July 2013

WIRELESS/SPECTRUM

SOFTBANK-SPRINT
[SOURCE: Wall Street Journal, AUTHOR: Ina Fried]
Sprint said has completed a deal to sell a controlling interest in the company to Japan’s SoftBank. With the deal’s closure, SoftBank now owns 78 percent of Sprint after investing $21.6 billion in the company. Of that, $16.6 billion will go to Sprint shareholders with $1.9 billion more (for a total of $5 billion) being added as new capital into Sprint itself. Sprint is also shedding the Nextel from its corporate name, which is especially apt since the Nextel network was shuttered at the end of June. Dan Hesse will remain CEO, while SoftBank chief Masayoshi Son will become the company’s chairman and SoftBank U.S. head Ronald Fisher will serve as Sprint’s Vice Chairman.
benton.org/node/155557 | Wall Street Journal | GigaOm
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A NEW SPRINT
[SOURCE: Kansas City Star, AUTHOR: Mark Davis]
Sprint Nextel Corp. wrapped up its $21.6 billion deal with Tokyo-based SoftBank Corp., which now owns a controlling stake in America’s No. 3 wireless carrier. The new Sprint Corp., 78 percent owned by SoftBank and without Nextel in its name, will make its debut on Wall Street on July 11. Dan Hesse was named chief executive officer of the new Sprint. Sprint said three of its current directors will remain as directors of the new Sprint: Robert Bennett, Gordon Bethune and Frank Ianna. Hesse also stays on the board. They are joined by SoftBank founder and chief executive Masayoshi Son, who became Sprint’s chairman, as well as SoftBank director Ronald Fisher. The new Sprint has named retired admiral Michael G. Mullen as its board member designated to oversee security issues. His appointment was part of the negotiations that won U.S. approval of the deal. Three other board seats remain vacant. SoftBank also deposited $1.9 billion into Sprint’s checkbook as part of the deal. It previously injected $3.1 billion to strengthen its finances.
benton.org/node/155577 | Kansas City Star
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VERIZON AND THE IPHONE
[SOURCE: Bloomberg, AUTHOR: Olga Kharif]
Verizon Wireless may end up owing Apple as much as $14 billion in purchase commitments over time if the mobile carrier fails to sell an agreed number of iPhones, a report from Moffett Research LLC said. Under a multiyear deal signed with Apple in 2010, Verizon Wireless is obligated to buy $23.5 billion worth of iPhones in 2013 alone, according to Craig Moffett, a telecommunications analyst who left Sanford C. Bernstein & Co. earlier this year to start his own research firm. Since the purchase commitment is more than twice what Verizon Wireless sold in 2012, the company may have a shortfall of $12 billion to $14 billion, worth $4 to $5 per share, Moffett said in the report. The report suggests sluggish demand for the iPhone, which accounts for about half of Apple’s sales. Other wireless providers around the world may be experiencing iPhone sales deficits as well, Moffett said. The sales shortfall bolsters analysts’ projection for Apple to report a 22 percent decline in net income to $6.87 billion in the third fiscal quarter.
benton.org/node/155551 | Bloomberg
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FIRSTNET RFIs
[SOURCE: National Telecommunications and Information Administration, AUTHOR: Press release]
As part of its extensive market research to determine the most appropriate network design approach, the First Responder Network Authority (FirstNet) announced the release of 10 requests for information (RFIs). These RFIs ask for input from vendors and interested stakeholders regarding potential deployment options for two crucial portions of the nationwide public safety network: the radio access network (RAN) and core network. The FirstNet RFIs follow a device RFI issued April 15. They are a key step in the competitive procurement process that FirstNet is following for its network buildout. Equipment and service providers are encouraged to respond to one or more of the new RFIs alone or jointly with other companies. They may describe potential solution elements, complete solutions or combinations of solutions on a regional or nationwide basis. Questions from respondents are due July 22 and responses are due Aug. 30, 2013.
benton.org/node/155549 | National Telecommunications and Information Administration
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T-MOBILE’S JUMP
[SOURCE: Wall Street Journal, AUTHOR: Ina Fried]
It has become a rule of thumb in cellphones that it just isn’t economical or practical to upgrade one’s phone more than once every two years. So, how is it that T-Mobile, through its new Jump program, is going to be able to offer customers the opportunity to upgrade as often as twice a year? The answer is a complex one, fueled by a range of factors from the surprisingly high resale value for popular smartphones to the importance of attracting and hanging on to high-end customers. First off, T-Mobile’s program isn’t free. Customers pay $10 a month, though that fee includes protection against theft, loss and accidental damage — a service for which T-Mobile had charged fees ranging from $8 to $12 on its own. And to get the new phone, customers essentially trade in their old one in exchange for being freed up from having to pay whatever they still owed on their own phone.
benton.org/node/155531 | Wall Street Journal
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MOBILE MESH NETWORKING
[SOURCE: Technology Review, AUTHOR: Tom Simonite]
After an earthquake crippled Haiti in 2010, killing and injuring hundreds of thousands and destroying the country’s communication networks, Paul Gardner-Stephen found himself thinking about all the cell phones that had instantly become useless. With cell towers out of commission across the country, they would be unable to operate. “If the software on the phones was right,” he says, “they would keep working for at least localized communication, handset to handset.” Gardner-Stephen, a research fellow at Flinders University in Adelaide, Australia, now leads a project that enables Android phones to do just that. Serval, as the project is called, offers an app that allows nearby phones to link up using their Wi-Fi connections, as long as they have been modified to disable the usual security restrictions. Voice calls, text messages, file transfers, and more can take place between devices with the Serval app installed. Devices don’t need to be in range of one another to communicate, as long as there are other devices running the app in between; data can hop between any phones with Serval installed. This approach, known as mesh networking, is not a new idea. But the combination of relatively cheap smartphones and Wi-Fi routers with the progress made by open-source projects such as Serval means that creating and operating such networks is now becoming possible without specialist knowledge.
benton.org/node/155506 | Technology Review
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INTERNET/BROADBAND

