Editors' note: This is a guest column. See Larry Downes' bio below.
Wednesday's announcement that the Federal Trade Commission had filed a complaint against chipmaker Intel came as quite a surprise.
Not because of the allegations themselves, which focus on illegal tactics the company allegedly uses to maintain its dominance in the market for PC and server CPUs. Nearly all of them have already been cited in regulatory actions in the United States and abroad.
Earlier this year, the European Union fined Intel nearly $1.5 billion for conduct similar to that alleged in the FTC complaint (an appeal is pending). New York State Attorney General Andrew Cuomo, likewise, filed an antitrust case against the company in November. Private antitrust suits, notably by competitor Advanced Micro Devices, have been ongoing since 2005. Japan and South Korea have already concluded their own actions against the company.
Rather, what is surprising about the FTC complaint is its timing. Given the range of both public and private litigation against Intel, it's hard to see what the FTC hopes to achieve by jumping in so late in the game. Indeed, the commission had been investigating the chipmaker since June 2008, before the EU reached its decision and before a landmark settlement between Intel and AMD was reached in the private lawsuit just last month, in which Intel agreed to pay AMD $1.25 billion and cross-license various patents.
According to Intel's statement Wednesday morning, the company and the commission had been close to a settlement "of all outstanding issues with the FTC" when the commission instead decided to issue its complaint.
The real deal
So what's going on here? Let's start by looking at a few key differences between the FTC action and those brought by other litigants. First, the FTC complaint broadens the charges against Intel. In early December, sources reported that the FTC had widened its investigation beyond CPUs to include anticompetitive behavior in graphics processing units, in which Intel is alleged to control about half the market.
Nvidia, one of Intel's main competitors for GPUs and itself a party in still another lawsuit, confirmed that the FTC had contacted the company about its investigation. (In a Wednesday statement, Intel argued that the GPU claims have not been fully investigated by the commission and are therefore premature. It appears that the addition of these new issues derailed the settlement talks, leading to Wednesday's action.)
Second, the FTC's complaint alleges multiple violations of the Federal Trade Commission Act, which only the commission has the authority to enforce. Under section 5 of the act, the commission may use its power to remedy practices that have not yet reached the threshold of harm necessary under either the Sherman Act or the Clayton Act, the more general antitrust statutes. As the U.S. Supreme Court put it in a 1953 case, the commission quotes from in the first sentence of its complaint, section 5 gives the FTC power to "stop in their incipiency acts and practices which, when full blown, would violate" the Sherman or Clayton acts.
Third, and perhaps most disturbing, the FTC's proposed remedies are much broader than those sought in any of the other litigation. Rather than seeking fines, penalties, or money damages, the commission intends to enforce wide-ranging changes to how Intel operates.
For starters, the FTC wants to limit Intel's use of bundled prices, quantity discounts, minimum purchase guarantees from original equipment manufacturers, pricing products below cost and other long-standing industry practices. Moreover, the commission intends to require Intel to license its technology to "others" on terms and conditions "as the commission may order" and to require Intel to preclear any future acquisitions, including purchases of intellectual property such as patents and copyrights.
These and many other restrictions on Intel's conduct would be overseen by an independent monitor appointed by the FTC. Intel would also be required to submit "periodic compliance reports" with the commission.
In short, if the FTC goes forward with its complaint, and Intel is ultimately found to have violated the FTCA, the company would find itself closely regulated for an undetermined period of time by the commission and its outside monitors. Even advertising and promotional materials would need to be reviewable on demand by the government.
Notable timing
None of these differences, however, add up to a justification for the FTC's decision to insert itself into a complicated matrix of ongoing litigation, just as the other actions are or are close to reaching resolution.
For starters, if the GPU claims are as strong as the commission says they are, then they could easily have formed the basis of a separate complaint, filed once the FTC had had a full opportunity to investigate them.
As for the FTCA, the FTC undermines its own argument that the special powers of section 5 are necessary to repair the semiconductor market. The commission notes throughout the complaint that Intel's monopolies and the behaviors it is seeking to remedy, with the exception of the GPU-related violations, have been ongoing since 1999--the year in which Intel and the commission settled an earlier section 5 complaint. Given that so many other lawsuits are already years in progress, it's unlikely that any "incipient" behavior is involved here; whatever Intel has done, it has done for years.
The FTCA is a red herring, in any case. As leading antitrust scholar Richard A. Posner noted in 2005, expansion of the Sherman and Clayton Acts over the years has left no real difference between the more general antitrust laws and the FTC's special powers under section 5. Private enforcement or lawsuits brought by the Department of Justice or state attorneys general now cover all the behavior that may have been subject only to what was once the broader powers of the agency.
