[JackSpratts]

"Supermodels not wanted. We want your brain." – Early KaZaa recruitment ad


"I have no idea what I'll be doing, but I know it will be reverse engineering, and I'm sure it will be interesting." – DVD Jon


"It's not clear that anyone could even make 'Eyes on the Prize' today because of rights clearances." – Peter Jaszi


"There's so much information out there that a lot of you are spending too much time keeping up with things and not doing important things - like your job." – Mike Masnick


"I'm here because I hope you will agree that an uncoerced, uncoercable press, though at times irritating, is vital to the perpetuation of the freedom and democracy we so often take for granted." – Judith Miller


"This legislation will make the unregulated gun industry the most pampered industry in America." – Kristen Rand


"A global information system needs a culture of sharing." – Arthur Carty







































October 22nd, ’05





The Hidden Cost of Documentaries
Nancy Ramsey

THE moment seemed innocuous enough.

Michael Vaccaro, a fourth grader, had just left P.S. 112 in Brooklyn and was headed home with his mother. Two filmmakers were in front of him, their camera capturing his every movement on video, when his mother's cellphone rang.

"It was such an indicator of today's culture," said Amy Sewell, a producer of "Mad Hot Ballroom," the documentary that follows New York City children as they learn ballroom dancing and prepare for a citywide contest. "Michael's mom had just asked him how school was, her cellphone rings, she answers it, and the look on his face says, 'I don't get to tell my mom about my day.' "

In addition, the ringtone was "Gonna Fly Now," the theme from "Rocky," and the neighborhood was Bensonhurst. "How perfect was that?" Ms. Sewell said.

Perfect, but a problem. Had the ringtone been a common telephone ring, the scene could have dropped into the final edit without a hitch, the moment providing a quick bit of emotional texture to the film. But EMI Music Publishing, which owns the rights to "Gonna Fly Now," was asking the first-time producer for $10,000 to use those six seconds.

Ms. Sewell considered relying on fair use, the aspect of copyright law that allows the unlicensed use of material when the public benefit significantly outweighs the costs or losses to the copyright owner. But her lawyer advised against it. "I'm a real Norma Rae-type personality," Ms. Sewell said, "but the lawyer said, 'Honestly, for your first film, you don't have enough money to fight the music industry.' " After four months of negotiating - "I begged and begged," Ms. Sewell said - she ended up paying EMI $2,500. (Total music clearance costs for "Mad Hot Ballroom," which featured songs of Frank Sinatra and Peggy Lee, came to $170,000; total costs over all were about $500,000.)

Today, anyone armed with a video camera and movie-editing software can make a documentary. But can everyone afford to make it legally?

Clearance costs - licensing fees paid to copyright holders for permission to use material like music, archival photographs and film and news clips - can send expenses for filmmakers soaring into the hundreds of thousands of dollars. Jonathan Caouette's "Tarnation," for instance - a portrait of a young man's relationship with his mentally ill mother that Mr. Caouette edited at home, on a laptop computer - was widely reported to have cost $218. In fact, after a distributor picked up "Tarnation," improved the quality with post-production editing and cleared music rights, the real cost came to more than $460,000. Clearance expenses were about half the total.

Securing rights to music has long been a serious challenge. Ten years ago, for instance, the filmmaker Steve James paid $5,000 to include the song "Happy Birthday" in "Hoop Dreams," the 1994 documentary that followed two Chicago basketball players through high school. One memorable scene portrayed a young man's 18th birthday, as the family sang "and his mom baked him a cake," Mr. James said. "It was an important scene, there was some amazement that Arthur had made it to 18. Of course, we wanted that in."

Scrutiny by rights holders has increased, Mr. James said, as the profit potential in documentaries has risen. "When I was starting out, documentaries were under the umbrella of journalism," he said. "Now, the more commercially successful documentaries have become and the more they're in the public eye, the more they're perceived as entertainment."

In another change, said Peter Jaszi, a law professor at American University, "rights holders are slicing their bundle of rights in finer and finer ways and selling them off in smaller and smaller pieces." He asked: "Would music copyright owners 10 years ago have predicted they'd be making a substantial part of their money over ringtones on cellphones?" (It's now a reported $3 billion industry.) As a result, he said, there's been "a tremendous upsurge in intellectual property consciousness and anxiety on the part of all kinds of users."

Mr. Jaszi is an author, with Patricia Aufderheide, the director of American University's Center for Social Media, of a report titled "Untold Stories: Creative Consequences of the Rights Clearance Culture for Documentary Filmmakers," for which 45 filmmakers were interviewed. Among the more striking examples he cites is "Eyes on the Prize," the series on the civil rights movement. Henry Louis Gates Jr., chairman of the department of African and African-American studies at Harvard, has called "Eyes" "the most sophisticated and most poignant documentary of African-American history ever made." But it was last broadcast in 1993, and while schools or libraries may have a copy, it is not legally available for sale or rent on DVD or video.

"There's a whole generation out there who have not seen the program," said Sandy Forman, an entertainment lawyer heading a project to reclear the rights so that "Eyes" can be rebroadcast and distributed to the educational market. "When the rights were originally cleared, they were acquired for different terms. Some were in perpetuity, some were for 3 years, some for 7, some for 10." Once just one group of rights expired - and there are 272 still photographs and 492 minutes of scenes from more than 80 archives, plus the music - "we had to pull the film from distribution."

In August, the project received $600,000 from the Ford Foundation and $250,000 from the New York philanthropist Richard Gilder. PBS's "American Experience" is considering a 2006 broadcast of "Eyes."

"It's not clear that anyone could even make 'Eyes on the Prize' today because of rights clearances," Mr. Jaszi said. "What's really important here is that documentary commitment to telling the truth is being compromised by the need to accommodate perceived intellectual and copyright constraints."

On occasion, storytelling takes a back seat to legal and financial considerations. When Jon Else was completing his film "Sing Faster: The Stagehands' Ring Cycle," a backstage look at an opera company that won a Filmmakers Trophy at the Sundance Film Festival in 1999, he wanted to use a scene in which the stagehands watched "The Simpsons" as Wagner roared overhead.

"I felt it was a wonderful cultural moment to see two stagehands playing checkers while the gods are singing about destiny and free will and Marge and Homer are arguing on the television set," Mr. Else said. "We got permission from Matt Groening's company," which produces "The Simpsons," and then went to Fox.

"The first response was $10,000 for four seconds," Mr. Else said. "When I explained this was for public television, they replied that was their public television minimum. We eventually worked our way down to $7,000, but it was at the end of production, we were exhausted and out of money." It became more complicated. "Fox said, Wait a minute, any chance you're going to sell this? It wasn't the case of Fox being intractable jerks; it's just this odd gray area.

"At the last second, I replaced it with a shot of a film that I own," he said, adding, "I'll burn in journalistic hell for that."
http://www.nytimes.com/2005/10/16/movies/16rams.html





Congress OKs Gun Industry Lawsuit Shield
Laurie Kellman

Congress gave the gun lobby its top legislative priority Thursday, passing a bill protecting the firearms industry from massive crime-victim lawsuits. President Bush said he will sign it.

"Our laws should punish criminals who use guns to commit crimes, not law-abiding manufacturers of lawful products," Bush said in a statement.

The House voted 283-144 to send the bill to the president after supporters, led by the National Rifle Association, proclaimed it vital to protect the industry from being bankrupted by huge jury awards. Opponents, waging a tough battle against growing public support for the legislation, called it proof of the gun lobby's power over the Republican-controlled Congress.

"This legislation will make the unregulated gun industry the most pampered industry in America," said Kristen Rand, director of the Violence Policy Center.

Under the measure, a half-dozen pending lawsuits by local governments against the industry would be dismissed. Anti-gun groups say some lawsuits filed by individuals could be thrown out, too.

The Senate passed the bill in July.

The bill's passage was the NRA's top legislative priority and would give Bush and his Republican allies on Capitol Hill a rare victory at a time when some top GOP leaders are under indictment or investigation.

"Lawsuits seeking to hold the firearms industry responsible for the criminal and unlawful use of its products are brazen attempts to accomplish through litigation what has not been achieved by legislation and the democratic process," House Judiciary Committee Chairman James Sensenbrenner, R-Wis., told his colleagues.

Reese reports opponents see the measure's strong support as testament to the gun lobby's influence.

Former House Majority Leader Tom DeLay, R-Texas, did not vote. He is in Texas in connection with his indictment in an alleged scheme to violate state election law.

Propelled by GOP election gains and the incidents of lawlessness associated with the passing of Hurricane Katrina, support for the bill has grown since a similar measure passed the House last year and was killed in the Senate.

Horrific images of people without the protection of public safety in New Orleans made a particular impression on viewers who had never before felt unsafe, according to the gun lobby.

"Americans saw a complete collapse of the government's ability to protect them," said Wayne LaPierre, the NRA's executive vice president.

"That burnt in, those pictures of people standing there defending their lives and defending their property and their family," he added, "where the one source of comfort was a firearm."

With support from four new Republicans this session of Congress, the bill passed the Senate for the first time in July. House passage never was in doubt because it had 257 co-sponsors, far more than the 218 needed to pass.

The bill's authors say it still would allow civil suits against individual parties who have been found guilty of criminal wrongdoing by the courts.

Opponents say the strength of the bill's support is testament to the influence of the gun lobby. If the bill had been law when the relatives of six victims of convicted Washington-area snipers John Allen Muhammad and Lee Boyd Malvo sued the gun dealer from which they obtained their rifle, the dealer would not have agreed to pay the families and victims $2.5 million.

"It is shameful that Republicans in Congress are pushing legislation that guarantees their gun-dealing cronies receive special treatment and are above the law," said Rep. Robert Wexler, D-Fla.

Bush has said he supports the bill, which would prohibit lawsuits against the firearms industry for damages resulting from the unlawful use of a firearm or ammunition. Gun makers and dealers still would be subject to product liability, negligence or breach of contract suits, the bill's authors say.

Democrats and Republicans alike court the NRA at election time, and the bill has garnered bipartisan support. But the firearms industry still gave 88 percent of its campaign contributions, or $1.2 million, to Republicans in the 2004 election cycle.

Gun control advocates, meanwhile, gave 98 percent of their contributions, or $93,700, to Democrats that cycle, according to the Center for Responsive Politics.

---

The bill is S. 397.
http://hosted.ap.org/dynamic/stories...M&SECTION=HOME





Microsoft Recants Disputed Music Contracts
AP

Microsoft Corp., already under government scrutiny over its behavior toward competitors, told manufacturers of iPod-like portable audio devices that they were not allowed to distribute rivals' music player software, but then pulled back after one company protested.

The Justice Department said the incident was ''unfortunate,'' but that government lawyers decided to drop the issue because Microsoft agreed 10 days later to change the contracts. The government disclosed details of the dispute in a federal court document made available Thursday.

The disputed contracts would have affected portable music players that compete with Apple Computer Inc.'s wildly popular iPod.

Legal and industry experts said Microsoft's demands probably would have violated the landmark 2002 antitrust settlement between the company and the Bush administration. They expressed astonishment that Microsoft was not more careful, given its mandatory legal training for employees about antitrust rules and continued monitoring by the Justice Department and a federal judge over its business deals through late 2007.

''One has to be skeptical that either the internal training is not working, in which case heads ought to be rolling, or that the lessons of the case are being ignored,'' said Albert A. Foer, head of the Washington-based American Antitrust Institute, which supports more aggressive U.S. antitrust policies.

Howard University law professor Andrew Gavil said he wonders whether Microsoft's early demands -- which would have compelled manufacturers to distribute to consumers only Microsoft's Windows Media Player software -- were a genuine mistake or a signal the company intends to revert to its hardball tactics.

''It's somewhat amazing it even happened,'' said Gavil, who has closely followed the Microsoft case. ''It's troubling that anyone inside Microsoft was still thinking this was a legitimate business strategy.''