BROADBAND ACCESS AS CIVIL RIGHT
[SOURCE: Broadcasting&Cable, AUTHOR: John Eggerton]
Getting broadband to every household, regardless of race, color, creed or economic situation is this century's central civil rights struggle, and Comcast is "all in" for that effort, said Comcast executive VP David Cohen, as well as reflecting the full diversity of the country in hiring, investment and programming. He said that the country did not have a broadband speed problem, unless it was defined as the slow speed of adoption, which he said was intolerable. "Civil rights advocates of 50 years ago fought and ultimately won the battle for equal rights," he said. "But the battle for equal opportunity continues. And that battle won't be won," he said, "so long as we have people stranded on the wrong side of the digital divide because broadband technology is fast becoming the most essential tool for full participation in American society." Cohen indicated bridging that divide was more than a dream. "Achieving digital equality really is possible," he said, but added that it would take a public-private partnership linking "the broadband industry, Silicon Valley, nonprofit organizations, schools, the faith-based community and government."
benton.org/node/155547 | Broadcasting&Cable
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TELECOM

USF REPORT
[SOURCE: telecompetitor, AUTHOR: Joan Engebretson]
A new study, titled “Unrepentant Policy Failure: Universal Service Subsidies in Voice & Broadband,” written by George Mason University Professor Thomas Hazlett and Scott J. Wallsten, vice president for research and a senior fellow at the Technology Policy Institute and at Georgetown University Center for Business and Public Policy, is highly critical of the Federal Communications Commission’s high-cost Universal Service Fund, which pays part of the cost of delivering communications services in rural areas where the costs of providing service are high. Rural telephone companies are “laughing all the way to the bank,” said Dave Herman, vice president of policy for the Alliance for Generational Equity. In the study, the authors argue that “any plausible cost-benefit test reveals that economic welfare would increase were the entire $9 billion per year USF program eliminated.” The $9 billion number that the authors cite includes not only the high-cost Universal Service program but also several other components of the program that target low-income users, rural healthcare providers and schools and libraries. The authors also argue that in transitioning today’s voice-focused high-cost program to a broadband-focused Connect America Fund, the FCC is providing “a new rationale for subsidies.”
benton.org/node/155545 | telecompetitor | read the study
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OWNERSHIP