The FTC's belated decision to pursue Intel brings Posner's longstanding critique of the commission into sharp focus. Posner, who has questioned the effectiveness of the commission since 1969, concluded in 2005 that the agency's continued existence might be justified, not for its enforcement of antitrust laws, but rather on the basis of its unique role in protecting consumers against fraud. The Department of Justice is a "powerful and highly regarded" federal agency tasked with enforcing antitrust law, Posner wrote, "but there is no counterpart federal agency that tries to protect consumers against fraud and oppression--unless it is the Federal Trade Commission."
And while the FTC complaint duly invokes "harm to consumers" 31 times in its complaint, evidence of any real damage will be hard to come by. Thanks to Moore's Law--Intel founder Gordon Moore's promise that semiconductors will continue to get faster, smaller, and cheaper every 12 to 18 months--the price of raw computing power has fallen dramatically and consistently since Intel was founded. Consumers are not being tricked or misled into buying computers with Intel processors.
Protecting consumers?
The commission can blow all the smoke it wants to about ensuring "freedom of choice" for consumers, but for better or worse, this litigation and all the rest of it is being brought for the benefit of Intel's competitors. Which is not to say that Intel hasn't violated anticompetition laws and that those violations, if left unremedied, "will have an adverse effect on competition and hence consumers," as the FTC delicately puts it.
Perhaps they will. But there is another, greater danger here, and that is the harm to the entire semiconductor industry that will result from regulators stepping in to resolve what are, in essence, private fights between Intel, its competitors, and some of its biggest customers.
The commission, along with its counterparts abroad and judges fashioning remedies in the public and private antitrust cases, might somehow get it right and fix the semiconductor market--or at least make it more efficient than it is under Intel's dominance. On the other hand, they might make things much worse.
The worst-case scenario seems increasingly likely. The FTC, in any event, is weighing in far too late on Intel's battles with AMD, and too soon in its fight with Nvidia and other GPU manufacturers. The remedies it intends to visit are breathtaking in their expansiveness and would leave Intel unable to compete, let alone compete fairly. The only beneficiaries of this latest chapter in the antitrust saga would be Intel's competitors, not consumers.
As Posner noted with characteristic understatement, an FTC untethered from its role of protecting consumers is little more than a tool for unhappy competitors. "If the competitor files a lawsuit, he must bear the expense of the suit," Posner wrote, "but if he can get the FTC to proceed against the seller, he incurs no cost. This opens up the possibility of using the FTC as a weapon against competition."
Even worse, it's a weapon that has the unfortunate habit of regularly backfiring on those who employ it.
Microsoft's apology Tuesday about a contractor copying blogging site software from a small company called Plurk might not be enough to take the lawyers off alert.
"We are still thinking of pursuing the full extent of our legal options available due the seriousness of the situation," Plurk co-founder Alvin Woon said in a statement posted Thursday. "Basically, Microsoft accepts responsibility, but they do not offer accountability."
Microsoft accepted responsibility for the copying, blaming it on a third-party company. It suspended access indefinitely to the site at MSN China, called Juku. "We apologize to Plurk and we will be reaching out to them directly to explain what happened and the steps we have taken to resolve the situation," Microsoft said Tuesday.
... Read more
The FTC wants Intel to grow up and start acting like a responsible company.
At least that's the goal behind the agency's lawsuit against the chipmaker. Filed on Wednesday, the FTC's suit charges Intel with a host of offenses, including using threats and rewards to convince PC makers not to buy chips from the competition, altering its compiler to weaken the performance of rival chips like those made by AMD, and preserving its CPU monopoly by stifling the market for GPUs (graphics processing units) made by Nvidia and other manufacturers.
On Wednesday, the FTC held a press conference in Washington in which it discussed why it launched the lawsuit now and what it hopes to gain.
Fielding questions from reporters, Richard Feinstein, director of the FTC's Bureau of Competition, explained that the allegations against Intel have been bubbling for the past 10 years. During that time, at each point in which Intel perceived a threat to its dominance, the company responded not by competing aggressively on its own merits but by behaving in a way that was exclusionary and detrimental to the competition and ultimately detrimental to consumers, said the FTC.
Federal officials said they chose now to file the suit in part because the allegations have continued and evolved over time, and also because many of the charges are fairly recent, such as Intel's perceived attacks on the GPU market.
