Wall Street Journal

How the Web's Fast Lanes Would Work Without Net Neutrality

If US regulators end up allowing telecom companies to set up fast lanes on the public Internet, companies that make the needed gear say the remaining service would inevitably get a little slower.

The idea of a fast lane, or "paid prioritization," means preferred traffic moving inside broadband providers' networks would be ushered through congested spots first.

The process works a bit like cars moving through a tollgate. When packets of data show up, the equipment that routes them along their way checks to see which ones have paid for priority access and slots those packets into faster moving queues. The rest would have to wait a little longer than they would have otherwise.

"You can reallocate what's in the pipe, but it can't get wider," said Don Bowman, chief technology officer for network-gear maker Sandvine. As an alternative, broadband providers could instead route traffic down separate channels for "managed services" that telecom and cable companies currently use to carry their own services, like video.

AT&T Calls on 'Deal Team'

When AT&T approached Wall Street about its plan years ago to buy T-Mobile, it shocked bankers with the amount of work it had already done.

"When we got their materials, you sort of threw up your hands and said, 'OK, so what are we going to do on this?'" said one banker who advised on the failed attempt.

The work was the product of AT&T's internal merger team, a group of about 20 people that the company has turned to again and again as it built itself up from a Midwestern regional carrier into the country's largest telecom by revenue. Now, the team is active again with talks to buy satellite-television provider DirecTV in a deal that could be valued at nearly $50 billion, people familiar with the matter said.

Working through such options falls in large part to a deal team that is unusually powerful within the company and unusually independent when it comes to working with Wall Street. The group has completed more than a quarter of a trillion dollars in acquisitions over the past two decades, including debt, according to data from Dealogic.

The team also weighs in on key business decisions. It was called in to review AT&T's initial deal with Apple to carry the iPhone, giving a crucial thumbs-up to the unusual agreement, a person close to the decision said. Its leader, Rick Moore, is present at most AT&T board meetings, other people familiar with the matter said.

Wider Virtualization Moves Into the Network

Emerging technology that replaces a network's hardware with software may help companies lower their IT costs and potentially provide a platform for new products and sources of revenue.

The transformation under way in the network is an extension of virtualization, which began a generation ago with mainframes and started to have a big impact on servers about a decade ago. That process has been meaningful for businesses from the very start, and CIOs expect that the significance of network virtualization will be just as big.

"Server virtualization was so impactful and led to more cloud computing. Networking people will tell you that network virtualization will be even bigger," American Airlines. CIO Maya Leibman said. IT leaders at companies such as American, Royal Dutch Shell and Mazda North America say they are beginning to explore, and in some cases implement, virtual networks within their own premises.

Telecom providers are rolling out wide area virtual networks, which will have even broader consequences. AT&T said in May that it planned to deploy the first of its virtual network products to big companies by June.

"Now you are talking about going beyond your data center," Leibman said. "Some will ask, why do you even need servers at all? The network can be the backbone of everything that happens in technology. Costs, speed to market and paradigms will be changed."

Why Didn’t Apple Join Opposition to FCC Net Neutrality Proposal?

More than 100 technology companies signed a letter taking issue with Federal Communications Commission Chairman Tom Wheeler’s proposed rules to allow providers of broadband connectivity to charge content providers for access to the fastest lanes on the Internet.

The one technology giant conspicuous by its absence? Apple. The list included prominent Apple rivals such as Google, Amazon, Facebook and Microsoft.

An Apple spokeswoman declined to comment on why it did not sign onto the letter. One possible explanation: The Wall Street Journal reported in March that Apple and Comcast are in talks for a streaming-television service that would use an Apple set-top box and get special treatment on Comcast’s cables to ensure it bypasses congestion on the Web.

NBC Extends Olympic Rights Through 2032

Comcast's NBCUniversal extended its deal to broadcast the Olympic Games through 2032, paying $7.75 billion for an additional 12 years of US broadcast rights, the International Olympic Committee said.

Comcast will pay $7.65 billion for the broadcast rights across all media platforms -- including free-to-air and subscription television, Internet and mobile -- from 2021 to 2032, plus an additional signing bonus of $100 million.

NBC has broadcast every summer Olympics since 1988, making it one of the network's signature franchises. By 2032, NBCU will have covered a total of 23 editions of the Olympic Games, since its first Games broadcast in Tokyo in 1964, the IOC said.

WSJ/NBC Poll Suggests Social Media Aren't Replacing Direct Interactions

Social media and online networking have exploded over the last 15 years, but they don't seem to be replacing direct social connections among neighbors or family members around the dining room table, a new Wall Street Journal/NBC News poll has found.

More than two-thirds of Americans have a social media profile and shop online, and more than 60% pay bills online, the survey found. But people are still nearly as likely to have frequent family dinners as they were 15 years ago. The poll findings paint a broad portrait of how Americans live and communicate with each other, and how their interactions have changed since 1999, when similar lifestyle questions were asked by Wall Street Journal and NBC News pollsters.

Bill McInturff, the Republican pollster who conducted the survey with Democrat Fred Yang, said the results seemed to counter the widespread concern that the proliferation of online connections was undermining direct social contact.