Microsoft said it recanted its demands after lawyers reviewed the contracts and after an unspecified industry rival complained. ''We have a legal process in place that prevents these incidents from occurring,'' spokeswoman Stacy Drake McCredy said.

The disputed contracts were drafts sent to manufacturers before Microsoft's lawyers reviewed them, said one lawyer familiar with details of the incident. This lawyer spoke on condition of anonymity because this person was not authorized to make public statements about the antitrust case.

The contracts, part of a campaign Microsoft called ''easy start,'' affected one of the rare technology sectors where Microsoft is not already dominant: handheld music players and online music services. The software giant and others have struggled to match the runaway success of Apple iPod player and iTunes music service.

Microsoft wants consumers to use its media software to download songs and transfer them onto their portable music players from Internet subscription services, such as those from Napster Inc., RealNetworks Inc. and Yahoo! Inc. Each company currently offers its own media software.

Before the disclosure of the document involving portable music players, U.S. District Judge Colleen Kollar-Kotelly had set a hearing for this coming Wednesday to review the adequacy of the antitrust settlement. It was unclear whether she will challenge lawyers from Microsoft or the government over the contacts.
http://www.nytimes.com/aponline/tech...Antitrust.html





Accused Spyware Installer Settles Lawsuit
AP

The former chief executive of a company accused of secretly installing adware and spyware on millions of home computers agreed to pay $750,000 in penalties after an investigation, New York Attorney General Eliot Spitzer said Thursday.

In April, Spitzer sued Los Angeles-based Intermix Media Inc., saying the company was responsible for sending software tens of millions of times on computers across the country and three million times in New York.

Adware and spyware deliver nuisance pop-up advertisements and can slow and crash personal computers. Spitzer said such programs are fraudulent and threaten to discourage e-commerce.

Shortly after filing the suit, Spitzer's office began investigating Intermix's founder and former CEO Brad Greenspan, Spitzer spokesman Brad Maione said.

Greenspan, 32, served as CEO of Intermix from July 2002 to October 2003. Investigators said he directed employees to bundle adware with other free programs and to make the software difficult to remove.

''This agreement sends a message that intrusive and deceptive practices will not be tolerated,'' Spitzer said.

Greenspan did not admit to any wrongdoing in the settlement. In a statement, he blamed the company's current management for increasing the amount of adware attached to Intermix's offerings and with deceiving investigators.

''My departure from Intermix in 2003 preceded the focus of the New York attorney general's investigation on Intermix' practices beginning in late 2004,'' he said. ''During my tenure at the company, the adware division was a small part of the business ... I continue to stand by my statements that it was the current Intermix Management team that ramped up the company's adware-download program aggressively during the investigation by the New York attorney general and misrepresented the status of the adware pop-up product.''

Intermix runs a collection of Web sites featuring quizzes, games and jokes that it packages for advertisers. It also owns MySpace.com, the popular social-networking site.

Spitzer said that Intermix's agreement to pay $7.5 million in penalties over three years and stop distributing adware programs was approved by state Supreme Court Judge Judith Gische.

Intermix ''is pleased to put this historical matter behind us,'' said Linda Goldstein, an attorney representing the company. ''This was activity in the company's past and to a large extent had been largely ended by the time the investigation began.''

Assistant Attorney General Kenneth Dreifach disputed those assertions, saying Intermix continued to attach spyware to its programs well into 2005.

''Our investigation began in September 2004 and we found numerous examples of programs'' bundled with spyware, he said. ''We contacted them in December and we were fairly surprised they went ahead with these egregious practices. It continued essentially to the eve of our suit.''

Software also agreed to pay $35,000 to end an investigation by the attorney general's office of its bundling of adware with free screensavers without providing notice to consumers, Spitzer's office said.

News Corp., the media conglomerate controlled by Rupert Murdoch, last month completed its purchase of Intermix for $580 million in cash.
http://hosted.ap.org/dynamic/stories...stomwire. htm





Sony BMG Sued in Bribery Case
Jeff Leeds

TSR Records, an independent music label, filed suit yesterday against Sony BMG Music Entertainment, accusing it of unfairly dominating radio play lists through the use of bribes to programmers and other illicit tactics.

The lawsuit, filed in Federal District Court in Los Angeles, comes three months after Sony BMG agreed to pay $10 million to settle allegations by the New York attorney general, Eliot Spitzer, that it had used improper radio promotion practices, including payola, or undisclosed payments to broadcasters.

TSR, of Tarzana, Calif., said independent labels were "systematically excluded" from radio play lists as a result of record company tactics. It contended that Sony BMG violated federal and California antitrust laws and improperly interfered with its business prospects. The case seeks unspecified monetary damages and attorneys' fees.

Tom Hayden, the label's chief executive, said in an interview that he often found that deserving acts, including a TSR rock band, Get Set Go, had been shut out of stations because of improper conduct by bigger labels.

Sony BMG said the company would not comment on pending litigation.
http://www.nytimes.com/2005/10/19/bu.../19payola.html





Publishers Sue Google Over Scanning Plans
Hillel Italie

Just weeks after a leading authors' organization sued Google Inc. for copyright infringement, the Association of American Publishers has also filed suit against the search engine giant's plans to scan and index books for the Internet.

Under the Google Print Library Project, millions of copyrighted books from three major university libraries - Harvard, Stanford and Michigan - will be indexed on the Internet unless the copyright holder notifies the company by Nov. 1 about which volumes should be excluded. Two other libraries, Oxford University and the New York Public Library, will contribute only out-of-copyright materials.

Google has called the project an invaluable chance for books to receive increased exposure. The library project is an offshoot of the Google Print program, for which publishers voluntarily submit copyrighted material.

But in papers filed Wednesday in the U.S. District Court in Manhattan, the publishers association sought a ruling that would support an injunction against illegal scanning and cited the "continuing, irreparable and imminent harm publishers are suffering ... due to Google's willful (copyright) infringement to further its own commercial purposes."

The suit named five publishers as plaintiffs: McGraw-Hill, Pearson Education, Penguin Group USA, Simon & Schuster and John Wiley & Sons. The suit seeks recovery of legal costs, but no additional damages.

Google, in a statement issued Wednesday, called the legal action "short-sighted" and said the project was a "historic effort to make millions of books easier for people to find and buy."

"Creating an easy to use index of books is fair use under copyright law and supports the purpose of copyright: to increase the awareness and sales of books directly benefiting copyright holders," David Drummond, Google's general counsel and vice president, corporate development, said in the statement.

The Authors Guild, which represents about 8,000 writers, filed a class action suit for copyright infringement last month. Besides an injunction, the guild is seeking monetary damages.

Patricia Schroeder, president and CEO of the Association of American Publishers, said Wednesday that the publishers' lawsuit followed months of negotiations with Google.

"We spent so much time on this I think half of our board ended up having trouble with their families because of canceling vacations," she said.

Publishers worry that Google is scanning entire books, even though just a limited amount of material will be displayed online. The library project's Nov. 1 deadline, Google's so-called "opt out" provision, was established over the summer in response to such concerns.

But Schroeder said Wednesday that the company still wrongly placed the burden on copyright holders. By contrast, publishers don't object to the larger Google Print program because nothing would be used without explicit permission.

Google has countered that it does not need permission for the library project and calls the "opt out" clause a courtesy. Google's Drummond said through spokesman Nathan Tyler that even after Nov. 1, copyright holders can request that material be removed.

The Google controversy reflects a general debate over the Internet and copyright law. Even the publishers association acknowledges that the project could benefit the book industry, if rights are respected. Science fiction author Cory Doctorow made his most recent book, "Someone Comes to Town, Someone Leaves Town," available for free last summer on the Internet, believing that the promotional value greatly outweighed any lost sales.

Schroeder noted that viewpoint, but cited two reasons for still objecting to Google's program.

"First of all, it sets a dangerous precedent. If you allow Google to do it, you allow anybody to do it. It's going to be an impossible task for copyright owners to defend themselves," she said.

"Secondly, the whole principal of copyright law is that you get to decide if it's good for you. Why should Google get to decide? Earlier this week, Google announced a version of its print program was now available in eight European countries, including France, Germany and Spain.
http://hosted.ap.org/dynamic/stories... ustomwire.htm





Barney: I Sue You, You Sue Me
Declan McCullagh

For a plush purple dinosaur who extols the virtues of affection and amity, Barney can be surprisingly aggressive in his legal demands.

Barney's lawyers at the New York firm of Gibney, Anthony and Flaherty sent stiff warning letters last week to Web sites displaying less-than-flattering images of the plump saurian.

"Your Web site depicts a plush Barney toy in a violent manner or position," Matthew Carlin wrote Tuesday on behalf of Lyons Partnership, which owns the Barney trademark. "We are writing to request that you remove this violent content toward Barney on your Web site."

One of the ostensibly violent sites, a site maintained by Baltimore-area programmer Rob Carlson, depicts a Barney toy suspended from the ceiling. Carlson, who has not removed the photograph, says it has been online for at least five years and nobody has complained before.

Carlin said he could not discuss his law firm's next steps in attempting to remove offensive images of Barney from the Internet. "I really can't comment," he said Monday in a brief telephone conversation.

Another letter from Carlin was directed to Stuart Frankel, who maintains the "Source of All Evil" site with a rendering of a vaguely Satanic cartoon tyrannosaur. "It is unlawful...to use this property without the permission of Lyons Partnership," Carlin wrote. "These materials must be immediately removed."

The Electronic Frontier Foundation, a San Francisco civil liberties group providing legal representation to Frankel, dismisses the legal threats as nonsense. "I think that Barney is unfortunately looking like he's becoming a recidivist in phony copyright claims," said Cindy Cohn, EFF's legal director.

In 2001, EFF took on Barney's lawyers after they sent out similar cease-and-desist letters. At the time, Cohn wrote back saying that anti-Barney screeds were protected by the First Amendment rights to publish parodies, and Barney's owners never pursued the matter further.

Since then, the EFF managed to break new legal ground by forcing voting machine maker Diebold to write a check to settle allegations of copyright misuse. "We were very happy to cash that check for $125,000 from Diebold when they made phony copyright claims," Cohn said. "I'd be happy to cash one from Barney."

Barney's lawyers have been aggressive in pursing trademark lawsuits before. They once sued the creator of a sports mascot that, as part of its performance, assaulted and generally did violence to a Barney look-alike.

But the 5th Circuit Court of Appeals ruled in 1999 that the performance was a parody and not forbidden by trademark law. "Even if young children--like the 2-year-old who had such a traumatic reaction to the downtrodden Barney--are in attendance, we would expect them to be supervised by parents who could explain the nature of the parody," the court decided.
http://news.com.com/Barney+I+sue+you...3-5898240.html





Japanese City Sued For Copyright Infringement

The Yomiuri Shimbun

A suit was filed Wednesday against the Yokohama municipal government for allegedly infringing the copyright of a painting by posting images of it on the Internet for a public auction.

The suit was filed with the Tokyo District Court by the Art Copyright Center, Ltd., based in Nakano Ward, Tokyo, which as the painting's copyright agent said the city had failed to obtain consent from the painter or the company. It is unusual for a municipal government to be sued over copyright violations. The court's decision could lead to a flurry of cases involving copyright infringement of paintings whose images are posted on the Internet.

According to the bill of complaint, the painting was obtained by the city from a resident in lieu of unpaid city taxes. In February, the city began auctioning goods seized from debtors via the Internet, including the painting. Three images of the painting were posted-- two of the complete picture and one showing a magnified image of the artist's signature. In the suit, the Art Copyright Center says the city did not ask its consent to post said images and was guilty of copyright infringement. The firm asked the court to order the city to take the images off the Internet and pay royalties of 170,000 yen.

According to the Yokohama municipal government, the images were slightly blurred before being posted on the Internet, and in the words of an official, were "not copies, which need a copyright license. Even if they are seen as copies, they were for reference and still don't require a license."

