappy that they are out of balance and will have to make alternative arrangements for capacity enhancements, just like any other interconnecting ISP.
benton.org/node/154257 | Verizon
Share: Twitter | Facebook
back to top
ISPs SHOULD DO THE JOB THEY ARE HIRED TO DO
[SOURCE: Public Knowledge, AUTHOR: John Bergmayer]
[Commentary] Since people rely on the Internet for such a wide range of services today, it's important that their Internet connections work well. This means that people should be able to access the broadband services of their choice using the connections they pay for--and those services should be fast, reliable, and low-latency. To some extent, this means that consumer Internet service providers (ISPs) need to do what it takes to make sure the popular services their customers demand--the reason they subscribe to broadband to begin with--work well. This is not about an ISP looking into the traffic a customer has requested (or is sending upstream) and giving it differential treatment. It's one level higher, and it's about whether an ISP will connect with other networks on the Internet in a way that's designed to enhance its customers' experiences, or in a way that is motivated by business interests that do not align with those of the customer. In some sense, to a customer, these are distinctions without a difference. All that matters to a customer is whether she can access the Internet and use the services she wants to use without having to know the details of what makes it all work. But ISPs should always remember that they are paid by their customers to provide Internet access and that they have a positive responsibility to make the experience a good one.
benton.org/node/154233 | Public Knowledge
Share: Twitter | Facebook
back to top
TELECOM
DOWNGRADING AND DISCONNECTING AMERICA’S COMMUNICATIONS NETWORKS
[SOURCE: The Huffington Post, AUTHOR: Bruce Kushnick]
[Commentary] Imagine waking up after a storm and your wired phone line is dead. You've kept it because the cell phone service isn't reliable or sounds like you are under water. Maybe you really wanted something more reliable in case of an emergency. You check and the burglar alarm isn't working either. You go to your home office and find that the DSL line is out as well. You walk over to your neighbor's house and their services are also out. You call the phone company and they ask you to 'leave a message'. You keep calling and they tell you that they are not going to fix any of your services; they offer to give you a wireless replacement called Voice Link. Then they inform you that it can't do DSL, the burglar alarm won't be fixed and they are not liable if your E911 service doesn't work. Welcome to the future of telecommunications in the US.
benton.org/node/154227 | Huffington Post, The
Share: Twitter | Facebook
back to top
TELEVISION/RADIO
FREEING BROADCASTERS FROM COBTEBT REGULATION?
[SOURCE: Broadcasting&Cable, AUTHOR: John Eggerton]
"Whatever the future of broadcasting might be, there is no question that broadcasters have the same First Amendment rights as other speakers." That was the message to the FCC from Public Knowledge, TechFreedom, Electronic Frontier Foundation and the Center for Democracy & Technology in comments filed at the Federal Communications Commission. Public Knowledge et al want the FCC to get out of the content regulation business entirely, and see indecency regulations as censorship. "The Commission's proposal that it will only address 'egregious' incidents of indecency is a step in the right direction, and its recent dismissal of more than a million unmeritorious complaints against broadcasters demonstrates a renewed attention to the First Amendment rights of broadcast speakers," they told the FCC. But they suggest that tweaking regulations is just putting a better caliber of lipstick on the same old pig.
benton.org/node/154256 | Broadcasting&Cable
Share: Twitter | Facebook
back to top
FOX: GET OUT OF INDECENCY REGULATION
[SOURCE: The Wrap, AUTHOR: Ira Teinowitz]
As other broadcasters urged the Federal Communications Commission to ease up on indecency regulations, Fox urged it to quit regulating broadcast indecency altogether. “Fox urges the commission to conclude it is legally required and logically bound to cease attempting broadcast indecency limits once and for all,” Fox Entertainment Group and Fox Television Holdings said in a filing. “Time and technology have moved inexorably forward, but the commission’s untenable effort to define indecent content through a hodgepodge of inconsistent and uneven rulings remain stuck in a bygone era.” Fox also said that if the FCC "defies the Constitution and common sense" and continues to regulate indecency, it should do so narrowly.
benton.org/node/154244 | Wrap, The
Share: Twitter | Facebook
back to top
SPORTS BLACKOUT RULE
[SOURCE: Broadcasting&Cable, AUTHOR: John Eggerton]
In a letter to Acting Federal Communications Commission Chairwoman Mignon Clyburn, Sens John McCain (R-Z) and Richard Blumenthal (D-CT) ask the FCC to act on a longstanding petition to lift its sports blackout rule. The rule prevents cable or satellite providers from carrying an NFL game when the over-the-air broadcast is blacked out due to lack of attendance at the game. In October 2011, the Sports Fan Coalition asked the FCC to lift the ban, saying it would be a "pro-fan, pro-consumer, deregulatory action serving the public interest by expanding the availability of sports to the public without adding any regulatory compliance costs to the private sector."