Unlike other complainants against Intel, the FTC is not imposing any fines or financial penalties. Instead, the agency simply wants the company to try a little behavior modification. The government said it is looking for changes in Intel's conduct to help restore market competition.
In its complaint, the FTC provided a laundry list of remedies that it plans to impose on Intel if the company is found to have violated any laws.
The full list of 26 different dos and don'ts can be found in the FTC's complaint, but to name just a few:
- Intel can't directly or indirectly require customers to purchase only its CPUs or GPUs.
- Intel can't require a customer to buy a minimum or fixed number of processors from Intel.
- Intel can't withhold payments or other compensation to OEMs (original equipment manufacturers) just because the companies are not exclusively doing business with Intel.
- Intel can't directly price its processors so its customers pay below cost just to thwart the competition.
- Intel can't make hardware or software designed to inhibit processors made by competing companies.
- For customers who bought "defective" compilers, Intel must provide them with a working compiler at no cost and compensate them for the cost of recompiling their software using the new compiler.
- Intel can't coerce benchmarking organizations to adopt benchmarks that are deceptive or misleading.
- Intel must file periodic compliance reports with the FTC and for a period of time make available any advertisements, tests, reports, studies, and other documents that relate to the charges against it.
In charging Intel, Feinstein said that the FTC is relying on principles from Section 2 of the Sherman Act, which deals with monopolies, and Section 5 of the Federal Trade Commission Act, which covers deceptive or anticompetitive actions that affect consumers.
Section 5 also specifies that the outcome of the FTC's case can't be used to establish liability on Intel's part in any other antitrust actions. That may work in Intel's favor as its lawyers have certainly been putting in overtime dealing with the barrage of lawsuits against the company.
Intel recently closed the books on a 2004 antitrust lawsuit filed against it by AMD. As part of the settlement, the company agreed to pay its rival chipmaker $1.25 billion and promised to refrain from offering incentives to customers to keep them from doing business with AMD.
Intel is still appealing the record $1.45 billion fine imposed on it in May by the European Commission after the company was found guilty of violating European antitrust laws.
And in November, New York Attorney General Andrew Cuomo filed a federal lawsuit against Intel, accusing it of paying off computer makers like Dell with rebates to retain its monopoly and shove AMD out of the marketplace. Though this case is separate and distinct from the FTC's suit, Feinstein did acknowledge that he spoke to and compared notes with the state attorney general.
With Intel already facing severe financial penalties from these other lawsuits, Feinstein said he didn't feel another fine was essential for the FTC's case. But he said that in theory the FTC can go into federal court and seek financial penalties if necessary.
Last-minute allegations
In response to the FTC's action, Intel held its own conference call Wednesday in which the company discussed the allegations in greater detail..
Intel spokesperson Chuck Mulloy told CNET that substantial common ground had been reached in the discussions between the company and the FTC, especially after Intel settled its suit with AMD. But negotiations broke down because the commission raised certain last-minute allegations, such as the benchmarking issue and the GPU matter, and because Intel felt some of the suggested remedies were over the top.
Mulloy said that the benchmarking and GPU concerns had never been addressed in the two years that the FTC had been investigating Intel, both formally and informally, and were added a few weeks prior to the lawsuit being filed. He said the commission issued a subpoena to Intel requesting information on the GPU issue on December 8, about a week before the suit was launched, and did not wait for a response from Intel.
The chipmaker was also unhappy with a couple of the remedies proposed by the FTC. One sticking point in particular was the notion of compulsory licensing, in which the commission would have required Intel to license its x86 architecture to other companies, which includes those trying to make their own chips compatible with Intel processors. But Intel objected because it considers the technology to be its own intellectual property worth tens of billions of dollars.
Mulloy also said that talks broke down because Intel felt the FTC was trying to micromanage the company's pricing schemes--dictating how and under what circumstances it could offer discounts to certain customers. He added that Intel did make some proposals to the commission on discounting schemes, but this issue was never resolved.
Intel's view is that this is overreach on the part of the FTC, said Mulloy. He feels Intel was on track to settle and was disappointed that it couldn't get it done.
To move the case along quickly, the FTC decided to have it heard before an administrative judge rather than a slower federal court. The speedier process of the administrative court will begin with a trial in September, which Feinstein believes will conclude by the end of the year. Depending on the outcome, there may or may not be further proceedings before the FTC. But ultimately, the case would be reviewed by the FTC for a final decision. If the judge rules against Intel and the company appeals, that could take the case to the middle of 2011.
Ultimately, Feinstein believes that Intel's actions have deprived the marketplace of the vigorous competition it needs, affecting innovation, prices, and consumer choice. Despite the gains in the microprocessor market, Feinstein said he believes it's hard to know what the market might have done over the past 10 years had it not been for Intel's conduct.
