April 2013

A Rising Chorus

[Commentary] People are increasingly fed up with a business-as-usual politics that doesn’t stand a chance at solving the daunting problems confronting our country. And they increasingly understand that the kind of change America needs depends very heavily on the kind of communications and media infrastructure we have. I am hearing people everywhere I go say the same thing: “This isn’t working. We’ve had enough. It’s time to change the way things are.” People are feeling, in their everyday lives, the ills and harms that reformers have been predicting would come our way. It’s more than Washington debates or business model theories that fuel their rising discontent. It’s what they live with every day. It all comes back to that central tenet: democracy reform depends upon media reform. We won’t get the first without the latter. Successful self-government cannot exist apart from a vibrant civic dialogue fueled by digging for facts, holding power accountable, and telling the truth. Our job as reformers is to harness the rising chorus of discontent and turn it into an unstoppable force for progress. Therein is the fuel to drive reform.

Europeans Reach Deal With Google on Searches

Google has for the first time agreed to legally binding changes to its search results after an antitrust investigation by European regulators into whether it abuses its dominance of online search.

After a two-year inquiry, the European Commission has accepted Google’s proposed settlement, according to two people briefed on the agreement who spoke anonymously because the proposal was not yet public. Google will not have to change the algorithm that produces its search results, the people said. Under the proposal, Google agrees to clearly label search results from its own properties, like Google Plus Local or Google News, and in some cases to show links from rival search engines. The changes will not be widely seen for at least a month, while rivals and others in the industry can weigh in on the plan, in a process called market testing. The biggest change has to do with search results related to topics like shopping and flights, a field known as vertical search. Google has been pushing into these areas, prompting complaints from competitors like Yelp and TripAdvisor who worry that Google will favor its own results over theirs. If the proposal is approved after market testing, the European Commission will have succeeded in demanding far more stringent concessions from Google than did United States regulators.

Google’s EU battles far from over

Google may have escaped the draconian antitrust penalties called for by its rivals, but the company still faces a bruising fight to put its regulatory battles in Brussels behind it.

The company’s rivals, who have submitted about two-dozen complaints against the US search group in Europe alone, expressed dismay at the weekend over the proposed settlement with the European Commission. They are promising to press for more sweeping changes to Google’s search engine. The modifications to Google search results pages for users in Europe will do little to help other companies that have been starved of traffic from the search engine, according to rivals whose complaints led to the three-year investigation in Brussels. “A modified form of labeling is a non-starter or worse and would represent a massive failure on part of the commission after a very long investigation,” said David Wood, legal adviser to the Microsoft-backed Initiative for a Competitive Online Marketplace. “Some labels would be likely to be ineffective or even affirmatively harmful,” warned Ben Edelman, an associate professor at Harvard University who has been a long-time critic of Google’s practices. Labeling a result as a “Google result” would suggest “that a given link is better or more official than the others”.

Dish Launches $25.5 Billion Bid for Sprint

Satellite-TV provider Dish Network is making a $25.5 billion bid for Sprint Nextel, an effort to derail the No. 3 U.S. wireless carrier's acquisition by Softbank of Japan.

Dish is offering to pay $4.76 in cash and about $2.24 in Dish stock, based on Friday's closing price, for every share of Sprint. Sprint shares closed at $6.22 on Friday. Dish argues that the deal represents a 13% premium to Softbank's complicated proposal to buy 70% of Sprint for $20.1 billion. Combining his company with Sprint would allow Dish to offer video, high-speed Internet and voice service across the country in one package whether people are at home or out and about. People who don't have access to broadband from a cable company would be able to sign up for Internet service delivered wirelessly from Sprint cellphone towers to an antenna installed on their roof. Taking over Sprint would be a big bite. The wireless carrier booked $35.3 billion in revenue last year, compared with $14.3 billion for Dish. The combined company would carry more than $36 billion in debt, according to CapitalIQ, even before loading on the $9 billion Dish indicated it would borrow to do the deal.

More Cracks Undermine the Citadel of TV Profits

[Commentary] For the longest time in the media business, the concept of the bundle has been foundational. Ads go with editorial content in print, commercials go with programming on television and the channels you desire are paired with ones you did not in your cable package. People were free to shop for what they wanted, as long as they were willing to buy a bunch of other stuff they did not. The box score last night for your home team? It was wrapped inside a bundle of paper that included everything from foreign news to ads for lingerie. If you liked a song, you generally had to buy an album full of others to get the goods. As for advertisers, the audience they wanted was bundled inside a much larger audience of people they did not. To get at the milk, both consumers and businesses had to buy the cow. Television has thrived on this kind of systematic stacking, but though bundles may be a handy way of protecting things, they also tend to obscure the weaknesses within. Those flaws are becoming more apparent as the practice of bundling comes under attack.

Following the Money With Apple's Apps

You might think mobile-app stores are raining money on Apple and Google given the hundreds of thousands of apps growing in their "ecosystems." In reality, sales are much more modest.