But Atsushi Yamato, an associate professor at the graduate school of Yokohama National University and an expert on copyright law, disagrees. "One needs to get a copyright license for public auctions as well as in other cases," he said. "Changing the image [by blurring], is seen as another violation of copyright." Yamato's opinion is shared by the Copyright Research and Information Center, an incorporated association.

In contrast, the Tokyo metropolitan government, which was the first local authority to hold public auctions of reposessed goods, sided with Yokohama, while the copyright department of the Cultural Affairs Agency took a neutral position, saying, "We would like to wait for the court's decision [before commenting]."

According to the law, copyright is valid for 50 years after the death of the artist, and is not transferred when one buys the work, as in the case of a painting. To reproduce or exhibit a work, it is necessary to obtain a copyright license.
http://www.yomiuri.co.jp/dy/national...14TDY02004.htm





California Sued Over Violent Video Game Ban

Two industry trade groups sued the state of California after the state passed a law barring the sale of violent video games to minors.

California Gov. Arnold Schwarzenegger, the former screen "Terminator" who is himself portrayed in several video games based on his Hollywood roles, vowed to fight the suit, which was filed on Monday in federal court in San Jose.

"I will do everything in my power to preserve this new law, and I urge the attorney general to mount a vigorous defense of California's ability to prevent the sale of these games to children," Schwarzenegger said in a statement.

"California's new law will ensure parental involvement in determining which video games are appropriate for their children," he said. "I believe strongly that we must give parents the tools to help them protect their children."

The trade group Entertainment Software Association announced its intentions to fight in court immediately after Schwarzenegger signed the ban 10 days ago. Video Software Dealers Association joined in the suit.

"It is not up to any industry or the government to set standards for what kids can see or do; that is the role of parents," said Douglas Lowenstein, the group's president.

"Everyone involved with this misguided law has known from the start that it is an unconstitutional infringement on the First Amendment freedoms of those who create and sell video games."

Federal courts have ruled against violent video game legislation in Washington state, the city of Indianapolis and St. Louis County in Missouri, saying the moves violated constitutional free speech guarantees.

The California ban came in the wake of lively debate after game publisher Take-Two Interactive Software pulled its best-selling game "Grand Theft Auto: San Andreas" from retailers this summer because of hidden sex scenes.

The state's measure bars the sale and rental to minors of games that show serious injury deemed especially heinous, atrocious or cruel. Violators are subject to a $1,000 fine.
http://news.com.com/Calif.+sued+over...3-5899595.html





U.S. Video Game Sales Down 20 Pct in Sept.-Analyst

U.S. retail sales of console video games fell 20 percent in September, but are seen rebounding at year-end -- the traditionally strong holiday season when

Microsoft Corp. also will launch its new game player, an analyst said on Monday.

Sales of video games for consoles are expected to have fallen to $365 million in the United States in September from $458 million a year earlier, Wedbush Morgan Securities analyst Michael Pachter forecast in a client note.

Pachter said he expects double-digit declines for September and October.

"We expect modest growth in November and dramatic growth in December," with full-year console video game software sales ending 9 percent higher year-on-year, Pachter said.

U.S. console video game software sales are up 9 percent through August, he added.

September sales figures from market researchers NPD Group are due later this week, Pachter said.

Video game sales have slowed as consumers wait and save for next-generation consoles from Microsoft, Nintendo Co. Ltd <7974.OS> and market leader Sony Corp. <6758.T>. Microsoft's Xbox 360 will be first to hit the market and is slated to arrive on store shelves on Nov. 22.

Pachter forecast a 2 percent rise in September sales at Electronic Arts Inc., the world's biggest video game publisher, and a 4 percent increase at Activision Inc., the industry's No. 2 player.

Sales at Take-Two Interactive Software Inc., which recently pulled and re-released its blockbuster "Grand Theft Auto: San Andreas" title without disabled sexual content that let to a restrictive rating change, is expected to have September sales that were down 24 percent from the year earlier.
http://today.reuters.com/news/newsAr...ch=video+games





Dutch Say Suspects Hacked 1.5M Computers
Toby Sterling

Three suspects in a Dutch crime ring hacked 1.5 million computers worldwide, setting up a "zombie network" that secretly stole credit card and other personal data, prosecutors said Thursday.

The three, who were arrested Oct. 6 and originally were estimated to have hacked 100,000 computers, have yet to enter a plea.

A court in the town of Breda extended the custody of the 19-year-old main suspect and a 22-year-old accomplice for a month Thursday, and ordered the release of the third, aged 27, pending trial, prosecution spokesman Wim de Bruin said. The suspects' names have not been released.

Prosecutors said, however, more arrests were likely as the investigation continues.

The two still being held are accused of blackmailing a U.S. company by threatening it with a "denial of service" attack, in which thousands of computers that have been infected are used to bombard a target with e-mail. De Bruin said the company did not want its identity known.

The software the hackers used, a variation of the worm known as "W32.Toxbot," was first detected this year. Antivirus software can remove it, but the hackers adjusted the program constantly to defeat protections.

The existence of the "zombie network" of infected computers was first detected by Dutch Internet provider XS4ALL. The company noticed unusual activity coming from a handful of its users' infected computers, said the company's chief technical officer, Simon Hania.

The company traced the network as far as it could, and then turned the matter over to prosecutors.

De Bruin said prosecutors worked with computer crime experts to trace the network to its source and then installed taps on the suspects' computers. The taps showed the suspects manipulating the zombie network to steal passwords and credit card data, De Bruin said.

They also are accused of stealing PayPal and EBay Inc. account information to order goods without paying for them, he said. Authorities have seized computers, a bank account, an undisclosed amount of cash and a sports car in the investigation.

About 30,000 of the infected computers were in the Netherlands. When investigators dismantled the global network, they found more than 15 times the number of infected computers they originally estimated.

XS4ALL's Hania said that although the zombie network may be the largest of its kind whose controllers were busted, it was only a "drop in the ocean."

"It destroys the Internet," he lamented.
http://hosted.ap.org/dynamic/stories...CTION=BUSINESS





Can’t even do that here

Green Light To Chase File-Sharers

Film and music companies can once again start to collect information about people who spread copyrighted material over the internet.

The Swedish Data Inspection Board (DI) has ruled that industry organisations such as the Swedish Anti-Pirate Bureau (APB) and record industry group IFPI can collect the IP addresses of people who spread films, computer games and music against copyright laws.

DI had earlier ruled that APB and IFPI’s methods broke privacy laws, as they were collecting personal information without permission. It had also decided that collecting information about illegal spreading of material was forbidden because only government authorities are allowed to keep registers of criminal offences.

Now, DI says that both organisations can have an exception from the law, and will therefore be allowed to re-start collecting information about file-sharers IP addresses.

“The organisations’ collection of IP numbers does not constitute an undue infringement of personal integrity,” DI argued in a press release.

The organisations representing copyright owners have the duty to protect their members’ financial and legal interests, it said. It added that they were only collecting information that users of file-sharing programmes had made public by signing on to the network.

If APB and IFPI were not systematically making a register of personal information, but were simply passing on information to internet service providers or to the police.

Björn Gregfeldt, chairman of APB, told The Local that the ruling meant that the fight against illegal copying could start straight away.

“We have never kept a register of personal details,” he said.

“We can restart our operations pretty much immediately, and maybe now we’ll be able to persuade internet service providers that they have to take this problem seriously.”
http://www.thelocal.se/article.php?I...&date=20051013





Swedish Music Industry Joins File Sharing Battle

Sweden's high profile battle between illegal file sharers and representatives of the film and games industries rumbles on. But now the country's music industry, which has so far kept quiet on the subject, is planning to get involved.

"We see no signs that illegal file sharing is declining," said Helene Rönnmark, at the Swedish branch of the International Federation of the Phonographic Industry (IFPI), to Computer Sweden.

"Therefore we are planning a number of measures during the autumn and it is important that the public is aware of that," she said.

The organisation will carry out a quarterly assessment of the scale of the problem and says it will not begin clamping down until the public has been informed of the plans.

Last week the IFPI, along with the games and film industry body, Antipiratbyrån (APB), was given the right to register the IP addresses of individuals found to be sharing copyright-protected material.

This gave the organisations an exemption from the Personal Data Act and was seen as a significant victory for APB and an indication that the hunt for illegal file sharers could proceed.

But any satisfaction that the organisation derived from it will have vanished this week, with the news that APB must inform people that their IP address is being registered.

The order comes from the Swedish Board of Data Inspection, but APB says it is impossible without the cooperation of the country's internet service providers. And the ISPs are not playing ball.

Only the file sharer's ISP can link the IP address to the person. If the ISP receives a request for such information from the police, they cannot refuse it, but a few calls from TT revealed that requests from APB would be ignored.

"We don't send out warning letters to our customers on anyone else's behalf," said Jan Sjöberg, the press officer at Telia Sonera Sweden.

The public face of APB, lawyer Henrik Pontén, thinks that the ISPs are taking a short-term view of the problem.

"It is also in their interests that there is a functioning games and film industry for legal distribution," he said.

"In the long run a working copyright law is also a condition for their business - we are in the same boat since we have the content and they have the means of distribution," said Pontén.
http://www.thelocal.se/article.php?I...&date=20051020





EU Pushes for Online Music Copyright
Aoife White

The European Union called on Europe's music industry Wednesday to create EU-wide copyright licenses for online music, saying this would boost demand for legal downloads.

"These licenses will make it easier for new European-based online services to take off," EU Internal Market Commissioner Charlie McCreevy said.

Music copyrights are currently collected by national agencies, but the emergence of online music services such as Apple Computer Inc.'s iTunes means there is growing demand for a license that covers all 25 EU nations.

The European Commission said the absence of bloc-wide copyright licenses has been one factor that has made it difficult for new Internet-based music services to develop their full potential.

Apple has to obtain separate licenses for each song in every EU country to offer it to all Europeans, which could cost it up to 475,000 euros ($569,000) per song, the commission said. In practice, this means that users in some countries have a much smaller catalogue to choose from.

However, the International Federation of the Phonographic Industry said the music business is already working hard to license online music by tackling problems negotiating rights with copyright holders.

"There are over 300 legal music sites in Europe now, some of them with over 2 million tracks," it said.

Germany is Europe's biggest online user of both legal and pirated music with 9.5 million people downloading, according to a Forrester Research report from August 2004. Some 89 percent of people questioned said they never paid to download music or video.

Last year, online music sales in the EU reached 27 million euros ($32 million), far below the booming U.S. market which reported $248 million in sales.

Research group Enders Analysis predicts European sales to surge to 900 million euros ($1.1 billion) by 2010, but foresees a continued lag behind the United States, where sales should reach 1.4 billion euros ($1.7 billion) that year.

McCreevy warned the music industry that, at this stage, he is merely asking them to develop licenses.

"I will be monitoring the situation closely and, if I am not satisfied that sufficient progress is being made, I will take tougher action," he said.

The commission said it wants to give rights holders and commercial users of copyright material the choice between two options.

It said commercial users and rights managers backed the first option allowing the national agencies that collect copyright payments to grant an EU-wide license.

Music publishers, independent record labels and some collective rights managers wanted to give copyright holders the choice to appoint a rights manager for online use in the EU.

McCreevy said last week he saw music copyrights as a test case which could lead to single licenses for books and films.
http://customwire.ap.org/dynamic/sto...stomwire. htm





Study: Europeans Pay Double Tax On Net Music
Andy McCue

European consumers are being forced to pay usage rights on legal copy-protected music downloads multiple times because of outdated private copy levies, according to a study.

The Business Software Alliance issued a report Thursday urging that the extra taxation that most European countries have added to music downloads be scrapped.

The BSA said the rise in online content protected by digital rights management (DRM) technology makes the need for private copy levies obsolete. These levies were originally designed as a tax on people making private copies of tapes and CDs they had bought.

But online content is increasingly DRM-protected. Under DRM, things such as music downloads carry a royalty at the point of purchase, so a percentage of the payment goes directly to artists and labels.