Updated December 18, 5:45 a.m. PST with response from Intel
.
Vice President Joe Biden
(Credit: WhiteHouse.gov)Vice President Joe Biden on Thursday is scheduled to announce $2 billion in grants that will be used to build broadband networks in underserved communities.
The funding, which is part of the $7.2 billion that was set aside for broadband in President Obama's $787 billion economic recovery deal earlier this year, will start with an initial $182 million investment in 18 broadband projects in 17 states. Biden is announcing the stimulus grants in Dawsonville, Ga.
The money is specifically meant to expand affordable broadband access to underserved areas of the U.S. Officials would not name which companies will be getting the grants that were announced on Thursday.
From BlackBerry smartphones to broadband Internet connections, President Obama understands that technology is an important economic and educational driver. High speed Internet access is seen as the cornerstone of the president's technology agenda, and he has emphasized the need for getting affordable broadband access to every American.
"The new broadband access will help underserved and often hard-hit communities overcome the distance and technology barrier by expanding connectivity between educational institutions, enabling remote medical consultations, and attracting new businesses as well as the jobs that come with them," the White House said in a statement.
The Federal Communications Commission is currently working on developing a national broadband plan that will provide a road map for achieving the goal of getting every American affordable access to high-speed Internet. A full report on the plan is due to Congress in mid-February.
Blair Levin, who is heading up the task force developing the national broadband plan for the FCC, has estimated that it could take as much as $20 billion to $350 billion to achieve the ultimate goal of ubiquitous broadband access. But he has acknowledged publicly on several occasions that the bulk of the investment will come from the private sector.
"The private sector is essential to this effort," Levin said. "Government spending will be limited. And competition is the best way to drive innovation. "
Still, at a meeting at the FCC on Wednesday, he said government funding will be necessary in places where the private sector is unable to find a viable business case. And he has proposed overhauling the $7 billion-a-year Universal Service Fund, which provides telephone access to rural communities, as one way to help fund such projects.
"Where funding is limited and where it's difficult to make a business case and where we don't want to go through the process of new legislation, there are ways to better utilize existing assets," he said.
But the USF alone will not be enough. And given that it will likely take years to expand the program, grants and government funding pumped into the system now will at least get the ball rolling on new deployments.
The Federal Trade Commission's complaint against Intel for alleged anticompetitive practices has a new twist: graphics chips.
To date, the antitrust actions of regulators worldwide toward Intel have focused on sale practices for central processing units, or CPUs, a market over which the company has fought heavily with Advanced Micro Devices. On Wednesday, however, the FTC spelled out a litany of allegations about Intel's alleged anticompetitive behavior in the market for graphics-processing units, or GPUs, in which Nvidia is a major player.
Nvidia is the world's leading supplier of "discrete," or standalone, graphics chips but takes a distant second place in overall market share to Intel, which supplies "integrated" graphics built into the chipsets that accompany all of its processors. Mercury Research estimates the total market for graphics chips, including integrated graphics, at almost $10 billion in 2009.
Why graphics, and why now? "It would be really hard to sell the public on expending resources to take Intel through administrative proceedings when it had already paid over a billion dollars to AMD," said Joshua D. Wright, a professor at George Mason University School of Law and a scholar in residence at the Federal Trade Commission until 2008.
"[The FTC] needed to be seen as doing something new," Wright said.
"[Nvidia] becomes the remaining star witness, now that AMD has left the field," said Roger Kay, principal at Endpoint Technologies. "And the FTC's focus, which begins to look toward the future, has to take into account how graphics will fit in as computer technology develops," Kay said.
Intel General Counsel Doug Melamed asserted in a statement that the FTC complaint "is based largely on claims that the FTC added at the last minute and has not investigated," referring to the GPU allegations. And Melamed added in a conference call that some of these GPU allegations were made as recently as December 8.
One of the areas the FTC case zeroes in on is the burgeoning competition for chipsets in Netbooks--small, inexpensive laptops that are typically priced around $350. Netbooks are powered by Intel's Atom processor--and integrated graphics silicon built into the chipset. In this market, Nvidia also sells its Ion chipset, which competes with Intel's integrated graphics product.
... Read more
Perhaps the next time Brad Smith heads to Brussels, it will be for a vacation.
After years of wrangling with Microsoft, the European Commission announced an accord with the software giant Wednesday on several fronts that seems poised to put an end to its antitrust concerns with Redmond.
