January 2014

[Commentary] In losing a battle, did the Federal Communications Commission win a war? In the aftermath of the United States Court of Appeals for the District of Columbia Circuit striking down key elements of the FCC’s Open Internet rules (commonly known as network neutrality), C|Net’s Marguerite Reardon raises important issues concerning the court’s finding on the FCC’s statutory authority to regulate the Internet: Before this decision was handed down from the court, there was some haziness about the true role of the FCC in regulating the Internet; but since the court's decision, it's crystal clear: the FCC -- and even state public utility commissions -- can now impose regulations on the Internet. How far does that authority go?

The big technology companies have put forth a united front when it comes to pushing back against the government after revelations of mass surveillance. But their cooperation goes only so far. Microsoft suggested that it would deepen its existing efforts to allow customers to store their data near them and outside the United States. Google, for its part, has been fighting this notion of so-called data localization.

“If data localization and other efforts are successful, then what we will face is the effective Balkanization of the Internet and the creation of a ‘splinternet’ broken up into smaller national and regional pieces, with barriers around each of the splintered Internets to replace the global Internet we know today,” Richard Salgado, Google’s director of law enforcement and information security, told a congressional panel in November. Microsoft and other tech companies are trying to prevent foreign customers from switching to services outside the United States. In the next three years, the cloud computing industry could lose $180 billion, 25 percent of its revenue, because of such defections, according to Forrester, a research company. Yet even though Google faces these same risks and requests from foreign customers, its policy position is for surveillance reform instead of data localization, according to a person briefed on Google’s policy who would speak only anonymously.

Mexican fixed-line phone company Telefonos de Mexico denied reports that it is seeking to split up the company ahead of impending regulatory decisions on how to increase competition in the market.

The fixed-line unit of America Movil, controlled by billionaire Carlos Slim, responded to comments by the head of the telephone workers union, who told the Milenio newspaper that the Telmex board of directors and the government had received a request for Telmex to split up the company. Union chief Francisco Hernandez Juarez said Telmex, a former state monopoly that was privatized in 1990, wants to hand back to the government several million low-revenue customers to avoid economic sanctions as the country's dominant fixed-line operator. In a response, Telmex said it hasn't requested any split of the company, either to its board of directors or the Communications and Transport Ministry. Telmex said that in 2013, it spun off assets of three affiliates that have operations in real estate and leasing of equipment, but aren't connected to telecommunications services. The Federal Telecommunications Institute, set up in 2013 under an overhaul of the country's telecommunications laws, is in the process of determining dominance in the telephony and broadcast markets with the purpose of applying measures to guarantee competitive conditions. Those measures could include asymmetric regulation, such as forcing dominant companies to charge less than they pay for completing calls on rival networks, securing cheaper access to the Telmex network for its competitors, or even forcing asset sales.

Apple chief executive Tim Cook is repeating his denials that his company has any type of back door that allows federal spy agents to spy on users.

“Much of what has been said isn't true; there is no back door,” he said. “The government doesn't have access to our servers.” In order for federal officials to access the computer giant’s data, they would “have to cart us out in a box,” he added. “And that just will not happen.” Cook added that he has been “pushing very, very hard to open the books and be totally transparent.” Americans would be more at ease about the programs, he said, if only they could hear what Apple has to say.