"With DRM technology's expanding role in the market, levies have become a superfluous double tax on consumers," Francisco Mingorance, director of public policy in Europe for the BSA, said in a statement. "Levies were designed to compensate for unpoliceable private copying. But with DRM, the rationale for levies disappears."

These levies don't apply to the United Kingdom, but most of Europe is forced to pay for usage rights through taxes imposed on their PC and music-playing equipment.

"Lawmakers cannot ignore that private copy levies are increasingly obsolete in the digital age," Mingorance said.

"Governments have an opportunity to bring real consumer benefits by applying the European Copyright Directive rules and phasing out the outdated levies system," he added.
http://news.com.com/Study+Europeans+...3-5894685.html





Three Indicted In Massive Bust Of Pirated CDs

A federal grand jury indicted three men on Wednesday in what prosecutors are calling the largest bust of pirated CDs in U.S. history.

The indictment follows the arrest last week of Ye Teng Wen, 29, Hao He, 30, and Yaobin Zhai, 33, on charges of illegally reproducing 325,000 music and software CDs.

Two of the men are American citizens and one has a U.S. work permit, said a spokesman for the U.S. Attorney for Northern California.

"The allegations of massive piracy of music and software reflect the potential loss of millions of dollars to the artists and businesses who legitimately own the copyrights on these works," U.S. Attorney Kevin Ryan said in a statement.

"These individuals are charged with affixing counterfeit labels on CDs to create the appearance of legitimacy, including the FBI Anti-Piracy Warning that stated 'Unauthorized copying is punishable under federal law."'

Prosecutors said the pirated CDs, which included Latin music and Symantec computer security software, circulated widely and one of the disks was found at a store in Chicago.

The three men, who live near San Francisco, have been released on bail and will appear in court on October 27.

Music industry officials say piracy has lead to a steady decline in CD sales over the past five years. Industry officials estimate that piracy costs software and music firms tens of billions of dollars worldwide.
http://today.reuters.com/news/newsAr...ch=Yaobin+Zhai





Australian ISP Settles With Music Industry
Steven Deare

The case between the Australian music industry's antipiracy unit and Internet service provider Swiftel Communications has been settled out of court.

Music Industry Piracy Investigations (MIPI) had alleged that Swiftel's employees and customers created a BitTorrent file-sharing hub to host thousands of pirated sound and video recordings.

Michael Kerin, MIPI general manager, would not reveal if a financial arrangement was involved, saying: "Let me put it this way--the music industry would never have settled the case unless it was on terms that suited it."

As part of the settlement terms, announced Friday, Perth-based Swiftel will implement a new process to deal with copyright-infringement notices issued by copyright holders.

"Swiftel regrets that it has not taken enough action to date to stop Internet piracy. We are committed to implementing a new set of industry-leading compliance programs to protect the music industry," Ryan O'Hare, chief executive officer of Swiftel, said in a statement.

The case has been ongoing in Australia's Federal Court since March after MIPI ordered a search on Swiftel's premises. The music industry claimed it had evidence that the ISP's employees and customers had infringed on copyright content by using BitTorrent.

The settlement follows the music industry's recent court victory over Sharman Networks, owners of Kazaa, a similar application to BitTorrent.
http://news.com.com/Australian+ISP+s...3-5895499.html





Yahoo to Bar Minor-Adult Sex Chat Rooms
Samuel Maull

Yahoo Inc. said Wednesday it will bar chat rooms that promote sex between minors and adults and restrict all chat rooms to users 18 and older.

The changes come under an agreement with New York Attorney General Eliot Spitzer and Nebraska Attorney General Jon Bruning.

"This is about protecting kids," Bruning said.

Spitzer said authorities did not have to resort to litigation. He said Yahoo, "acting as a good corporate citizen, ... did the right thing. We asked them to create a filter to stop this kind of thing and they have done so."

In June, while still in discussions with the attorneys general, Yahoo voluntarily closed its user-created chat rooms following complaints that some had names suggesting they facilitated illegal conduct, including sex between adults and minors.

Yahoo spokeswoman Mary Osako said Wednesday that Yahoo was still determining if and when user- created chats would be restored as it makes improvements "to enhance the user experience and compliance with our terms of service."

If they do get restored, the agreement calls for Yahoo to review the names of such rooms ahead of time and reject any deemed inappropriate. Even if a room's name is innocuous, Yahoo also will bar any whose postings encourage sex acts between adults and minors, purging such chat rooms within 24 hours from when it becomes aware of them.

"These efforts are consistent with and build upon our long-standing commitment to providing a safer and more secure online experience for consumers," Osako said.

The company also is eliminating the teen chat category and limiting usage of all chat rooms to adults, although it was not clear how the company would prevent children from signing up as adults because credit cards aren't required.

Spitzer, a Democrat running for governor next year, said he started the investigation at Bruning's urging.

"The agreement we have today is the first of its kind," Spitzer said. "We think this is an agreement that can be a template for others to use."

Bruning said the agreement means "our children are safer online and predators have fewer opportunities to prey on them."

Among the illicit chat rooms removed were those with labels such as "girls 13 & up for much older men," "8-12 yo girls for older men," and "teen girls for older fat men." Many of these were located within the "Schools and Education" and "Teen" chat categories.

An undercover investigator, posing as a 14-year-old while visiting one of those chat rooms, received 35 personal messages of a sexual nature over a single 25-minute period, the attorneys general said.

Spitzer and Bruning said they launched their investigations earlier this year after receiving tips that children had unfettered access to adult chat rooms.

Other measure announced under the agreement:

-Yahoo will make it easier to report any threats to child safety, give priority to such complaints and designate specific employees to do so.

-Yahoo will develop educational materials and feature them on the Yahoo network, promoting the safe use of chat rooms.

-Yahoo will donate $175,000 to the National Center for Missing and Exploited Children's New York affiliates, and provide banner advertising to that organization targeted to teens.
http://customwire.ap.org/dynamic/sto...stomwire .htm





China Arrests Over Net Obscenity
Correspondents in Beijing

CHINA has arrested 101 suspects since police started to crack down on internet obscenity in August.

The suspects included people who used the internet to set up illegal chat rooms that recruit others to participate in pornographic movies, the Xinhua news agency said, citing the public security ministry.

"This behaviour has severely polluted the internet environment, done harm to juvenile's physical and mental health and caused strong public anger," the ministry said.

The special crackdown was jointly initiated by the Ministry of Public Security, the Ministry of Information Industry and the Information Office of China's cabinet, the State Council, in August.

To date, 1,568 pieces of evidence have been obtained, from which 76 criminal cases have been put on file, resulting in the arrests of the 101 suspects, the ministry said.

Police are intensifying their crackdown on internet "obscenity", the Xinhua report said.

China's online population has grown rapidly in recent years from just 620,000 in 1997. With more than 100 million users now, it is the world's second largest internet market after the United States.

The Chinese government recognises the internet's potential for spreading education and technical skills but also fears its capacity for carrying content considered subversive or unhealthy for the population.

This month, the government shut down three popular websites as part of a new drive to keep out content seen as anti-government and potentially inciting unrest.
http://australianit.news.com.au/arti...-15319,00.html





Surveillance

Secret Code in Color Printers Lets Government Track You

Tiny Dots Show Where and When You Made Your Print
Press Release

San Francisco - A research team led by the Electronic Frontier Foundation (EFF) recently broke the code behind tiny tracking dots that some color laser printers secretly hide in every document.

The U.S. Secret Service admitted that the tracking information is part of a deal struck with selected color laser printer manufacturers, ostensibly to identify counterfeiters. However, the nature of the private information encoded in each document was not previously known.

"We've found that the dots from at least one line of printers encode the date and time your document was printed, as well as the serial number of the printer," said EFF Staff Technologist Seth David Schoen.

You can see the dots on color prints from machines made by Xerox, Canon, and other manufacturers (for a list of the printers we investigated so far, see: http://www.eff.org/Privacy/ printers/list.php). The dots are yellow, less than one millimeter in diameter, and are typically repeated over each page of a document. In order to see the pattern, you need a blue light, a magnifying glass, or a microscope (for instructions on how to see the dots, see: http:// www.eff.org/Privacy/printers/docucolor/).

EFF and its partners began its project to break the printer code with the Xerox DocuColor line. Researchers Schoen, EFF intern Robert Lee, and volunteers Patrick Murphy and Joel Alwen compared dots from test pages sent in by EFF supporters, noting similarities and differences in their arrangement, and then found a simple way to read the pattern.

"So far, we've only broken the code for Xerox DocuColor printers," said Schoen. "But we believe that other models from other manufacturers include the same personally identifiable information in their tracking dots."

You can decode your own Xerox DocuColor prints using EFF's automated program at http:// http://www.eff.org/Privacy/printers/...ex.php#program.

Xerox previously admitted that it provided these tracking dots to the government, but indicated that only the Secret Service had the ability to read the code. The Secret Service maintains that it only uses the information for criminal counterfeit investigations. However, there are no laws to prevent the government from abusing this information.

"Underground democracy movements that produce political or religious pamphlets and flyers, like the Russian samizdat of the 1980s, will always need the anonymity of simple paper documents, but this technology makes it easier for governments to find dissenters," said EFF Senior Staff Attorney Lee Tien. "Even worse, it shows how the government and private industry make backroom deals to weaken our privacy by compromising everyday equipment like printers. The logical next question is: what other deals have been or are being made to ensure that our technology rats on us?"

EFF is still working on cracking the codes from other printers and we need the public's help. Find out how you can make your own test pages to be included in our research at http:// www.eff.org/Privacy/printers/wp.php#testsheets.
http://www.eff.org/news/archives/2005_10.php#004063





Study Ranks Homeland Security Dept. Lowest in Morale
David E. Rosenbaum

At the Department of Homeland Security, the main government agency responsible for protecting the country against terrorism and responding to natural disasters like Hurricane Katrina, only 12 percent of the more than 10,000 employees who returned a government questionnaire said they felt strongly that they were "encouraged to come up with new and better ways of doing things."

Only 3 percent said they were confident that in their department, personnel decisions were "based on merit." Fewer than 18 percent said they felt strongly that they were "held accountable for achieving results." And just 4 percent said they were sure that "creativity and innovation are rewarded."

In each of these instances and many others, the responses of the Homeland Security employees were less favorable than those of all the other departments and large agencies surveyed by the federal Office of Personnel Management, according to a new study by an outside research organization.

Experts in human resources said the morale problems indicated in the survey should be of serious concern to the top officials at the department.

"It shows there is something fundamentally wrong at the organization," said Peter Cappelli, professor of management and director of the Center for Human Resources at the Wharton School of the University of Pennsylvania.

"If you were on the board of directors of a company and you got results like this," Professor Cappelli said, "you would lean on the managers to fix the problem or get rid of them."

The department was created by law in 2002 and was not fully in operation until late 2003. It brought together workers from established agencies with widely varying histories, missions and cultures, including the Coast Guard, the Federal Emergency Management Agency, the Secret Service, the Customs Service and the Transportation Security Administration.

Asked about the survey, Russ Knocke, the press secretary for the department, said the morale problems occurred because "the Department of Homeland Security was a merger of 22 agencies, a start-up all at once, and a number of the agencies experienced some growing pains the first couple of years."

"This is a unique circumstance," Mr. Knocke said. "This is not like a business in the private sector or even other departments in the federal government. It's a unique department with a great sense of urgency for fulfilling its responsibility."

The survey was taken by the Office of Personnel Management between August and December 2004. Forms with 88 multiple-choice questions about workers' attitudes toward their jobs were sent to 276,424 federal employees selected at random, and 147,914, including 10,473 from the Department of Homeland Security, returned completed questionnaires. The department employs 180,000 workers.

The purpose of the survey, the personnel office said, was to allow managers to measure "employees' perceptions of whether, and to what extent, conditions characterizing successful organizations are present in their agencies."

In June, the personnel office posted agency-by-agency answers to 78 of the questions, at www.fhcs2004.opm.gov/published.htm.

This month, Scott Lilly, a senior fellow at the Center for American Progress, a liberal research institute, published the first comparison of how employee attitudes in various agencies compared with one another on all those questions.