TV-PRINT SYNERGY
[SOURCE: Variety, AUTHOR: Brian Lowry]
Tribune’s long-awaited decision to spin off its newspaper holdings and bet squarely on television pounds a final nail in the coffin of the rationale underlying the Times Mirror-Tribune merger back in 2000. “The acquisition would give Tribune Co. daily newspapers in the country’s three largest cities — New York (where Times Mirror owns Newsday), Los Angeles and Chicago, and is part of a long-range Tribune Co. strategy of owning multimedia assets in the same markets,” the Times reported at the time, adding that Tribune has “long promoted synergy among its various media properties.” But the synergies between newspapers and TV, in hindsight, weren’t as advantageous as anticipated. Although print reporters remain logical talking heads for TV news, the two cultures are vastly different — one steeped in TV-based showbiz and the thirst for ratings, and the other rooted in more old-fashioned notions about journalism with a capital “J.” Even an evolution toward a web environment where newspapers prize clicks and traffic as much as broadcasters covet ratings hasn’t completely closed this divide.
benton.org/node/155565 | Variety
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CONTENT

APPLE LOSES E-BOOKS TRIAL
[SOURCE: New York Times, AUTHOR: Brian Chen, Julie Bosman]
A federal judge found that Apple violated antitrust law in helping raise the retail price of e-books, saying the company “played a central role in facilitating and executing” a conspiracy with five big publishers. “Without Apple’s orchestration of this conspiracy, it would not have succeeded as it did in the spring of 2010,” the judge, Denise L. Cote of United States District Court in Manhattan, said in her ruling. She said a trial for damages would follow. The Justice Department said the judge’s decision was a victory for people who buy e-books. “Companies cannot ignore the antitrust laws when they believe it is in their economic self-interest to do so,” the Justice Department said in a statement. “This decision by the court is a critical step in undoing the harm caused by Apple’s illegal actions.” It appears unlikely that the ruling will have an immediate effect on the book-buying public. The publishers who have already settled with the government are operating under the settlement’s terms, which prohibit publishers from restricting a retailer’s ability to discount books. Since those settlements have gone into effect, prices on many newly released and best-selling e-books have gone down. Keith Hylton, a professor at Boston University’s School of Law, said that Apple should have some good arguments to back its appeal, but it will be a difficult fight. “The new problem Apple faces is that the judge’s massive opinion relies so heavily on facts and inferences that an appellate court is unlikely to have room to modify the decision substantially.
benton.org/node/155537 | New York Times | Justice Department | Highlights from ruling | WSJ | The Hill | LA Times | NPR | paidContent | CNNMoney | Washington Post | chart | Reuters | USAToday | ars technica | Fast Company | Fortune | IDG News Service
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WHAT E-BOOKS RULING MEANS FOR CONSUMERS
[SOURCE: Wall Street Journal, AUTHOR: John Paczkowski]
A federal judge’s ruling that Apple conspired with publishers to raise the prices of e-books may have broad implications for the publishing industry and for Internet companies providing media content over the Web, but it will have little immediate impact on consumers. Since the five publishers accused of conspiring with Apple already settled with the Department of Justice, agreeing to lift restrictions they had imposed on price discounting and other promotions by e-book retailers, U.S. District Judge Denise Cote’s decision won’t accomplish much for the folks who actually buy and read e-books. “One of the reasons this case is interesting is that the mere fact that the government brought the complaint immediately improved life for consumers,” Stanford law school professor Mark Lemley said. “E-book prices dropped by a third literally overnight, as Amazon was free to lower its prices. So I wouldn’t expect to see a dramatic effect on consumer prices as a result of this ruling — we’ve already gotten the benefit of antitrust enforcement.” In other words, the DOJ’s victory over Apple is largely a symbolic one.
benton.org/node/155535 | Wall Street Journal | Washington Post
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ADVANTAGE AMAZON?
