January 2011

Math That Moves: Schools Embrace the iPad

As students returned to class this week, some were carrying brand-new Apple iPads in their backpacks, given not by their parents but by their schools. A growing number of schools across the nation are embracing the iPad as the latest tool to teach Kafka in multimedia, history through “Jeopardy”-like games and math with step-by-step animation of complex problems.

As part of a pilot program, Roslyn High School on Long Island handed out 47 iPads on Dec. 20 to the students and teachers in two humanities classes. The school district hopes to provide iPads eventually to all 1,100 of its students. The iPads cost $750 apiece, and they are to be used in class and at home during the school year to replace textbooks, allow students to correspond with teachers and turn in papers and homework assignments, and preserve a record of student work in digital portfolios.

Facebook Deal Spurs Inquiry

The Securities and Exchange Commission has begun examining whether disclosure rules for privately held firms need to be rewritten as a result of recent deals allowing investors to buy shares in Internet companies such as Facebook Inc. and Twitter Inc., according to people familiar with the situation.

The review is at an early stage, these people cautioned, and SEC officials looking at the recent deals haven't concluded that any of them run afoul of the 47-year-old rules governing private companies. The rules require firms with 500 or more shareholders of record in a given type of stock to publicly disclose certain financial information. The requirement is designed to protect investors from risking money on companies that say little about their operations and performance. Still, Facebook's agreement with Goldman Sachs Group Inc. to create an investment vehicle that will allow some of the securities firm's richest clients to buy as much as $1.5 billion of equity in Facebook is causing the SEC to re-examine a key dividing line between public and private companies. While SEC officials could decide the rules need to be updated in order to provide adequate protection for investors, the agency is trying to balance that with the demands of private companies that want to raise capital. As part of the investigation, SEC officials plan to scrutinize special-purpose vehicles like the one being created by Goldman and Facebook to determine if they are being designed primarily to circumvent the so-called 500-shareholder rule.

Why Facebook is in no hurry to go public

"Facebook is in an enviable position because there's such a big secondary market for shares where you can achieve liquidity without going public," said Victor Shum, a San Francisco attorney who counsels emerging growth high-tech firms. "Why invite public scrutiny if you don't have to?"

Without burning cash on marketing gimmicks like sock puppets, Facebook has already amassed more than 500 million active members worldwide and is expected to report revenue of $2 billion for 2010. Facebook has become an online powerhouse rivaling Google Inc. of Mountain View, and its projected valuation would place it above the market capitalization of publicly traded firms like Yahoo Inc. and eBay Inc. That's quite a difference from the dot-com companies that "went IPO and bust" because they "had no revenues, just a dream and eyeballs," said Shum, a partner at Jeffer Mangels Butler & Mitchell LLP. Venture capitalists who "made their investments wanted to go IPO as soon as possible because they wanted their 10 times return on investment," he said. Despite speculation that a future IPO was in Facebook's corporate profile, co-founder and CEO Mark Zuckerberg has stated that building a better company remained a higher priority. Remaining private also means companies aren't bound by Securities and Exchange Commission regulations - made more complex in the last decade by the Sarbanes-Oxley and Dodd-Frank bills - requiring full disclosure of minute details of financial operations, including revenue figures and business strategies.

The Year Ahead for Media: Digital or Die

An onslaught of digital technologies has laid waste to traditional media. The new year will bring a clearer picture of what will emerge from the rubble.

Online games that piggyback off social networks are thriving. Publishers are increasingly chipper about the profit potential for digital books, newspapers and magazines, one example of how the historic rivalry between media and tech companies, while still intense, may be softening. Some sectors, like television, may have their toughest days ahead of them. There, a digital tide is rising as new ways to watch TV over the Internet begin to push aside traditional habits. How will TV networks and cable companies make up for the cash they will lose if viewers "cut the cord" and look for shows on the Web? Advertisers, anxious about how technology is undermining their business, will likely continue to flee from sluggish mediums like print to fast-growing ones, like mobile. But they'll face the watchful eye of regulators concerned they aren't doing enough to protect consumers' digital data. For media chiefs, 2011 will bring more gambling, as executives weigh how much to invest in emerging businesses directly cannibalizing their traditional ones. As usual, they'll be watching each other, and consumers, closely. Here's a look at the pieces.

Attacks on company websites intensify

It will be much harder this year for companies to deflect the rising onslaught of cyberattacks orchestrated to knock them off the Internet. Hundreds of times each day, attackers use a technique called distributed denial of service, or DDoS, that involves coordinating home PCs to flood targeted websites with nuisance requests -- to the point where no one else can access the site. Most DDoS attacks get blocked or filtered. But the volume and sophistication of such attacks accelerated in 2010, a trend that looks to intensify in 2011. "The good guys are slightly ahead," says Craig Labovitz, chief scientist at network security firm Arbor Networks. "But it's not clear this equilibrium will continue." One major driver: More home PCs than ever have broadband connections capable of sending large streams of data to commercial websites. That's made it easier for protest groups to rally like-minded cohorts to join in attacks.