Of 30 cabinet departments and large independent agencies, the employees at the National Aeronautics and Space Administration and the National Science Foundation had the highest morale, Mr. Lilly found.

The morale at the Department of Homeland Security was far worse than that at the agency where the survey showed morale to be next lowest, the Small Business Administration.

In terms of positive answers, by Mr. Lilly's calculations, the department ranked dead last on half the questions.

The department finished in the top half of the 30 departments and agencies on only one question. More than 56 percent strongly agreed with the statement "The work I do is important." That placed Homeland Security employees second only to those at the Department of Veterans Affairs.

On the other hand, in answer to the question "How would you rate the overall quality of work done by your workgroup?" only 22 percent of Homeland Security employees answered "very good."

Only 20 percent strongly agreed that "My work gives me a sense of personal accomplishment."

Only 27 percent strongly agreed that "people I work with cooperate to get their job done," and 13 percent strongly agreed that "my job makes good use of my skills and abilities."

In each of these instances, the department's employees were less positive about their jobs than were workers at any other department or agency in the study.

Mr. Knoke, the Homeland Security spokesman, pointed to the long hours and weekends put in and the dangerous situations faced by many workers in his department, and said, "I really don't think our employees come to work every day and make the sacrifices they make in their personal lives because they're looking for the kind of workplace environment that is necessarily going to be the easiest or the simplest."

But Professor Cappelli of the Wharton School said a poor work environment "rarely drives morale into the floor like this." What usually causes bad morale, he said, are "questions about the overall mission of the organization."

Indeed, fewer than one-quarter of the Homeland Security employees said they knew for sure "how my work relates to the agency's goals and priorities."

Samuel B. Bacharach, a professor at Cornell and the director of the Institute of Workplace Studies there, said that what should be most worrisome to top officials about the employees' attitudes at the Department of Homeland Security was the sense that creativity and initiative were not rewarded.

If these questions were asked of employees at a private company, said Carl E. Van Horn, a professor at Rutgers and director of the university's John J. Heldrich Center for Workforce Development, the executives "would be happy with 85 percent" positive responses.

"If it was only 75 percent," Professor Van Horn said, "they would want improvements."
http://www.nytimes.com/2005/10/16/po...tml?oref=login





Bank Regulators Want Stronger Alternative To Password-Based Web Log-Ons
AP

Federal regulators will require banks to strengthen security for Internet customers through authentication that goes beyond mere user names and passwords,
which have become too easy for criminals to exploit.

Bank Web sites are expected to adopt some form of ``two-factor'' authentication by the end of 2006, regulators with the Federal Financial Institutions Examination Council said in a letter to banks last week.

In two-factor authentication, customers must confirm their identities not only through something they know, like a PIN or password, but also with something they physically have, like a hardware token with numeric access codes that change every minute.

Other types of two-factor authentication include costlier hardware involving biometrics or ``smart'' cards that would be inserted into designated readers on a user's computer.

Banks might also issue one-time passwords on scratch-off cards or require ``secret questions'' about a customer's account, such as the amount of the last deposit or mortgage payment.

The council also suggested that banks explore technology that can estimate a Web user's physical location and compare it to the address on file.

The most common way of stealing consumers' personal identity data and financial account credentials online, known as phishing, typically involves sending e-mails that direct unwitting users to phony Web sites. Data harvested at such sites is then used fraudulently.

The Anti-Phishing Working group, an industry association, reported 13,776 unique types of phishing attacks in August.

While some financial institutions have given their customers electronic password tokens, those have tended to be optional. Other banks have instituted password entry through mouse clicks instead of typing, a protection against keystroke-snooping programs.

But in general, the industry can do more to stop account fraud and identity theft, according to the financial institutions council -- which includes the Federal Reserve; the Federal Deposit Insurance Corp.; the U.S. Comptroller; the Office of Thrift Supervision and the National Credit Union Administration.

``The agencies consider single-factor authentication, as the only control mechanism, to be inadequate for high-risk transactions involving access to customer information or the movement of information to other parties,'' the council wrote. ``Account fraud and identity theft are frequently the result of single-factor ... authentication exploitation.''

FDIC spokesman David Barr said the rules will serve as standards that will be checked when banks' practices are audited.

Although the requirements apply just to financial services companies, the policy could stimulate wider use of two-factor authentication by other merchants that are willing to ``federate'' their Web sites with banks, said Michael Aisenberg, director of government relations for Internet services provider VeriSign Inc.

VeriSign is a member of the Liberty Alliance, a group that is working to develop standards for federated authentication.

In a federated system, a two-factor login at one site would be recognized by another, so a travel agency associated with your bank would automatically grant you access if you came straight from the financial institution's Web site.

At the very least, Aisenberg said, ``The securities industry is going to have to go along and other regulated sectors will no doubt follow along as well.''
http://www.siliconvalley.com/mld/sil...printstory.jsp





Microsoft Exec: ID Cards Pose Security Risk
Andy McCue

Microsoft has warned that the U.K.'s national identity card plans pose a security risk that could increase the likelihood of confidential data falling into the hands of criminals.

Jerry Fishenden, a top security and identity management expert at Microsoft, said that the British government's current technology proposals are flawed. He also criticized other technology suppliers for failing to speak out publicly about their concerns for fear of damaging any future bids for part of the lucrative contract for ID cards.

Fishenden, national technology officer at Microsoft UK, said that the plans for a central national identity register could lead to "huge potential breaches" and a leakage of personal information.

"I have concerns with the current architecture and the way it looks at aggregating so much personal information and biometrics in a single place," he said. "There are better ways of doing this. Even the biometrics industry says it is better to have biometrics stored locally."

Fishenden said no systems are ever completely secure and warned that putting vast amounts of personal data and biometric information such as iris, fingerprint and facial scans in one central database could prove too tempting a target for hackers and other criminals.

The U.K. government is backing a bill to make ID cards compulsory for all British residents. The cards, which are intended to help combat terrorism, illegal immigration and organized crime, will be based on biometric data. They have run into opposition both for the potential cost to holders and over worries about privacy and reliability.

Microsoft has expressed its concerns directly to the ID cards team at the U.K. government's Home Office, Fishenden said. Other suppliers are keeping quiet about their fears over the viability of the proposals because they want a piece of what would be a multibillion-pound project.

"Every supplier I talk to privately expresses their concerns," he said. "They seem happy to express their reservations to each other. But I don't think we have been as vocal as we should have been on this debate."

The Microsoft executive's comments come as British members of parliament are due to vote on a third reading for the Identity Cards Bill and just a day after Home Office minister Tony McNulty admitted that the proposed biometric technology has problems recognizing some people, such as those with brown eyes.

McNulty's statement followed a report in the U.K. newspaper the Independent on Sunday warning that one in 1,000 people could be incorrectly identified by the biometric systems because of difficulties in identifying those such as manual laborers who wear down their fingerprints.
http://news.com.com/Microsoft+exec+I...3-5900411.html





Throw another right on your barbie

Terror Laws Spark Data Fears
Paul Osborne

CIVIL libertarians say new anti-terror laws could ease police access to business customer records without adequate checks and balances.

Under the draft laws, banks, airlines, phone and power companies could be forced to provide information about customers suspected of terrorist offences to federal police and ASIO agents.

The Australian Federal Police (AFP) and ASIO would be given an easier process for obtaining records from businesses that would otherwise require a search warrant.

They would only need "reasonable grounds" to issue special notices to businesses such as ship and aircraft operators for details on their cargo, crew, passengers, stores and voyage.

The AFP also would be able to apply to a magistrate for notices requiring banks, travel and transport companies, power, gas and water companies and telecommunications carriers to provide information on a suspect's accounts, transactions and activities.

Firms could face fines of up to $6,600 and be protected from court suits on the grounds of breaching privacy rules, contracts or legal privilege.

The government argued the "notice to produce" would make it easier to investigate terrorism and not negatively brand a business as having been served with a warrant.

But NSW Council for Civil Liberties spokesman Cameron Murphy said the laws went further than what police needed to investigate terrorism.

"This might just be a back door for police to get highly personal information about people's finances and it's likely to just be done using the guise of terrorist investigations, Mr Murphy said.

"The problem is that these laws provide police extraordinary new power while at the same time reducing accountability - they are a recipe for misuse and corruption."

Australian Privacy Foundation spokesperson Anna Johnston said the government needed to show why the current search warrant system did not work.

"What's wrong with the search warrant system?" Ms Johnston said.

"If getting a search warrant quickly is hard why don't (they) spend more resources to improve the availability of judges, rather than lessen judicial oversight?

"The role of judicial approval in allowing search warrants is not only about protecting innocent victims and, if you like, a second pair of eyes to pick up mistakes, but an important anti-corruption measure to stop rogue police officers."

She said the AFP had sought the new powers, which the government had yet to formally respond to, in the recent review of privacy laws

Ms Johnson also said businesses had to be responsible and should still hand over information useful to police.
http://australianit.news.com.au/arti...-15319,00.html





Police Agree On National Database
Selina Mitchell

AUSTRALIA'S police ministers have agreed to a national rollout of a massive database of "persons of interest", which will eventually include information on missing persons.

The Commonwealth has committed $5.6 million to the rollout and the states and territories have agreed to share the costs of running the system.

The CrimTrac Minimum Nationwide Person Profile (MNPP) will give police access data on persons of interest provided by any jurisdiction.

The database will include images and text.

It will replace the National Names Index, a text-based police mainframe system.

The online MNPP system was tested for three months by NSW and Victoria earlier this year at a cost of $11 million and the two states will continue to update their information.

Other state's police can access it, but are yet to provide data to the system. That should occur next year.

The MNPP is designed to give operational police online access to comprehensive information on people of interest, including those that may be wanted in another state, reported as missing in another state, or known to be a threat to themselves or others.

The decision to introduce the system nationally was made at the Australasian Police Minister's Council, held in Brisbane last week.

It did not immediately approve the inclusion of a national missing persons database as part of the system.

The Council considered a draft national missing persons policy, but a spokesman for Justice Minister Chris Ellison said more work was required before a national database of missing persons could be finalised.

The Council also discussed the Australian National Child Offender Register (ANCOR).

Launched by Senator Ellison in September last year, the register tracks the movements of offenders against children, including sex offenders.

A spokesman the justice minister said the register could not be fully effective until all states had passed legislation based on a common model.

The South Australian and Tasmanian parliaments were "dragging their heels", he said.

Under ANCOR, people convicted of sexual or other serious offences against children will be required to register with police and provide details such as club memberships and travel plans.

The information can only be accessed by police.

It is being used by most states and territories.
http://australianit.news.com.au/arti...E15306,00.html





Cop To Be Punished Over File Breach

A Victorian police chief inspector will face disciplinary action over the leaking of 291 files from the police database.

The unnamed officer, who works in the unit that manages the Law Enforcement Assistance Program (LEAP), was responsible for wrongly authorising the release of thousands of files, a report by the police Ethical Standards Department has found.

Victoria's Chief Commissioner Christine Nixon said the same officer then failed to brief her properly on the seriousness of the security breach.

Ms Nixon said yesterday the report recommended formal disciplinary action be taken against the senior officer, who gave approval on July 14 for the files to be emailed to a corrections officer and to a senior officer within the Justice Department.

"There were 291 names ... it made 7000 pages of documentation and so it was a fairly extensive file," Ms Nixon said.

The people whose files had been released would not be told of their involvement in the incident for fear of jeopardising the identity of a whistleblower.

Asked if the 291 people involved shared the same surname, Ms Nixon said: "Part of the search method that was used was not a very defined search method, and so it gave data for 291 individuals."

Ms Nixon said the officer's punishment would be a matter for the disciplinary advisory unit.

The state Government last month announced the appointment of a commissioner to oversee police data security and a $50 million plan to replace the LEAP system.

Ms Nixon apologised to the community for the latest breach of trust, of which there have been several incidents in recent years.