Brad Smith
(Credit: Microsoft)In the wake of the announcement, I spoke to Smith, Microsoft's general counsel, about the decision, what it means for the future of Windows, and whether the company sees its spot on the antitrust hot seat now being taken up by other companies, including Google.
Here's an edited transcript of our conversation:
Q: Is this really it as far as Europe is concerned?
Smith: This is definitely a major milestone for Microsoft. Today's announcement reflects a broad set of agreements that really address a wide array of issues. At the same time, we obviously need to keep our eye on the ball. Antitrust issues will continue to be important for us, just as they are going to continue to be important for a number of other leaders in our industry. We're going to have to do an excellent job implementing these agreement. We are going to have to do an excellent job addressing any new issues that arise in the future. Having said all that, I also think it is fair to say, as Commissioner [Neelie] Kroes did when she spoke in Brussels, this does represent the closing of one chapter and gives us the opportunity to open a new chapter. We're definitely enthused about that opportunity and we're committed to ensuring the next chapter is a positive and constructive one.
One of the things that Steve Ballmer talks a lot about in terms of antitrust issues is getting legal clarity on what one can and can't do. Do you feel like you now have that understanding with the EU?
Smith: I think this gives us a great deal more clarity. I think it gives the industry as a whole more clarity. It's perhaps most helpful in the area of interoperability because it really implements a new framework. It applies to a broad array of Microsoft products--Windows, Windows Server, Exchange, SharePoint--and for all of these products it has certain principles that we have to adhere to. It addresses the way we implement file formats.
At the same time, no advance on any single day can ever answer all questions for all companies for all time.
Essentially the EU has said through its very objections that you can't put a media player in Windows and you can't put a browser in Windows. What do you feel Microsoft can include in future versions?
Smith: There are two things to think about. First is what gets included in Windows, and second, what's the right way to address something that is included.
Our basic approach is to include in Windows, software that has APIs (application programming interfaces) that will be beneficial for other applications to call on and use. The browser is definitely an example of that. It's quite probably even more important in that role today than it was, say, when the browser issues first arose in the 1990s. The media player plays a similar role in terms of some broad APIs that are used by a wide variety of other applications.
There are other things that we have put in Windows in the past that don't necessarily involve the same role. A good example of that is Windows Live Messenger. We had Windows Messenger in Windows XP. It's not in Windows Vista or Windows 7 We're trying to make thoughtful decisions about what is included.
Then the second question that arises is how do things get included. How do we document APIs that our browser is using so that other browsers can use them as well? That's part of the U.S. consent decree.
How do we ensure that [computer makers] have flexibility to offer competing choices? How do we ensure that consumers are aware of competing choices and can use them if they wish. That latter part is an area where different governments have chosen different approaches at different times. The U.S. Department of Justice chose one approach in its consent decree. The Korean Fair Trade Commission chose a second approach. The European Commission in the media player case in 2004 chose a third approach. Today's announcement on the browser reflects the European Commission choosing a fourth approach.
Some people have the opinion that as a result of these different antitrust issues, Microsoft really finds itself with one hand tied behind its back as it competes in the battles of today. Do you believe Microsoft in the current antitrust environment competes on an even footing with some of the other Internet giants?
Smith: I do believe it is very important for all technology leaders in our industry to follow the same laws and obey the same rules. The rules don't necessarily apply in the same way when a company has a small market share as it does when a company has a large market share. But there are a number of companies that have large market shares for very important products. We've taken a number of steps to get into line with new legal rules in this field. The law has evolved and we've needed to evolve to address these new obligations.
We do believe our competitors need to play by the same rules. They've often been at the forefront of asking regulators to evolve the law in new directions. Now that the regulators have done so, we believe they need to pay attention as well.
Do you anticipate a period of time over the next few years where Microsoft is more likely to be the subject of antitrust inquiries or the company on the other side of the table for a change?
Smith: I think that we have addressed a very wide array of issues. Perhaps, in part because we were the first company to have to go through these inquiries, at least since the dawn of the PC era. We've probably had to go farther and sooner than other companies have had to do. We're now in an era where a different company seems to be in the headlines for competition law issues, if not every day, at least every month.
I think that what we are going to see in the next decade is this field of law being applied to a wide number of technology leaders that have high market share. We're going to see that, not only in Washington and Brussels, but we're likely to see that in more countries around the world simply because the global economy has evolved.
Have you expressed concerns specifically to Europe or Washington, D.C., about some of Google's behaviors?