Apple and Google rank the "top grossing" apps in the App Store and Google Play stores respectively, but they don't disclose the dollar figures behind the rankings. Getting a rough idea is possible, however, thanks to streaming-radio service Pandora Media. Pandora's free-to-download mobile app sells subscriptions to users who don't want to hear ads. Such sales in the quarter ended in January amounted to $16 million. Of that amount, perhaps 80%, or $12.7 million, was generated via mobile devices, a proportion corresponding to the amount of time users spend on mobile devices instead of PCs. And most of that would have been sold through Apple's App Store: Pandora only began selling subscriptions directly via its Android app mid-way through the January quarter. Since Apple keeps 30% of App Store sales, it probably didn't make much more than $3 million from Pandora last quarter—not a lot, yet good enough for a top-five ranking among the highest grossing non-game iPhone apps world-wide, according to research firm App Annie.

When answering a cry for help requires a phone call

[Commentary] If I had never worked as a mental health therapist in the Baltimore schools, I likely would have been baffled by the Lifeline phone program, wondering when a cellphone had become a constitutional right. What I would have failed to have understood is that when people cannot be reached by phone, the consequences can be severe.

I will never forget the day when one of my third-grade clients attempted suicide at school. His mother had no phone, so we had to call a neighbor to get her so that the child could be taken to the hospital without us filing an emergency petition, which would have meant having him removed from school in handcuffs by uniformed police. We reached her after about an hour of trying. The next time he had a psychiatric emergency at school, we were unable to explain the urgency of the situation to the neighbor without violating the family’s privacy, and she wasn’t willing to let the mother use her phone. The mother was not reached until after the police removed the boy from the school. Had Lifeline cellphones existed then, the child could have received the care he needed in a much more timely fashion, without undue added trauma.

Legacy Cable Operators in Austin Are Terrified of Google Fiber

The power dynamic will not shift overnight, but the newly announced launch of Google Fiber in the tech-savvy gulch that is Austin, Texas, has legacy cable operators shaking in their boots. And with good reason.

On paper, literally everything about Google Fiber makes standard digital-cable service look like something that was cobbled together by members of a lesser phylum. Boasting gigabit download/upload speeds (up to 1,000 Megabits per second), Google's connectivity is roughly 70 times faster than Time Warner Cable’s standard 15 Mbps plan. Google Fiber TV is just as head spinning, allowing subscribers to record up to eight programs simultaneously while offering two terabytes of storage, on par with the capacity of DISH Network's Hopper. When Google Fiber late last year began transforming Kansas City into the nation's sole "no-buffering zone," incumbent Time Warner Cable established a hotline for locals to report tips and rumors about the construction effort. To sweeten the pot, TWC rewarded select members of its spy network with $50 gift certificates.

Loads of Companies Are Violating Children's Privacy

Children's privacy is so sensitive that all it took for kids game Mobbles to pre-emptively pull its app last December was a complaint filed with the Federal Trade Commission by a privacy group. Four months later, the app, which had been accused of collecting e-mail addresses without parental permission, has yet to return. Mobbles' disappearance could have something to do with the FTC’s comprehensive overhaul of privacy rules affecting digital companies targeting kids, which will go into effect July 1. Just what exactly those changes to the Children’s Online Privacy Protection Act (COPPA) are is anybody’s guess. The FTC promises to clarify the updates in the form of FAQs "sometime this month," leaving companies with only 10 weeks to get in line.

That's why the Interactive Advertising Bureau filed a request with the FTC to delay implementation by six months. "It’s a complete makeover and that will take time," said Mike Zaneis, the IAB’s svp, general counsel. Even if the FTC grants the extra time, the digital kids market undoubtably will be changed. The new regulations could cause some sites and apps to drastically reduce functionality or interactivity, force others behind paywalls or drive some right out of business.

Enough about data caps: They’re a terrible idea

[Commentary] In a recently published piece, Prof. Daniel Lyons of the Boston College Law School argued that broadband data caps are a reasonable form of price discrimination. Lyons believes that data caps allow ISPs to more equitably distribute network costs among users based on how much they value internet access. He then goes on to suggest the best model of price discrimination comes from the airline industry, and that ISPs would be wise to learn from them. This seems to me to be just awful advice.

One of the primary reasons consumers hate the airline industry as a whole is precisely because of standards of pricing that make no sense, are unnecessarily opaque and completely unpredictable. Certainly, there are other issues consumers gripe about, like on-time arrival (something they also share with cablecos, who sometimes, maybe show up between 8 and never), but at best, their pricing model simply makes no sense to the consumer, and at worst seems suspect and predatory. There are plenty of ways to address pricing that fairly charges customers without requiring them to pursue an engineering degree or a private investigator to figure it out. [Corbett is the president and founder of the Glen Echo Group which has a number clients involved in the broadband field representing a spectrum of interests]

Benton

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