"We've charged members with inappropriately using the database (previously) - it's an issue around the way people see information they use on a daily basis and how they protect it," she said.

"The vast majority of members of Victoria Police do the right thing."

The report will be forwarded to the Office of Police Integrity for review.

Police have provided a summary of the report, but the full document will not be released.

State Opposition Leader Robert Doyle called for the full report to be released.

"Six weeks after we were supposed to get some report on the leaking of sensitive police information what we get is a police press release," he said.

"It still doesn't answer the central questions. We still don't know how it happened."

The latest ESD report follows a series of breaches of the troubled LEAP system.

Earlier this year, the Office of Police Integrity recommended the system be scrapped.
http://australianit.news.com.au/arti...E15306,00.html





Missouri May Track Cell Phones for Traffic Data
David A. Lieb

Driving to work, you notice the traffic beginning to slow. And because you have your cell phone on, the government senses the delay, too. A congestion alert is issued, automatically updating electronic road signs and Web sites and dispatching text messages to mobile phones and auto dashboards.

In what would be the largest project of its kind, the Missouri Department of Transportation is finalizing a contract to monitor thousands of cell phones, using their movements to map real-time traffic conditions statewide on all 5,500 miles of major roads.

It's just one of a number of initiatives to more intelligently manage traffic flow through wireless data collection.

Officials say there's no Big Brother agenda in the Missouri project - the data will remain anonymous, leaving no possibility to track specific people from their driveway to their destination.

But privacy advocates are uneasy nonetheless.

"Even though its anonymous, it's still ominous," said Daniel Solove, a privacy law professor at George Washington University and author of "The Digital Person." "It troubles me, because it does show this movement toward using a technology to track people."

Cell phone monitoring already is being used by transportation officials in Baltimore, though not yet to relay traffic conditions to the public. Similar projects are getting underway in Norfolk, Va., and a stretch of Interstate 75 between Atlanta and Macon, Ga.

But the Missouri project is by far the most aggressive - tracking wireless phones across the whole state, including in rural areas with lower traffic counts, and for the explicit purpose of relaying the information to other travelers.

In fact, it would be the biggest system of its kind in the world, said Richard Mudge, a vice president at Delcan Corp., the Canadian company that won the Missouri bid.

The contract is expected to be completed within several weeks, and a cell phone monitoring system tested and implemented within six months after that. The cell phone provider for Missouri hasn't been disclosed, but Delcan uses data from Cingular Wireless LLC phones in the Baltimore project.

Governments have had the ability to measure traffic volumes and speeds for years. They can embed sensors in pavement, or mount scanners and cameras along the road. But those monitoring methods require the installation of equipment, which must be maintained, and can take only a snapshot of traffic at a particular spot.

In contrast, "almost everyone has a cell phone, so you have a lot of potential data points, and you can track data almost anywhere on the whole (road) system," said Valerie Briggs, program manager for transportation operations at the American Association of State Highway and Transportation Officials.

Although most new cell phones come equipped with Global Positioning System capabilities that can pinpoint their exact locations, the tracking technology used for transportation agencies does not depend on that.

Instead, it takes the frequent signals that wireless phones send to towers and follows the movement of the phones from one tower to another. Then it overlays that data with highway maps to determine where the phones are and how fast they are moving. Lumping thousands of those signals together can indicate traffic flow.

A Delcan demonstration Web site developed for Baltimore uses various shades of green, yellow and red to show block-by-block whether vehicles are moving at or below the speed limits. As rush hour started on a recent work day, observers could watch as green turned to yellow and then red on roads heading out of downtown.

The Baltimore project began this spring as a pilot program that monitors Cingular users over about 1,000 miles of road, but Maryland officials hope to eventually create a statewide version. (A Delcan competitor, Atlanta-based AirSage Inc., has an agreement with Sprint Nextel Corp. to monitor phones for its projects in Georgia and Virginia.)

Pete Rahn, director of the Missouri Department of Transportation, would like to make a similar Web site available to Missouri motorists, and to post estimated travel times on electronic road signs.

The Missouri and Maryland plans also assume that the contractor will market more detailed information to the private sector - automakers that offer onboard navigation systems, cell phone companies, shipping businesses or media that broadcast rush-hour traffic reports.

The private sector marketing helps drive down the states' cost. Missouri expects to spend less than $3 million a year on the service, Rahn said, although the exact price won't be known until the contract is finalized. Maryland is spending $1.9 million, although the entire Baltimore project costs nearly $5.6 million, said Mike Zezeski, director of real-time traffic operations for the Maryland Department of Transportation.

By contrast, the San Francisco Bay area spent about $35 million over several years to install roadside scanners and develop computer programs, Web sites and call centers for a real-time traffic service based on electronic toll passes, said Randy Rentschler, a spokesman for the region's Metropolitan Transportation Commission.

Officials considered using cell phone monitoring but opted against it, partly because of privacy concerns.

"We felt very strongly we had a bullet-proof privacy policy" with toll-pass monitoring, Rentschler said. "On cell phones, we could never do that."

As with cell-phone monitoring, the information received from the Bay area's toll scanners is anonymous. It's also encrypted and destroyed daily. But the local transportation commission went a step further, mailing 250,000 metal bags into which motorists could place their toll devices to prevent them from being monitored along the roads.

Cell phone users could accomplish the same thing by turning off their phones.

The Electronic Privacy Information Center (EPIC) suggests that someone should notify cell phone owners that their phones are being monitored for traffic data.

Privacy experts also worry that the traffic monitoring could later evolve into other uses - perhaps to catch speeders or fugitives.

That's because each cell phone has a unique serial number, in addition to its call number and a code that indicates its service provider. A cell phone company must always be able to track the location of its phones in order to know where to route a call.

"It's a mission creep issue that would be of most concern to consumers," said Lillie Coney, associate director of Washington, D.C.-based EPIC. "They may start out saying we want to know if there's a traffic problem and then take that information and start using it for different purposes."
http://hosted.ap.org/dynamic/stories...CTION=BUSINESS





Furor Grows Over Internet Bugging
Ryan Singel

A recent government order mandating that voice over internet protocol services must include the same government-approved wiretapping capabilities as traditional phone companies threatens to cripple peer-to-peer telephone innovation, according to new warnings from civil liberties groups and an internet telephony pioneer.

The new rules from the FCC were published last month and take effect Nov. 14 , though companies have 18 months to comply. The order expands a controversial 1994 law known as the Communications Assistance for Law Enforcement Act, or CALEA, which required phone companies to buy or retrofit switching equipment to meet stringent, government-approved wiretap standards that permit law enforcement to more easily wiretap digital phone calls, and to capture information such as voicemail PINs typed on a phone after a call is completed.

Under the new order, VOIP services that can both dial into, and be called from, the traditional phone network also have to comply with the costly requirements, pulling services like AT&T CallVantage and Vonage into the wiretap regime.

Critics say the rules make it harder for new U.S. internet telephony companies to get off the ground.

"What the FBI has asked for, and what the FCC has to date given them, would require any new developer of a voice-based technology to submit their application for the FBI's approval before even one single person on the internet can try it," said John Morris of the Center for Democracy and Technology. "If the FCC continues to give the FBI every power it asks for, we will see a tremendous diminution of innovation in the United States and innovation will move overseas to places that are more supportive of small innovators."

The ruling could be particularly troublesome for companies using a peer-to-peer architecture that doesn't route calls through a central server, and which may not technically be able to comply. The FCC order says that all calls on such a system -- not just the ones to and from the traditional network -- have to be wiretappable using CALEA standards.

The end result, according to Jeff Pulver, who co-founded Vonage and runs a free P2P internet telephony service called FWD, is that the rules "take away our freedom to innovate and take away inspiration for people to be entrepreneurial in this space."

"This comes at a time when it's most susceptible to being screwed up," Pulver said. "The technology is still in its adolescence. This is a transformational current -- we are talking about the communications and computing industry transforming into something that has never existed before. This is not your parents' telecom service."

The ruling appears to pull in the best-known P2P telephone service, Skype, which eBay recently purchased for $2.6 billion. Skype offers optional pay services called SkypeIn and SkypeOut that permit customers to receive calls from, and make calls to, the traditional phone system. That means it will have to re-engineer its system to make its customers wiretappable, even during free peer-to-peer calls between Skype users -- something that might not be possible. The company did not return a call seeking comment.

Lee Tien, an attorney for the Electronic Frontier Foundation, sees this as an example of how the FCC order could hinder innovation by providing companies with a financial incentive for restricting their offerings.

"This might be where CALEA distorts things," Tien said. "It might cause a company to ... say, 'We will just have one of these capabilities, not both,' and this will keep them out of CALEA, while still offering 75 percent of functionality that people want."

SIPphone, which appears to use peer-to-peer architecture and allows for calls into and out of the traditional network via a third-party contractor, would also likely be affected by the new rules, but Wired News was unable to reach company representatives by press time.

When the FCC announced in 2004 that it intended to extend CALEA to VOIP companies, it indicated that the rules would differentiate between managed and unmanaged services, leading many to believe that peer-to-peer companies would not be affected.

The final rules discarded that line, relying instead on a differentiation between voice applications that touched the public network and those that didn't. Applications such as multiplayer gaming chat and telephony through instant- messaging services such as AOL Instant Messenger and Google Talk are thus exempt.

FCC spokesman Mark Wigfield was unable to elaborate on the change, but pointed Wired News to portions of the final ruling that said the difference between a managed and unmanaged service was muddy and that the line between a connected and unconnected service was much clearer.

According to the ruling, telecommunications giants SBC Communications and Verizon Communications, which each offer a traditionally routed VOIP service, both argued for extending CALEA to all VOIP providers, including any using peer-to-peer architecture.

The FCC's order also forces all broadband internet service providers to comply with CALEA, and a recent FBI proposal would expand the wiretapping requirements to reach emerging in-flight broadband systems on commercial airliners. The Electronic Frontier Foundation and the Center for Democracy and Technology say they plan to file a lawsuit challenging the FCC's authority to extend CALEA to the internet.
http://www.wired.com/news/politics/0,1283,69277,00.html





Japan Preparing VoIP For Mobile Phones In 2007
AP

Japan is readying a new network for cell phones that will allow people to connect to the Internet to talk over the phone more cheaply and transmit data more quickly.

The government plans to introduce mobile Voice over Internet telephony by 2007, officials said Thursday.

The mobile service under consideration at the Ministry of Internal Affairs and Communications will allow people to use Voice-over-Internet Protocol, or VoIP, phone service, on cell phones -- similar to what's now available on fixed lines.

The mobile VoIP services now more common allow people merely to connect their cell phones to the Net at ``hot spots'' using Wi-Fi wireless access.

Nations around the world are working on Internet telephony on mobile phones, and the Japanese government effort highlights this nation's efforts to keep up with global telecom trends.

The proposal for the network, which will also transmit large amounts of data such as streaming video on cell phones, is being discussed in a ministry panel of experts and telecommunications officials and is set to reach a decision in December, said ministry official Junko Koizumi.

Although details, including the kind of mobile VoIP technology, are not yet decided, several carriers are expected to apply for licenses to offer mobile VoIP services, which are likely to be cheaper than talking on cell phones today, she said.

The Internet Protocol mobile phones are expected to relay information at up to 15 megabits per second -- more than a thousand times faster than the fastest third-generation cell phones now available in Japan at 384 kilobits per second.

Such speeds may slow down if too many people use the service in the same area, and voice quality may go down, Koizumi said.
http://www.siliconvalley.com/mld/sil...l/12893071.htm





Skyping the Hype
Meelis Kitsing

"Supermodels not wanted. We want your brain." This ad, in English, appeared in Estonian newspapers in 1999. At the time, the advertisement seemed ironic in a country where the biggest international breakthroughs had been achieved by skin-and-bones supermodels, such as Carmen Kass. Now the anti-supermodels irony is history. The result of the brains attracted by the ad -- the peer-to-peer (P2P) Voice over Internet Protocol (VoIP) venture called Skype -- was sold to eBay in September for $2.6 billion.