[SOURCE: New York Times, AUTHOR: David Streitfeld]
Traditional players in the book business have been upended. Only Amazon, led by Jeff Bezos, seems to have a plan. He is executing it with a skill that infuriates his competitors and rewards his stockholders. “We’re at a moment when cultural power is passing to new gatekeepers,” said Joe Esposito, a publishing consultant. “Heaven forbid that we should have the government telling our entrepreneurs what to do, but there is a social policy issue here. We don’t want the companies to become a black hole that absorbs all light except their own.” The Apple case, which was brought by the Justice Department, will have little immediate impact on the selling of books. The publishers settled long ago, protesting they had done nothing wrong but saying they could not afford to fight the government. But it might be a long time before they try to take charge of their fate again in such a bold fashion. Drawing the attention of the government once was bad enough; twice could be a disaster. Charles E. Elder, an antitrust lawyer at Irell & Manella, said that the ruling could lead Apple and other technology companies negotiating with media companies to “proceed with extreme caution” to avoid any appearance of collusion.
benton.org/node/155575 | New York Times | NY Times - fallout | WSJ | San Jose Mercury
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WARNING TO TECH INDUSTRY?
[SOURCE: Politico, AUTHOR: Michelle Quinn, Steve Friess]
The U.S. government’s victory over Apple in the e-books antitrust case sends a message to the tech industry, legal observers say: Even popular innovators can’t run roughshod over antitrust laws. The decision is “an important touchstone,” said Phil Weiser, dean of the University of Colorado Law School and a former deputy assistant attorney general in the Justice Department’s antitrust division. “At times, tech companies want to take the position that they are a fast-moving industry and antitrust law is not an effective means of oversight. There is no technology industry exception.” “In lots of these digital distribution areas, people are groping for the right kind of business models,” said Dan Crane, a University of Michigan law professor focusing on antitrust issues. “Part of what this decision does is send a warning shot to those who would attempt to coordinate a business model across an industry. It’s a warning signal to people not to overstep.”
benton.org/node/155572 | Politico
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GUILTY OF COMPETITION
[SOURCE: Wall Street Journal, AUTHOR: Editorial staff]
[Commentary] A conspiracy to increase prices that results in lower prices is either incompetent or it isn't a conspiracy. Take Apple's entry into the digital books market with the iPad, which led to more consumer choice, competition and innovation, as well as lower e-book prices. That reality has not deterred a federal antitrust vendetta against Apple, now joined by Judge Denise Cote. As proof of Apple's malfeasance she notes that the company "did not want to begin a business in which it would sustain losses" and "hoped to launch a new content store that was both profitable and popular." Next up, indictments for every other successful American company. We trust the Second Circuit or even the Supreme Court will squelch this threat to competition and efficient markets.
benton.org/node/155571 | Wall Street Journal
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TELECOM

FIRE ISLAND LESSONS
[SOURCE: Tales of the Sausage Factory, AUTHOR: Harold Feld]
[Commentary] We now have some preliminary data for how much Fire Island customers love Verizon using them as guinea pigs for untested services such as Voice Link. Turns out – surprise! – they totally hate it. Actually, “hate” understates the matter. Forcing Fire Island residents to take Voice Link ranks up there with Microsoft Vista as “most loathed involuntary ‘upgrade’ from our monopoly provider.” Reaction has been so terrible that it likely will have ripple effects for the broader question of the whole copper-to-wireless conversion. Which in some ways is a shame, because Voice Link is not intrinsically a bad idea and is not a bad product in and of itself. But a combination of disregarding the inability to support certain features as “not important” and a failure to properly introduce the product into the community has created a serious backlash on Fire Island.
benton.org/node/155500 | Tales of the Sausage Factory
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CYBERSECURITY