Smith: We were very transparent last year when Google entered into its agreement with Yahoo. We felt that that was an illegal agreement that Google had entered into for the sole purpose of preventing Microsoft from becoming a more successful competitor, together with Yahoo, in the search space.
It was only when the Department of Justice informed the parties that it was on the verge of filing suit that Google decided to drop that agreement. We have not been shy about raising concerns when we have them.
It was only a couple hours after you guys settled with Brussels that we heard from D.C. with regards to Intel. When you initially heard that the FTC was filing suit against Intel, did you have feelings of empathy toward what their lawyers are going through, or what were your initial reactions?
Smith: I obviously know from a lot of firsthand experience the challenges that arise when a company needs to address these kinds of issues. Our road was a long one and it had its share of difficult moments. Antitrust issues are never easy for company to address.
This isn't a case where Microsoft has taken a public stance or even voiced to the regulators a position, is it?
Smith: We have not taken any public or nonpublic positions on the issues.
Are you guys looking to reach an agreement with Plurk? You guys said that you used code you shouldn't have? I'm curious if you are trying to negotiate some sort of settlement with them?
Smith: I wouldn't want to say anything that goes beyond the public statement we put out.
It does seem when I look at any particular issue with regards to the Internet, Microsoft tends to have a much more cautious approach. It seems like it is tough to compete when others are bundling more than you.
Smith: I think our goal is to be thoughtful but also fast-moving. As we look at the Internet today, it is increasingly a regulated space. That wasn't the case a decade ago. I think a thoughtful company needs to really think through how its products and services are going to comply with the regulations that are going to be enforced or likely to be applied in many different countries around the world. At the same time, one cannot let that get in the way of moving forward quickly. I think it's striking that balance that is really quite important. One needs to move fast. One shouldn't move faster than speed of thought and yet one shouldn't be so thoughtful that one simply analyzes problems and fails to solve them.
Do you think Microsoft has erred a little too much on side of caution in recent years?
Smith: I don't know that we've erred too much on the side of caution, but I do think it's extremely important we move quickly. This is a very dynamic space it is certain to remain a very dynamic space. Customers are interested in deploying new products and services, whether it is on the client, on the server, or on the cloud. The real key is to develop the capability to be both thoughtful and fast moving.
The Federal Communications Commission is taking on difficult and controversial issues as it works toward developing a comprehensive national broadband plan.
On Wednesday the agency heard from an FCC task force on the progress that it's making in writing that broadband plan, which will be presented to Congress in February.
The FCC has been tasked with developing a plan that will get broadband services to all Americans. In working to come up with a comprehensive policy, the FCC has tackled several controversial issues, most notably reforming the Universal Service Fund, reallocating wireless spectrum, and forcing more competition in the market for cable set-top boxes.
One of the top items on the FCC task force's to-do list is reforming the $7 billion rural phone subsidy program called the Universal Service Fund. This program, which also provides funding for schools and libraries through its E-rate program, is funded by consumers, who are charged extra fees on their long-distance phone bills. Specifically, the agency wants to expand the program to help fund broadband service in parts of the country where private industry doesn't find it profitable to invest.
The task force didn't provide long-term recommendations for transitioning USF into funding broadband deployments. But in the short term, it suggested extending some current programs such as life-line link-up to schools and other public areas to provide more access to unemployed people who may not have Internet connectivity at home. The idea is that these individuals can use broadband in these public areas to look for jobs.
FCC Chairman Julius Genachowski said it will take time to get reforms in place. He noted that the national broadband plan won't directly affect USF, but he said the program, once it's expanded, will eventually help fund and become a key part of helping get broadband to underserved parts of the country.
"It's tempting to kick the can [USF reform} further down the road," he said. "But for many reasons it's important to begin tackling these issues now. We must make sure that the fund fully supports the technology of today and tomorrow, not just the technology of the past."
But the process is going to be a long one, he said. And he wouldn't comment on whether true reform could be achieved in his term as chairman.
The FCC task force also reiterated its plans to re-evaluate spectrum issues. Genachowski has said publicly that one of his top priorities is reallocating and finding more spectrum that can be used to build wireless broadband services. Both he and the CTIA, a trade group representing the wireless industry, say there is a looming spectrum crisis that could result in dire consequences without adequate attention now.
During its report to the commission, the broadband task force said it is working with Congress to inventory and assess current spectrum usage in the U.S. It is calling for Congress to also require periodic review of spectrum uses and to find ways to clear spectrum bands that aren't serving other uses, such as wireless broadband.