The ad was placed by Niklas Zennstrom and Janus Friis, a Swede and a Dane, who later became known as the founders of Kazaa (a P2P filesharing program) and Skype. It seems to be about the only commercial message Zennstrom and Friis had to pay for. Despite their efforts to remain geeks, the Swedish-Danish tandem and the Estonian programmers behind Kazaa and Skype became supermodels in their own right. They were on the front page of the New York Times as early as 2002. When their new program, Skype, was still in its beta version, Fortune magazine ran a feature story, the lead of which opened with a scene in the trendy bohemian bar Noku in the Old Town of Tallinn. Now Skype is becoming a household name, with magazines ranging from the Economist to Vanity Fair fawning over the venture -- which has yet to make a profit and had a turnover of $7 million last year and expects to earn $60 million this year.

Despite the media frenzy, Skype should not be dismissed as hype. Skype users swear by the superb quality of the experience. A recent conversation with a Stanford-educated Indian computer engineer who frequently makes calls to India via Skype confirmed the excellence of service. Prior to using the service, he doubted the quality, based on a number of technical problems he foresaw as hampering the technology's potential. To his surprise, he discovered that Skype actually provided better quality than experienced in regular phone calls to India.

Unlike many other VoIP service providers, Skype (like the file-sharing program Kazaa) relies entirely on peer-to-peer (P2P) technology. P2P technology creates important technological advantages compared to the traditional server-client model. The Skype directory is entirely decentralized and distributed among network nodes. This in turn implies that Skype can increase its scale rapidly without added investments for expensive and centralized infrastructure.

For instance, the Skype team's previous undertaking, Kazaa, has often been called the new Napster. However, the Napster comparison completely misses an important technological difference. While Napster utilized client-server structure for some tasks, Kazaa relied entirely on P2P technology. Naturally, the technological difference translates into crucial legal and economic implications. In the case of Kazaa, it has been more difficult to hold the distributors of file-sharing program responsible for illegal downloading of files. Due to the use of server-client structure by Napster, documentation of its direct involvement in illegal file-sharing was easier.

This technological aspect explains why P2P VoIP is economically superior to server-client VoIP as well as to traditional telephony. Economic superiority has a tremendous effect on the competitive rivalry in the telecom market. Skype has a lower cost structure, thereby enabling lower prices in comparison with non- P2P VoIP and traditional phone services. It is also easier to scale Skype's subscribers, because Skype does not need to invest in additional infrastructure for accommodating new users - a necessary investment for non-P2P centralized VoIP service providers and, obviously, traditional telephony companies. Hence, Skype is not growing rapidly because of hype but rather, due to its technological and thus economic superiority. The quality of this disruptive technology has created hype - not other way around.

Most interesting is the origin of this superior technology. It did not emerge in the high-tech clusters of Silicon Valley or Boston's Route 128. Skype's management and marketing office is in London. The company is registered in Luxembourg. However, all the programming and product development is carried out in Tallinn, Estonia.

Furthermore, Skype's programmers were not in any way backed by the government. Quite the opposite, it received relatively little attention before skyrocketing to international fame; the local "technology gurus" and politicos with technological leanings were busy searching for the "Estonian Nokia." Just half a year ago, many local IT and telecom analysts were still underestimating the role Skype might play in changing the traditional telecom landscape. And then overnight, millions of dollars poured into the country and Skype has become a part of eBay.

Loose networks of computer programmers and small companies in libertarian and bohemian environments are behind such success. Estonia's reforms in the 1990s created an open environment for Internet diffusion and related technologies in Estonia. A recent report out of the World Economic Forum on the competitiveness of countries ranked Estonia as 20th in the world -- far ahead of any other new EU member states and also ahead of many "old" EU members. The country has consistently placed in the top ten of various rankings on economic freedom during the last years.

The conventional account of Estonia's success in entering the information age overnight, despite its initial backwardness, has overemphasized the role of direct government intervention, and has perhaps given attention to some large companies while ignoring a vast number of small technology companies. Certainly, due credit must be given to politicians for opening the market and carrying out rapid liberalization after the collapse of the Soviet Union. In this sense, the government has contributed to this achievement by not interfering much in the market during the last decade. Technology entrepreneurs and creative destruction took care of the rest.

Nevertheless, technological successes have led to attempts by politicos to capitalize on the achievement by showing themselves as true heroes. Such a posteriori rationalization and this self-congratulating attitude has created some unnecessary public sector financed pet projects. The shortcomings of direct government intervention are well demonstrated by the sorry saga of the national gene project, where public sector money was poured in and politicians dominated the supervisory board. Despite many years of hype and political backing, the gene project has nothing to show for the taxpayers' money spent so far.

Hence, the difference between the bohemian, non-hierarchical culture of Skype and the government- backed gene project could not be more telling. The success of Skype and the failure of the gene project can be understood in the context of research by Richard Florida, who emphasizes the importance of "creative classes" for the emergence of new technology enterprises. Technology, talent and tolerance, what Florida calls the 3Ts, are mutually self-enforcing and their combination is vital for entrepreneurship. In other words, Florida identifies the linkages and positive externalities of technological, economic, and artistic and cultural creativity. Indeed, the story of Skype demonstrates that bohemian clubs have better chances for contributing to the emergence of a new technology venture than does government intervention.
http://www.techcentralstation.com/102005A.html





Estonians Break Ground, Vote Online
Jari Tanner

This tiny former Soviet republic nicknamed "e-Stonia" because of its tech-savvy population is breaking new ground in digital democracy. This week, Estonia became the first country in the world to hold an election allowing voters nationwide to cast ballots over the Internet.

Fewer than 10,000 people, or 1 percent of registered voters, participated online in elections for mayors and city councils across the country, but officials hailed the experiment conducted Monday to Wednesday as a success.

Election officials in the country of 1.4 million said they had received no reports of flaws in the online voting system or hacking attempts.

But critics say the fact that no problems emerged shouldn't give people comfort that Internet voting is safe from hacks, identity fraud and vote count manipulation. Potential attackers, they say, may simply wait until Internet voting is more widely used - by which time it would be harder to stop.

In the United States, the Pentagon canceled an Internet voting plan for military and overseas citizens in 2004 because of security concerns. Plans for large-scale voting in Britain have also been dropped.

"The benefits don't come anywhere near the risks," said Jason Kitcat, an online consultant and researcher at the University of Sussex, England. "It's a waste of money and a waste of government energy."

He acknowledged that Estonia's system was the most secure to date, but said no system was "good enough for a politically binding election."

Thousands of people voted online in Democratic primaries in Arizona in 2000 and Michigan in 2004. The city of Geneva, Switzerland, has held several online referendums, the first in January 2003.

But Estonia is the first to extend it to voters nationwide, experts said.

"They have the perfect population size to do something like this," said Thad Hall, a University of Utah political scientist and co-author of a book on Internet voting. "As they have success, people will start to copy their success."

Estonia has the most advanced information infrastructure of any formerly communist eastern European state.

It gave the Linux-based voting system a trial run in January, when about 600 people voted online in a referendum in the capital, Tallinn. The plan is to allow online voting in the next parliamentary elections in 2007.

"I believe this is the future," said Mait Sooaru, director of an Estonian information logistics company who cast his electronic ballot Monday. "It was easy and pretty straightforward."

To cast an online ballot, voters need a special ID card, a $24 device that reads the card and a computer with Internet access. Some 80 percent of Estonian voters have the ID cards, which have been used since 2002 for online access to bank accounts and tax records.

Election committee officials said the ID card system had proven effective and reliable and dismissed any security concerns with using it for the online ballot.

Arne Koitmae, of Parliament's elections department, said Internet voting would make it easier for people in remote rural locations to vote.

Election officials said only 9,317 people out of 1.06 million registered voters opted to vote online. Estonians were also given the option of voting by mail and in person on Sunday.

Koitmae said many ID card users still lack the reading device, which explains the low turnout of online voting.
http://hosted.ap.org/dynamic/stories...CTION=BUSINESS





Broadband Subscriber Growth Slows
AP

Broadband subscriber growth started to slow in 2005, according to a new study from Kagan Research.

The Monterey, Calif.-based research firm forecasts 9.3 million net new broadband subscribers in 2005 - down from the 9.5 million in 2004. That figure is seen dropping off to 8.1 million net new users in 2006 with continued decreases thereafter. For 2009, Kagan forecasts 5.6 million net new broadband subscribers for a total of 72.4 million.

The slowing growth coincides with broadband's ascending popularity. This year marks when "high- speed data services have finally overtaken dial-up connections as the dominant pathway to the Internet for U.S. consumers," senior Kagan analyst Ian Olgeirson said in the report.

The firm estimates a total of 45.2 million broadband subscribers by the end of 2005, and 29.6 million dial-up users. A year ago, the ratio was almost even with 35.8 million broadband households and 35.1 million dial-up users.

Cable currently dominates the broadband market with roughly a 60 percent market share, though Kagan projects that will shrink to 53 percent by 2009.

Phone carriers, which are busy upgrading their networks, should see growing market share - from 35 percent in 2001 to 40 percent in 2009.
http://hosted.ap.org/dynamic/stories...CTION=BUSINESS





Power Companies Enter the High-Speed Internet Market
Ken Belson

The idea has been around for years. In Spain and elsewhere in Europe, utility companies have long offered high-speed Internet service to consumers over their power lines.

But American utilities are only now beginning to roll out broadband connections on their grid.

For Jim Hofstetter, a salesman for Cadbury Schweppes, the food and beverage company, this new option was far better than the high-speed connection he used for years from his local cable provider.

"I would never go back now that I have this," said Mr. Hofstetter, who often works from his home office in the Hyde Park neighborhood of Cincinnati. He pays $30 a month for the service from Current Communications, an Internet service provider, which uses the power lines run by Cinergy, the local utility in Cincinnati. That cost is about $15 cheaper than comparable Internet access from either Cincinnati Bell or Time Warner Cable.

The Current service can be piped into any electrical outlet in Mr. Hofstetter's home, with no reduction in speed even when he, his wife and their three daughters are online at the same time. All that is needed is a baseball-size jack that plugs into the wall and is connected to a computer with an Ethernet cable.

Known as broadband over power line, or B.P.L., the service is poised to challenge the cable and phone companies that dominate the high-speed Internet market. Instead of burying cables and rewiring homes, B.P.L. providers use the local power grid, which means that any home with electricity could get the service.

For now, the two biggest commercial B.P.L. services in the United States are operated by Current and Cinergy in Cincinnati, and the city of Manassas, Va., which has teamed up with ComTek Communications Technology, another B.P.L. provider.

[On Oct. 5, Manassas and ComTek announced that B.P.L. was now available in every home in the city.]

Dozens of other utilities across the country are testing the service and hiring specialists like Current and ComTek to run it.

While the technology is not new, the home adapters and equipment on telephone poles that transmit data over power lines as radio signals have only recently become affordable enough for companies to start selling the service.

Current's service is now available to more than 50,000 homes in Cincinnati, and it plans to reach 250,000 homes by 2007. The company declined to say how many subscribers it has, but industry analysts estimate that about 15 percent, or 7,500, of the city's households have signed up since the service was introduced in October 2004.

While its subscriber rolls are still modest compared with those of cable or phone companies in Cincinnati, Current's early success has shown other utilities - some of which dabbled disastrously in telecommunications in the 1990's - that B.P.L. could be a viable business.

With equipment prices falling, Internet access companies like EarthLink, which do not control their own data lines but contract with cable and phone companies to use their networks, are looking at B.P.L. as an alternative delivery system, too.

"It doesn't matter what pipe you use as long as you have a pipe into the house," said Kevin Brand, the vice president for product management at EarthLink, which plans to introduce a B.P.L. service in the first half of 2006. "The power companies don't want to do this alone and they need an Internet provider like us to make this fly."