CYBERTHEFT TALKS
[SOURCE: New York Times, AUTHOR: David Sanger]
Vice President Joseph Biden Jr. opened annual strategic talks with senior Chinese leaders by repeating the United States’ accusation that the electronic theft of American intellectual property could undermine the relationship between the world’s two largest economies. And to no one’s surprise, the Chinese had an answer ready: that the publication of secret documents showing the extent of American surveillance of Chinese universities and other institutions undercuts the Obama Administration’s case. That friction, American officials conceded in private, underscores how difficult it will be for the United States to make progress on what President Barack Obama and his top aides have said is now a central issue between two countries whose economies are intertwined and whose militaries are in competition.
benton.org/node/155569 | New York Times
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EDUCATION

BROADBAND FOR EVERY SCHOOL
[SOURCE: The Huffington Post, AUTHOR: Tanya Lombard]
[Commentary] The White House's report, Four Years of Broadband Growth, shines a light on what broadband expansion means for women and minorities across America. Education is the most important tool we have to serve low income communities, and 21st century students deserve 21st century technology in every school nationwide. It's encouraging to see the Federal Communications Commission pursue the modernization and expansion of E-Rate to support the communications needs of U.S. schools and libraries. This renewed focus by the FCC follows President Obama's announcement of a nationwide educational initiative, ConnectED, that will serve to outfit 99 percent of America's students (K-12) with high speed wired or wireless internet connectivity by 2018. To move this initiative forward, FCC Acting Chairwoman, Mignon Clyburn, publicly stated her support for modernizing and expanding the E-rate program to bring high-speed broadband to more U.S. schools and libraries, as well as creating new incentives for broadband service providers to deploy new fiber connections in communities with limited or no access to high-speed internet services.
benton.org/node/155520 | Huffington Post, The
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FCC REFORM

FCC PROCESS REFORM
[SOURCE: Broadcasting&Cable, AUTHOR: John Eggerton]
The House Communications Subcommittee has posted the testimony of witnesses in the July 11 Federal Communications Commission process reform hearing. The witnesses are split over the issue of whether the current proposed bills solve problems, though not so much on the issue of whether there are some problems to solve. Analyst Larry Downes, Free State Foundation president Randolph May and former FCC Commissioner Robert McDowell support proposed bills. A pair of academics on the panel -- Stuart Minor Benjamin of Duke Law School and Richard Pierce from George Washington University Law School -- said they had problems with the current draft legislation. Benjamin said he shared "many of the concerns" that underlie the bills and was particularly sympathetic to streamlining FCC reports. Those bills are ones that would take a host of actions, including imposing shot clocks and putting limits on the FCC's merger review function to only narrowly tailored remedies and a companion bill that would combine FCC reports. But he also said that he had reservations about the main bill, including that they were targeted at the FCC, which undercuts the Administrative Procedures Act (APA), and that it could create the basis for numerous legal challenges. He also argues that the merger review provisions leave the FCC with "little if any role." Pierce was even stronger in his critique. "The addition of twelve mandatory steps to the FCC rulemaking process would be a return to the uncertain, confused, ad hoc world of agency decision making that the Congress wisely and unanimously rejected when it enacted the APA in 1946." He says the new requirements would be extremely burdensome and time consuming.
benton.org/node/155555 | Broadcasting&Cable
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GOVERNMENT & COMMUNICATIONS