benton.org/node/154234 | Broadcasting&Cable
Share: Twitter | Facebook
back to top
TWC SUED
[SOURCE: Deadline Hollywood, AUTHOR:]
Time Warner Cable (TWC) raised a lot of eyebrows when it paid $3 billion for TV rights to the LA Lakers for the next 20 years and then a record $8 billion for LA Dodgers rights for the next 25 years. When the Dodgers deal launches in 2014, the cable company will have four new networks for all that content. But the plan to partially pay for those new channels via boosting TWC customers’ fees — even from Southern California users who don’t want the channels and have no way to opt out of the bundles — apparently is not sitting well. Some of those customers filed a class action suit in LA Superior Court targeting TWC, the Lakers and the Dodgers for restitution and injunctive relief for violating California Business & Professions Code 172000. The complaint says unless restrained by the court, TWC will “pass these costs along to its total Southern California subscriber base, resulting, directly or indirectly, in additional fees passed onto subscribers beginning with the 2014 season of approximately $4-$5 per month per subscriber … which together add (or will if unrestrained) $100 per year to the subscriber’s TWC bill”. The plaintiffs provided more math with eye-popping numbers, writing, “In sum, TWC will extract from its customer base primarily in Southern California at least $11 billion to recoup its investment, and approximately 60% of this amount, or $6.6 billion, is extracted from individuals who do not want and do not watch and do not want to pay for Lakers and Dodgers telecasts and who, if given the option to do so, would opt out of such telecasts.” The teams are part of the suit, according to the filing, because they knew the cost of the new channels — TWC SportsNet and TWC Deportes for the Lakers and in next year SportsNet LA for the Dodgers — would be passed on to consumers, even nonfans.
benton.org/node/154226 | Deadline Hollywood
Share: Twitter | Facebook
back to top
SPORTS WORTH EVERY PENNY
[SOURCE: Multichannel News, AUTHOR: Kent Gibbons]
Sports programming deserves all the money it gets and then some, at least from the perspective of sports networks. “Going forward, I would argue that the value of sports is increasingly geometrically,” Tracy Dolgin, CEO of YES Network, said during a panel session at the Sports Business & Technology Summit in New York. The reasons are well known: most sports viewing is done live and, as Dolgin said, you can watch any TV show you want on Netflix, other "over-the-top" services or even on DVD if you are willing to wait long enough. “Sports is not: sports is available one way. It’s the product that makes you keep your cable subscription.” What’s more, multichannel video distributors sell more than just video – but “there’s nothing better than video to hold a broadband customer,” Dolgin said.
benton.org/node/154216 | Multichannel News
Share: Twitter | Facebook
back to top
FCC FEES AND DIVERSITY
[SOURCE: Broadcasting&Cable, AUTHOR: John Eggerton]
The Minority Media and Telecommunications Council (MMTC) told the Federal Communications Commission that if it wants to promote diversity, one way would be waiving or deferring regulatory and application fees, which it sees as yet another barrier to minority entry into the broadcast market. MMTC pointed out that the FCC's own diversity committee endorsed the regulatory fee break for some broadcasters and the application fee waiver for small businesses and nonprofits. It also said that the FCC's snail's pace on new diversity-promoting policies, combined with the absence of a tax certificate policy to encourage investment in diversity, is already accelerating the decline of minority ownership.
benton.org/node/154220 | Broadcasting&Cable
Share: Twitter | Facebook
back to top
CONTENT
B&N AND APPLE TRIAL
[SOURCE: Fortune, AUTHOR: Philip Elmer-Dewitt]
Barnes & Noble, the last of the nationwide brick-and-mortar bookstore chains, plays only a bit part in the Department of Justice's antitrust case against Apple. It was one of the "other retailers" that, alongside Amazon, was forced to change its business model when Apple joined the cabal of book publishers conspiring to raise the price of e-books. So there was an element of cognitive dissonance in the Manhattan federal courtroom where the case is being tried when Theresa Horner, Barnes & Noble's VP of digital content, was sworn in as a witness for the defense and began to tell the court what the e-book market looked like in late 2009 and early 2010 from her point of view. It was a mess. Barnes & Noble had put an e-book app on the iPhone App Store that summer as a way to prime the pump before it introduced the Nook, the e-book reader that was to compete with Amazon's Kindle. But it soon discovered that to sell New York Times bestsellers it had to match Amazon's $9.99 price. Because Barnes & Noble was typically paying publishers $13 for the e-book rights to $26 books, that meant it was losing $3 with every sale.