Despite the growth of online culture, the poll found that 58% said they had a family dinner at least five times a week -- about the same as the 60% who said so in June, 1999. Married couples with children were the demographic group most likely to have family dinners.

Looking beyond family life, the poll found that 69% of Americans said they knew their neighbors well, compared with 73% who said so in 1999. Neighborliness didn't seem to diminish among people who make connections through social media. Among adults between 18 and 49 years old, 68% of people with a social media profile said they knew their neighbors well, compared with 57% of people without a social media profile.

Samsung's New Challenge: Rising Component Costs

As the world's biggest smartphone maker tries to keep profits up in its mainstay mobile phone business, one key challenge will come from an unexpected place: the rising costs of the components that go into its devices.

Samsung's first-quarter earnings showed that its smartphone margins remained flat from 2013, highlighting the need for the South Korean technology giant to keep costs low amid uncertain demand for its new flagship Galaxy S5 smartphone. Samsung executives said that the Galaxy S5 smartphone, which officially went on sale in early April, was received positively by the market and would likely do better than the previous model, without elaborating.

But analysts said margins could well slip this quarter. The company packed its latest phone with pricey features -- such as an improved camera, a fingerprint scanner and a heart-rate sensor -- hoping to give it a leg up against a crowded field of rivals that, like Samsung's devices, run Google's Android operating system.

"Despite increasing sales volumes, a decline in profits seems inevitable due to falling prices and intensifying competition," said Greg Roh, an analyst with HMC Investment Securities in Seoul. Not helping Samsung's cause is the company's continued reliance on its massive advertising budget to keep its sales humming, and the rising cost of making its own devices.

New FCC Spectrum Screen Would Count All of Sprint's Airwaves

Sprint will soon become a much bigger holder of wireless airwaves in the eyes of US telecom regulators, a shift that could make it harder for the carrier to do spectrum deals while easing the process for its rivals.

The Federal Communications Commission said it plans to adjust the way it counts airwaves when setting the so-called spectrum screens that trigger additional scrutiny of mergers or spectrum deals.

The bulk of the spectrum being added to the screen -- 101 megahertz of the 128.5 megahertz in total -- is primarily controlled by Sprint and not currently counted.

The proposed change is expected to be voted on at the FCC's May 15 meeting. The FCC applies extra scrutiny to deals when a carrier owns more than a third of all available spectrum in a given market or when the deal would push it over that mark.

The new screens would cause Sprint, the country's third-largest carrier by subscribers, to hit or exceed the one-third threshold in most major markets. The new limits could benefit Verizon Communications, AT&T and T-Mobile US, because they would own a smaller percentage of the total. That would make it less likely they would trigger extra scrutiny when doing smaller spectrum deals.

US Appeals Court Issues Mixed Ruling Reviving Apple Patent Claims Against Motorola Mobility

A federal appeals court revived Apple's legal claims that handset maker Motorola Mobility copied its iPhone patents, but the ruling could weaken a separate case Apple is pressing against Samsung Electronics.

The US Court of Appeals for the Federal Circuit ruled that an influential Chicago-based federal judge made multiple legal errors when he dismissed competing patent-infringement claims by Apple and Motorola in 2012. The court said Judge Richard Posner wrongly excluded expert testimony in a case where Apple and Motorola were each pressing claims the other owed monetary damages for infringement.

The ruling means that Apple will have a new chance to argue Motorola infringed its patents. In the latest case, Apple is seeking $2.2 billion from Samsung for infringing five patents. Samsung has countered by saying that Apple infringed two of its patents and is seeking $7 million.

The FCC's 'Reasonable' Internet Plan

[Commentary] Imagine if businesses had to go to after every sale so a federal agency could pass judgment on whether the deal is "commercially reasonable."

Readers in heavily regulated industries may say they already do. But it's not the way to prosperity and it's not the model that has allowed the Internet to become an engine of the US economy. Yet new Chairman Tom Wheeler previewed the Federal Communication Commission's latest attempt to enforce "net neutrality" rules on Internet service providers. These are the companies like AT&T and Comcast that run wires into homes and businesses to deliver Internet connections.

A long-standing dream among liberal activists is to prevent these firms from charging higher prices to heavy consumers of Internet bandwidth. The most zealous promoters of this idea don't even believe that capacity hogs like Netflix or Google's YouTube should pay extra for all the video they send over digital communications networks (though the companies themselves have more nuanced positions). The net-neuts also want new rules preventing networks from blocking or discriminating against websites -- say, by slowing down connections to websites that aren't affiliated with the network.

Although Congress has never appointed the FCC to run the Internet, Chairman Wheeler will now try a third time to sneak this idea past the judiciary and fulfill a 2008 campaign promise from President Obama. Chairman Wheeler will likely present his proposal, which he briefly described in a blog post, as a compromise between free markets and the heavy-handed regulation that the FCC has always applied to the traditional telephone system. And our liberal friends are already howling that to allow any variable pricing will relegate average customers to an endless Internet traffic jam while well-heeled companies take the fast lane on a private cyber toll road.