The task force also said during its presentation Wednesday that it's looking at ways to spur more competition in the cable set-top box market. The group said that a lack of competition in the set-top box market has also resulted in a lack of innovation. The agency feels that more competition in this market would spur companies to develop new Internet applications and services that could be accessed via TVs.
The FCC is considering requiring paid TV providers, such as Comcast, Time Warner Cable, AT&T, and Verizon Communications to supply a low-cost network interface device that would allow people to access the Internet on their TVs and to access cable TV without using a cable box.
WASHINGTON--The wireless and TV broadcasting industries faced off for the first time at a congressional subcommittee meeting on the Hill on Tuesday, setting in motion what could be a long drawn out battle over whether wireless spectrum should be reallocated and where the government will get this new spectrum.
Steve Largent, president and CEO of CTIA, the wireless industry group, and Gordon Smith of the National Association of Broadcasters, were among the witnesses gathered before the House Energy and Commerce Committee's Subcommittee on Communications, Technology and the Internet to discuss what the CTIA and the Federal Communications Commission have called a looming spectrum crisis.
CTIA and FCC Chairman Julius Genachowski have said that finding new spectrum as well as new ways to use existing spectrum more efficiently are top priorities that need to be addressed to keep up with growing demand for new wireless broadband services.
"Spectrum is our industry's backbone and it is what allows us to continue to innovate and create new apps, products, and services," Largent said in a statement. "Without this additional spectrum, our industry will cease to provide U.S. consumers with the most innovative and most competitive wireless offerings in the world."
The hearing comes just weeks after the CTIA ruffled broadcasters' feathers when it filed comments with the FCC suggesting that some of the additional spectrum it seeks for wireless broadband could come from unused TV broadcast spectrum. Broadcasters oppose giving up their spectrum. And some representatives for broadcasters say they don't believe that there is a spectrum crisis.
"There is no shortage of wireless spectrum in this country," said John Hane, counsel in the communications practice group of Pillsbury Winthrop Shaw Pittman, which represents the TV broadcast industry. "There is a lot of spectrum already available that could be used more efficiently. That is why we need these bills to take an inventory of what is currently being used."
Indeed, NAB and CTIA both said they support the passage of the Radio Spectrum Inventory Act, which would require the FCC and the U.S. National Telecommunications and Information Administration (NTIA) to inventory the wireless spectrum available in the U.S. It would also require those organization issue a public report on the government and private uses of the spectrum.
Smith of NAB also said during his testimony that it's important for Congress to look at all spectrum holders to ensure they are using their spectrum efficiently rather than singling out the broadcast industry.
"NAB believes that any inventory of spectrum should be comprehensive," he said in his prepared testimony. "Let's look at all bands and all services, including federal government bands. And let's view how each service is using its existing spectrum."
The NAB also said it supports another bill in the House, called the Spectrum Relocation Improvement Act, which would streamline the process for federal agencies to turn over unused spectrum so it can be auctioned to bidders in the private sector.
It's clear that the CTIA and FCC are taking on a big fight with calls for spectrum reallocation. And Jim Cicconi, senior executive vice president of external and legislative affairs for AT&T, said in an interview Tuesday that he admires the FCC for taking on such a battle.
"We certainly think that there is looming spectrum crisis," he said. "And I give the FCC chairman a great deal of credit for being courageous enough to lay out the problem and to seek what is best for consumers."
But he added that he also believes that the government needs to look at all sources of spectrum in solving this problem.
"That's why we agree there should be a spectrum inventory done," he said.
But skeptics, such as Hane, believe that a full inventory will actually show that no spectrum crisis exists. He argues that Congress may realize once it evaluates the data that there is no real crisis and that the current allocation of spectrum is sufficient to handle future growth.
Specifically, he says that wireless operators could be doing more with Wi-Fi and femto cell technology, which boosts radio signals indoors and then uses a wired broadband connection to send calls and data across a carriers network. He thinks this could help solve some of the efficiency problems that exist today instead of forcing TV broadcasters or government agencies to give up their spectrum.
But the CTIA argues that Wi-Fi and Femto cells are not enough to solve the spectrum shortage. Largent said additional spectrum is necessary to keep the U.S. competitive in the wireless market. And carriers such as AT&T, which is currently facing capacity issues due to heavy use of data services on devices like the iPhone, agree that freeing up more spectrum could help alleviate the problems the company currently faces.
Using a report from the International Telecommunications Union, CTIA calculates that by 2015 the U.S. and other developed nations will need about 1300 MHz spectrum to keep up with growing wireless broadband demand. Largent said in his testimony that the U.S. is lagging other nations in making additional spectrum available. Today, the U.S. has a little less than 500 MHz of spectrum that is commercially available. The trade group is asking the FCC to identify 800 MHz of additional spectrum that can be reallocated for wireless broadband use.