NSA SLIDE
[SOURCE: Washington Post, AUTHOR: Craig Timberg]
Recent debate over U.S. government surveillance has focused on the information that American technology companies secretly provide to the National Security Agency. But that is only one of the ways the NSA eavesdrops on international communications. A classified NSA slide obtained by The Washington Post lists “Two Types of Collection.” One is PRISM, the NSA program that collects information from technology companies, which was first revealed in reports by the Post and Britain’s Guardian newspaper last month. The slide also shows a separate category labeled “Upstream,” described as accessing “communications on fiber cables and infrastructure as data flows past.” The interaction between Upstream and PRISM — which could be considered “downstream” collection because the data is already processed by tech companies — is not entirely clear from the slide. In addition, its description of PRISM as “collection directly from the servers” of technology giants such as Google, Microsoft and Facebook has been disputed by many of the companies involved. However PRISM works, the NSA slide makes clear that the two collection methods operate in parallel, instructing analysts that “You Should Use Both.” Arrows point to both “Upstream” and “PRISM.”
benton.org/node/155533 | Washington Post
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CHIN, NSA AND ANDROID
[SOURCE: Quartz, AUTHOR: Jake Maxwell Watts]
Google’s Android smartphone operating system uses source code contributed by the US National Security Agency. Especially in the post-Edward Snowden era, that’s a red flag for Beijing, and helps to explains why China has been so eager to encourage the growth of non-Android smartphones within its borders. Security Enhancements for Android is one of several projects that the US spy agency contributes to open-source operating platforms. Ostensibly, the NSA’s addition to Android is designed “to raise the bar in the security of commodity mobile devices,” an NSA researcher told Bloomberg Businessweek. And indeed, anti-hacking protection is actually what the spy organization is supposed to be providing. But you can bet that Beijing is dubious about the NSA’s stated aims, especially after news that the US agency hacked millions of Chinese SMS messages and is working closely with American technology firms.
benton.org/node/155494 | Quartz
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STORIES FROM ABROAD

EU ROAMING PROPOSLS
[SOURCE: Financial Times, AUTHOR: James Fontanella-Khan, Daniel Thomas]
Telecoms executives have described proposed European Union laws for a single European telecoms market as little more than “a headline grabbing move” that will deny them €7 billion of “roaming” customer charges while doing little to address broader investment issues. Their reactions came after learning the details of unpublished draft legislation from Neelie Kroes, the EU commissioner for telecommunications. The centerpiece of the 56-page set of proposals is the elimination of roaming charges – one of the most profitable sources of revenues for mobile operators, by next year. A study commissioned by Etno, the European telecoms industry body, showed that such a move would cut mobile operators’ cash flow by up to €7bn by 2020, and could have a negative effect on investment in mobile networks. Under the plans, companies would be forced to offer customers EU-wide mobile packages. “Difference between roaming and domestic tariffs [charged by mobile carriers within the 28 country bloc] should approach zero,” the document said. But while the draft legislation includes more industry-friendly initiatives, such as spectrum harmonization, it does not propose any changes to how the European Commission would view mergers and acquisitions.
benton.org/node/155561 | Financial Times
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INTERCONNECTION DEALS
[SOURCE: GigaOm, AUTHOR: David Meyer]
AT&T and Verizon have failed in their attempt to block the French telecoms regulator from examining their secret interconnection agreements – deals that may be key to the erosion of network neutrality. The regulator, ARCEP, is concerned that quiet battles between bandwidth providers and Internet service providers may in effect be degrading the quality of popular web services for French consumers — one specific case involves subscribers of the ISP Free getting lousy YouTube performance. The worry is similar to that in the US, where a spat between ISP Verizon and bandwidth provider Cogent Communications is thought to have been messing up Netflix performance for Verizon’s customers. This all comes down to net neutrality. Data carriage providers have traditionally carried each other’s traffic for free under so-called peering agreements, which have been essential to making sure all internet services get an equal chance for delivery at decent quality. Now, with high-bandwidth services such as video on the rise, consumer ISPs are seeing a chance to extract cash out of the internet backbone or bandwidth providers by charging them for delivering heavy traffic to the end user.
benton.org/node/155559 | GigaOm
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July 2013

Union's Digital-Learning Statement Critiques Online-Only Instruction

Tech Challenges Lead Oklahoma to Opt Out of PARCC Exams

EU Commission raids telecoms

Weekly Digest

Introducing The New Sprint

July 11, 2013 (SoftBank Now Firmly in Control of Sprint)

After completion of SoftBank deal, a new Sprint emerges

E-Book Ruling Gives Amazon an Advantage

Apple e-book ruling seen as warning to tech industry

Guilty of Competition

Differences on Cybertheft Complicate China Talks