benton.org/node/154214 | Fortune
Share: Twitter | Facebook
back to top
ONLINE VIDEO
[SOURCE: New York Times, AUTHOR: Brian Chen]
Now that the video rental store is all but dead, many people are turning to Internet services to get TV shows and movies. By some measures, Apple is No. 1 in online video, but by others, Netflix is leading. Apple released new statistics on the videos it provides in the iTunes Store. The company said customers were downloading 800,000 television episodes and 350,000 movies a day. In a recent study, the NPD Group, a research firm, said Apple was by and large the leader for home video downloads. For television shows, iTunes accounted for 67 percent of this market in 2012, and Microsoft’s Xbox video service was a distant second with 14 percent of the market, NPD said. For movies, iTunes had a 65 percent share of the market, with Amazon and Microsoft far behind at 10 percent each, it said. Another popular method for watching movies and TV online is paying a subscription and streaming as many as you want. In the subscriptions-based video streaming market, Netflix is dominant, with a 90 percent share, and Hulu Plus and Amazon are still hardly relevant. To put things in perspective, subscription-based streaming is the most popular method for watching online video. For all the movies watched at home in the first quarter of 2013, 19 percent of consumers watched a movie using a subscription-based service like Netflix, and 5 percent downloaded a movie rental from an on-demand service like iTunes, according to Russ Crupnick, an NPD analyst who follows the online video industry. About 74 percent of consumers watched a movie on a DVD or Blu-ray disc they bought or rented, he said.
benton.org/node/154235 | New York Times
Share: Twitter | Facebook
back to top
BIG DATA REPORT
[SOURCE: New York Times, AUTHOR: Steve Lohr]
[From Big Data 2013 -- A special New York Times section on the business and culture of big data.] Science, politics, crime prevention, public health, sports and industries as varied as energy and advertising are all being transformed by data-driven discovery and decision-making. The pioneering consumer Internet companies, like Google, Facebook and Amazon, were just the start, experts say. Today, data tools and techniques are used for tasks as varied as predicting neighborhood blocks where crimes are most likely to occur and injecting intelligence into hulking industrial machines, like electrical power generators. Big Data is the shorthand label for the phenomenon, which embraces technology, decision-making and public policy. Supplying the technology is a fast-growing market, increasing at more than 30 percent a year and likely to reach $24 billion by 2016, according to a forecast by IDC, a research firm. All the major technology companies, and a host of start-ups, are aggressively pursuing the business. Demand is brisk for people with data skills.
benton.org/node/154250 | New York Times | Big Data 2013 | NYTimes – privacy
Share: Twitter | Facebook
back to top
POLICYMAKERS
TOM WHEELER
[SOURCE: Fortune, AUTHOR: Dan Mitchell]
"Competition is a power unto itself that must be encouraged. Competitive markets produce better outcomes than regulated or uncompetitive markets." That's a platitude that could easily have been uttered in the late 1990s, when financial markets were being deregulated. Or during the 1970s, when the airlines were being deregulated. But it was uttered on June 18, by Tom Wheeler, President Obama's nominee as chairman of the Federal Communications Commission. Not that the statement is entirely wrong, of course. But it's understandable that some people will be a bit concerned when it's spoken by a guy who, during the same Senate Commerce Committee hearing on his nomination, cited his experience as a lobbyist for some of the industries he'll soon be charged with regulating as a reason he'll be a great chairman. And it's understandable that people will be that much more concerned about the fact that Wheeler was a top bundler for both of Obama's presidential campaigns, raising about $700,000 in total. Wheeler's actual view on regulation seem to be a lot more nuanced than his statement would suggest. At another point in his testimony, he characterized his view of regulation as "protecting competition with appropriate oversight to see that it flourishes."
benton.org/node/154231 | Fortune
Share: Twitter | Facebook
back to top
COMPANY NEWS
GOOGLE’S STOCK SPLIT
[SOURCE: Fortune, AUTHOR: Miguel Helft]
A year ago, Google CEO Larry Page sought to strengthen and extend the founders' majority control, proposing a stock split that would create a new class of stock with no voting rights. The details were arcane but the effect clear: Page and Sergey Brin would continue to call the shots, even though they currently own about 15% of Google's equity. Not surprisingly, advocates of shareholder rights universally panned the move. After all, the owners of Google's new shares would have few rights beyond their ability to sell their shares. A Massachusetts pension fund sued to block the split, alleging the founders and the board had breached their fiduciary duty to shareholders. Google's board approved a proposed settlement of the lawsuit. The particulars of the settlement are complicated, but it essentially calls for Google to compensate the owners of the new class of shares if those shares fall in value below those of Google's other shares. If a court approves the plan, the stock split is likely to go forward. Page's undemocratic style of governance has hardly been a handicap. A $1,000 investment in the company at the IPO would now be worth about $10,500. Google shares closed above $900 on Tuesday, just shy of their all-time high of $920, giving the company a market value of nearly $300 billion. Since Page announced the controversial stock split last year, shares have risen 38%. Google's shareholders may be disenfranchised, but they are not unhappy. None of this is to say that Google has been setting a good example.
benton.org/node/154213 | Fortune
Share: Twitter | Facebook
back to top