Largent pointed out that countries much smaller than the U.S. have much more spectrum available to them. For example, Germany, which has about 107 million wireless subscribers, will soon have about 645 MHz of spectrum available commercially. And the United Kingdom, which has only about 77 million subscribers will soon have 707 MHz of spectrum available for commercial purposes.
Largent said it is important for Congress to begin the spectrum reallocation process now because it takes years to identify and auction off new spectrum. The past two major FCC spectrum auctions each took more than 10 years to complete from start to finish.
NAB's Smith cautioned congressional leaders to not act hastily in reallocating spectrum. Not only could it hurt free over the air TV, but he said it could stifle innovation in improving digital TV. The U.S. just spent several years and billions of dollars converting to digital TV service, which uses spectrum more efficiently and often provides better service to consumers.
"Our national priorities should recognize the value that free over-the-air broadcasting brings to every American," Smith said in his testimony. "Broadcasting and broadband are not 'either/or' propositions as some have suggested; that's a false choice."
The bills before Congress are just the first step in what is likely to be a long battle for the wireless industry, government agencies and TV broadcasters.
"This is the first round in a 128-round match up," Hane said. "This is just getting started. So it's premature for the CTIA to begin talking about reallocating spectrum when we don't even have a full inventory of the spectrum that's currently being used."
The court case between eBay and Craigslist is increasingly beginning to seem as if it was scripted by John Grisham. It's the little guy against the big machine.
Craigslist would like us to dedicate all our sympathy to its cause, as it describes its dealings with the big, bad wolf, aka eBay. Or, as Monday's court session heard, the big, bad she-wolf.
Jim Buckmaster, Craigslist's CEO, told the court that Garrett Price, an eBay executive, had written him an e-mail that waved a large rainbow-colored warning flag, according to a Reuters story.
"He said he needed to tell me there were two Meg Whitmans," Buckmaster told Craigslist's counsel in court, according to the report. "We had met and reached an agreement with Good Meg. There was another Meg, an Evil Meg. We would be best served to know that Meg could be a monster when she got angry and frustrated."
A monster? That nice lady who, in her run for governor, promises to make California solvent without resorting to punitive taxation or pumping iron? This is surely hard to believe.
The proceedings are being streamed live by the Courtroom View Network, and one wonders just what joy the network might bring Tuesday when eBay's no doubt friendly counsel attempts to hide his fangs from the Craigslist CEO, while simultaneously snipping at his vulnerable parts.
In case you had missed the cause of this kerfuffle, eBay is claiming that Craigslist illegally diluted its 28.4 percent shareholding by "self-dealing," underhand methods.
Craigslist is claiming that eBay made a promise not to start its own Craigslist-type site and then went right ahead and created Kijiji. It seems that such a promise did not appear in what some laypersons might describe as the written form, according to the Associated Press.
Buckmaster also declared that Whitman promised him that if any problems arose between the two companies--an e-mail was produced to the court on Monday in which an eBay executive described Craigslist people as being "definitely on another planet"--then eBay would sell its shares, according to Bloomberg.
"I believed that I could rely on her statements," Buckmaster told the court, Bloomberg said.
Just as Grisham protagonists seem slightly naive to the workings of the world, Buckmaster seems to want the court to believe that Craigslist were nice guys who couldn't imagine how beastly business people could be.
In many Grisham novels, the heroes flee to freedom in some lovely place, with enough money to enjoy the rest of their blissful lives.
Has that thought never crossed the minds of Buckmaster and founder Craig Newmark? Just wondering.
Mandatory ISP filtering legislation will be introduced in Australia around the middle of 2010, after which there will be a one-year period to implement and activate the filtering technology.
The Australian federal government on Tuesday announced it will introduce amendments to the Broadcasting Services Act, which will by 2011 require all ISPs to block refused-classification-rated material hosted on overseas servers.
As part of the new legislation, the government intends to explore what additional process could be implemented around how Web sites are added to the government's "Refused Classification" (RC) list.
The obvious contender for the new RC list's oversight is the Australian Communications and Media Authority (ACMA), which manages a list of locally hosted illegal content, and issues so-called "take-down" notices to local operators.
Read more of Mandatory ISP filter due mid-2011 at ZDNet Australia.
And see also:
• Industry welcomes filter policy
• Telstra supports Conroy's filter
• EFA: Filtering 'damages Australia's reputation'
• Welcome to National Censorship Day