The Federal Communications Commission is also promoting B.P.L. as an alternative to the cable and phone companies that dominate the broadband market. Since nearly every home has electricity, the commission hopes that utilities can provide high-speed access to rural areas where phone and cable companies typically do not sell the service.

To the Hofstetters in Cincinnati, the advantages are obvious. They do not need to sign up with a separate broadband provider. No wires are strung along the walls and no clunky modems are required.

They have two broadband adapters that they can move to any outlet in the house. When Mr. Hofstetter takes his computer to a different room in the house, he takes an adapter with him, plugs it in and is instantly connected to the Internet. He can buy extra adapters for about $30.

"I'm not sure we can make broadband much more simple than this," said William H. Berkman, Current's chairman. "It's like when Wal-Mart automated everything."

For big utilities like Cinergy, the additional revenue from selling broadband is just one benefit. Since B.P.L. equipment atop telephone poles sends data signals both to and from homes, the technology can help utilities quickly spot power outages as well as monitor each home's electricity use. That capability, if broadly deployed, could save utility companies millions of dollars by eliminating the need for meter readers.

"Providing broadband over power lines is really about using the network better," said James E. Rogers, the chief executive of Cinergy, which formed a joint venture with Current in 2004.

This "smart grid" technology is a big reason utilities around the country are showing more interest in B.P.L. In July, I.B.M. formed a partnership with CenterPoint Energy, a Houston-based utility, to develop broadband services. Other utilities, including Con Edison in New York, have started testing the service.

Investors are also taking note. In July, Google, the Hearst Group and Goldman Sachs invested an estimated $100 million in Current. And equipment makers like Intel and Motorola have recently joined the HomePlug Powerline Alliance, which is developing standards for adapters and other B.P.L. equipment.

In the meantime, B.P.L. providers have been besieged with complaints from ham radio operators, who say that B.P.L. signals interfere with their radio signals. The National Association for Amateur Radio said that Current had done a better job than other B.P.L. providers in avoiding frequencies that ham radio users occupy.

Jay Birnbaum, Current's general counsel, noted that last year the F.C.C. ruled that B.P.L. companies could provide their service as long as they transmitted radio frequencies below certain levels. The ham radio association, however, wants the F.C.C. to conduct more tests.

Current is already planning to introduce new services, including an Internet phone service later this year. Customers will be able to plug their phones into a B.P.L. adapter instead of a wall jack for a traditional phone line.

Mr. Hofstetter, for one, is eager to try the phone service, because he now spends nearly $200 a month on local and long-distance calls. Current expects to sell a bundle package of broadband and unlimited phone service for less than the phone companies charge for similar services.

"If these guys ever get into video, I'd get that, too," Mr. Hofstetter said.
http://www.nytimes.com/2005/10/17/te...owerlines.html





Microsoft Befriends Some Competitors
Allison Linn

Here's a possible slogan for Microsoft Corp.: If you can't beat 'em, join the guys who are having the same problem. Microsoft struck two deals this week with sometime adversaries aimed in part at taking on mutual competitors.

Those partnerships with RealNetworks Inc. and Yahoo Inc. could signal a return to Microsoft's roots of successfully challenging IBM by finding the right allies, analysts say. And both show how seriously Microsoft takes competitors, including Google Inc. and Apple Computer Inc.

Microsoft "grew to a point where they thought they were big enough they could weather any storm," said analyst Rob Enderle. "I think they've been reminded recently that nobody's really big enough."

RealNetworks, the Seattle-based digital media company, on Tuesday announced a broad partnership with longtime nemesis Microsoft that also settles all the company's antitrust complaints. A series of agreements to share technology and promote each other's products could better position both companies to fight against Apple's market-leading iPod player and iTunes music service.

The need to compete better could not have been more clear when, the following day, Apple announced its newest iPod, which plays video, including some hit TV shows, that can be downloaded from iTunes.

As Apple CEO Steve Jobs strutted across a stage Wednesday touting his latest product, Microsoft and Yahoo were announcing that they had finally agreed to make their instant messengers work together.

That deal is designed in part to take on America Online Inc.'s more popular instant messenger. But analysts say the companies also probably have one eye on Google, which launched its own messenger last month.

The mostly free software for sending lightning-fast text over the Internet is popular with business users and teens alike because it electronically mimics regular conversation. Many also see lucrative potential in up-and-coming services like video chats, computer- to-computer calling and perhaps even efforts to sell music or other products.

The RealNetworks deal follows several years of efforts by Microsoft to carve a place in the living room - and in people's portable gadget collections - for Windows-based systems that can deliver music, TV shows and movies to consumers.

Various Windows Media technologies have been key to that effort, and companies including Creative Labs Inc. and Samsung Inc. have had portable Windows-based products on the market for the past year.

But analyst Phil Leigh with Inside Digital Media said the video iPod's attractive price, combined with the television content it has already snagged, including ABC's "Desperate Housewives" and "Lost," gives it an immediate edge over those fledgling efforts.

"Based upon the demand that they've got for the iPod per se, it's pretty clear that the video iPod is going to outsell all of the other devices that were introduced in the Microsoft ecosystem a year ago," Leigh said.

On the heels of the Yahoo-Microsoft announcement came news that AOL, a division of Time Warner Inc., has been talking with Google and Comcast Corp. about taking a joint stake in AOL. Those talks could perhaps edge out Microsoft, which has held its own talks with AOL over partnering in areas including search and instant messaging.

Analyst Charles Di Bona with Bernstein & Co. said Microsoft's recent partnership efforts could show that the company is refocusing on its roots as a platform company, providing the base software but leaving it to others to provide hardware and content.

That's the strategy Microsoft used in its early, extremely successful days, when it paired its operating system with computer makers' hardware to beat International Business Machines Corp.

In recent years, Microsoft has moved more into content with projects such as MSNBC and Slate, the online magazine it has since sold.

But going forward, Di Bona expects the company to focus less on content, such as its music download site, and more on partnerships that encourage others to use products such as its Windows Media software and copyright protection technology.

"They don't want to beat the iPod per se; they want to provide the software that allows other people to beat the iPod," he said.

Leigh said a disadvantage of that strategy is that Microsoft has to coordinate with multiple hardware and content providers, and can't always control how good the end result is.

"The Microsoft ecosystem has a lot of moving parts, and in the Apple ecosystem, Apple has complete control," Leigh said.

Also, although Microsoft has traditionally built itself on successful partnerships, some companies may be distrustful of working with the world's largest software company.

A big fear has been that to partner with Microsoft is to be owned by Microsoft, and the bullying tactics that came out during the company's U.S. government antitrust case are still fresh on the minds of some technology executives.

Brad Smith, Microsoft's top lawyer, has made it a priority to settle most of the company's outstanding private U.S. antitrust complaints, and a key part of some of those settlements has also been to forge business deals and increase goodwill.

Microsoft reached a massive antitrust settlement with Sun Microsystems Inc. last year that included a pledge to work together. Outside the courts, the company also has signed deals such as its cooperation agreement with phone maker Nokia Corp. in February.

Smith said the recent partnership push comes as the computer industry is evolving to be more focused on people using many different technologies over the Internet. That's forced Microsoft to change its philosophy, working to make its products more compatible and its relationships with others in the industry more harmonious.

"Consumers want to be able to use technology from multiple companies simultaneously, and so we have to work with each other in the industry, both to promote that kind of interoperability while we also continue to compete with each other," he said.

Companies such as Sun, Real and Nokia also have stressed that they continue to battle Microsoft one some fronts. And Di Bona said the partnerships shouldn't be taken as any indication that Microsoft, known for its brutally competitive streak, is getting soft.

"I don't think they view themselves as sort of the also-rans teaming up with the also-rans," he said. "They're definitely still in this to win. They're just deciding what stick they want to use."
http://customwire.ap.org/dynamic/sto...10-14-21-04-10





Control

Senators: Bloggers May Not Be True Journalists
Anne Broache

Politicians indicated on Wednesday that a proposed law offering journalists special privileges might not be extended to Web loggers.

"The relative anonymity afforded to bloggers, coupled with a lack of accountability, as they are not your typical brick-and-mortar reporters who answer to an editor or publisher, also has the risk of creating a certain irresponsibility when it comes to accurately reporting information," Sen. John Cornyn, a Texas Republican, said in a statement prepared for a Senate Judiciary Committee hearing on reporters' privilege legislation.

The hearing came as politicians are weighing the Free Flow of Information Act. The current wording of the measure, proposed in identical form in the U.S. House of Representatives, offers protection of confidential sources for anyone who "publishes a newspaper, book, magazine, or other periodical in print or electronic word." The District of Columbia and every state except Wyoming already have some form of protection on their books.

Wednesday's hearing largely centered on broader tensions that remain between the Justice Department, which opposes the measure on the grounds that it would inhibit its investigative powers, and representatives from the news media, who contended that protection of confidential sources is essential for doing their work. New York Times reporter Judith Miller, who spent 85 days in an Alexandria, Va., jail this summer because she refused to give up the name of a confidential source, participated on a panel clamoring for federal action.

"I'm here because I hope you will agree that an uncoerced, uncoercable press, though at times irritating, is vital to the perpetuation of the freedom and democracy we so often take for granted," she said.

Only a fraction of the questioning from senators hinged on whom should be covered by shield laws.

Largely echoing remarks he made during the first hearing on the topic, Cornyn voiced hesitance over whether the proposed shield law should apply to the "Internet blogger who has a cell phone with a camera, and maybe a laptop computer, and can publish with equal ease as a journalist."

Cornell University law professor Steven Clymer, who spoke on a panel that expressed reservations about the bill, told Cornyn that he thought the current wording of the bill would cover bloggers. Clymer indicated that he viewed this as a "dangerously broad" move that would undermine the idea of granting privileges at all.

Skepticism about treating bloggers as professional journalists is not new. Sen. Richard Lugar, the Indiana Republican who is the primary sponsor of the shield law bill, told a journalism conference last week that bloggers should "probably not" be considered real journalists. (In the realm of election law, however, lawmakers have called for blanket exemptions for Internet publishers.)

It's clear that as lawmakers pursue the measure, debate over the definition of "journalist" will weigh heavily on the process.

Cornyn on Wednesday called for "serious discussion of what constitutes the term 'reporter.'" Lack of agreement on that definition has stalled federal efforts at shield law legislation for years, said Sen. Patrick Leahy, a Vermont Democrat, in a statement.

"With bloggers now participating fully in the 24-hour news cycle," he said, "we might face similar challenges in defining terms today."
http://news.com.com/Senators+Blogger...3-5902539.html





ILN News Letter
Michael Geist

Canadian Privacy Commish Denies Patriot Act Complaints

The Canadian Privacy Commissioner has denied a series of complaints launched after a major bank disclosed that U.S. law enforcement could access credit card user's personal information. The Commissioner concluded that Canadian privacy legislation "cannot prevent U.S. authorities from lawfully accessing the personal information of Canadians held by organizations in Canada or in the United States, nor can it force Canadian companies to stop outsourcing to foreign-based service providers."
http://www.privcom.gc.ca/cf-dc/2005/313_20051019_e.asp


CBS Expands Podcasting To Soap Operas

The WSJ reports on an initiative from CBS to make podcast version of its soap opera Guiding Light available for free download. The show began as a radio program in 1937.
http://online.wsj.com/article/SB112956084439070707.html


Qualcomm Sues Broadcom In Escalating Patent Dispute

Qualcomm Inc. has sued Broadcom Corp. for alleged patent infringement in an escalating legal battle between the two rivals. The lawsuit accuses Broadcom of improperly using Qualcomm's technology related to compressing video files so that they can be more easily transmitted.
http://www.latimes.com/technology/la...,2937602.story


'DVD-Jon' Profiled By WSJ

The WSJ profiled Jon Lech Johansen, better known as DVD Jon. Johansen is targeting Apple Computer Inc., repeatedly hacking the software that runs its popular, Internet-based iTunes music store to remove restrictions on how many times purchased songs can be copied or on which devices they can be played.
http://online.wsj.com/article/SB112933886505169569.html