Interoperability, Data on FCC's January Agenda, Not Comcast

Federal Communications Commission Chairman Julius Genachowski announced that the following items will be on the tentative agenda for the next open meeting scheduled for Tuesday, January 25, 2011:

Interoperability Order and FNPRM: An Order and Further Notice of Proposed Rulemaking to ensure that the public safety broadband network is interoperable nationwide.
Data Innovation Initiative Presentation: Presentation on the status of the comprehensive reform efforts to improve the agency's fact-based, data-driven decision-making.

President Obama Signs COMPETES Act, Local Community Radio Act

On January 04, 2011, the President Barack Obama signed into law:

H.R. 5116, the “America Creating Opportunities to Meaningfully Promote Excellence in Technology, Education, and Science (America COMPETES) Reauthorization Act of 2010,” which reauthorizes various programs intended to strengthen research and education in the United States related to science, technology, engineering, and mathematics; and
H.R. 6533, the “Local Community Radio Act of 2010,” which modifies current restrictions on low-power FM radio stations.

American Media's True Ideology? Avoiding One

In a media landscape littered with opinionated talk show hosts and ideology-driven websites, strong points of view are hardly tough to find. But media critic Jay Rosen says mainstream news reporters don't disclose what they believe enough of the time.

"I'd like to know something about their background –- like where they're from," says Rosen, an associate professor of journalism at New York University. "If they've been covering a beat for a while, I'd like to know what fascinates them about their beat, what they think are the biggest challenges facing the nation, who some of their heroes and villains are, and any convictions — deeply held convictions — they've developed by reporting on the story over a long period of time." Rosen says there would be a real benefit to such disclosure. "We can tell where the person is coming from and apply whatever discount rate we want to what they're saying," Rosen says. "I also think that it's more likely to generate trust. And this is the main reason why I recommend 'here's where I'm coming from' replace 'the view from nowhere.'" That phrase — "the view from nowhere" — is what Rosen calls the media's true ideology: not exactly on the right, and not exactly on the left. It is, he says, the way news organizations falsely advertise that they can be trusted because they don't have any dog in the fight.

Network neutrality? Not at the coffee shop

Network neutrality rules arrived just before Christmas, but they won't apply to Kindles, coffee shops, or dial-up Internet. And they won't apply to Google. The toughest rules apply only to "fixed broadband Internet access service," which can include fixed wireless links ("mobile" broadband has different, and even weaker, rules). Dial-up isn't covered, since "telephone service has historically provided the easy ability to switch among competing dial-up Internet access services" and the telephone network is still regulated under "common carrier" rules. But the Federal Communications Commission was at pains to make clear that the new rules will not apply to businesses that provide Internet access to their customers as an extra benefit. "We decline to apply our rules directly to coffee shops, bookstores, airlines, and other entities when they acquire Internet service from a broadband provider to enable their patrons to access the Internet from their establishments," the agency wrote, though it notes that the ISP providing the service to the coffee shop or bookstore does have to play by the rules. In these scenarios, the coffee shop owner is the "end user" of the Internet, even if the shop makes money charging its users for access. The coffee shop can therefore block file-sharing traffic with impunity, and it doesn't need to disclose such blocking or throttling. (Though the FCC does ask quite politely for such business to "disclose relevant restrictions on broadband service they make available to their patrons.")

The Federal Pat-Down of the Internet

[Commentary] With so many Americans rightly focused on jobs and the economy, it is very possible that many people are unaware of the Federal Communications Commission (FCC) scheme to impose a number of burdensome government regulations on the Internet. The move - while bad for consumers, innovation and investment - is not surprising because it is the fulfillment of a campaign promise made by President Barack Obama in 2008.

Never mind that the Internet is a bright spot for our struggling economy and functioning just fine without what amounts to a federal pat-down of the inner workings of the Internet. Federal regulation of the Internet, also known as network neutrality, has been seen as the holy grail for the media regulation obsessed left-wing special interest groups like Moveon.org, Free Press and George Soros's Open Society Institute for the latter half of the past decade. And with these and other special interests to satisfy going into a Presidential Election, it really does not matter that only 21 percent of Americans support federal regulation of the Internet over the free market or that these regulations will deter capital investment which create private sector jobs. Despite promises to change how Washington works, this is special interest policy-making 101 and to the Obama Administration's FCC all other facts are seen as inconvenient truths. The American people should reject this power-grab and demand that government get out of the business of picking winners and losers when it comes to the Internet. As a Member of Commerce serving on the Committee with oversight of the FCC, that is what I will continue to do until this poorly conceived plan is abandoned once and for all.

Benton

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