Peer-To-Peer News - The Week In Review - August 27th, ’05

[JackSpratts]

Extinction Long Seen, Video Stores Hang On
Lorne Manly

Ever since Blockbuster and Movie Gallery opened their first video stores 20 years ago, predictions of their imminent demise have been as common as late fees.

The Barron's columnist Alan Abelson deemed video stores a terrrible business opportunity back in 1986. Five years later, the chief executive of the Pilgrim Group referred to Blockbuster as a "casket case," adding that the video store would go the way of the dinosaur in three years.

The drumbeat of doom for the traditional video rental store intensified this month after Blockbuster and Movie Gallery, the country's two largest chains, with more than 50 percent of the market, announced their second-quarter results. Not only did they both post losses, they disappointed Wall Street with missed estimates, poor same-store sales and refusals to offer guidance for the coming months.

Yet that trip to the video store remains a stubborn fixture in the rapidly changing entertainment landscape. Complaints about the lack of selection, a paucity of hits and annoying late fees have not overcome the joys of browsing. Even the newer threats - the convenience of online subscription services like Netflix and the ability to order movies at the touch of a cable remote's button - are not expected by many analysts to crush the rental experience anytime soon.

Neither chain may ever become an investor's dream, but many analysts argue that with smarter management, judicious cost-cutting and further forays into sales of new and used DVD's and video games, and online subscription services, they can survive and perhaps even reward investors.

"The idea that video stores are magically going to go away for some reason is misguided," said Tom Adams, president of Adams Media Research, a research and consulting firm for the entertainment industry. "It is still the most popular way to watch movies."

The number of DVD's (and a dwindling number of VHS tapes) rented by the movie-loving public still dwarfs any other form of movie watching. According to Adams Media Research, there were nearly 3.2 billion rental transactions last year. By contrast, box-office admissions were less than half of that number, DVD sales totaled about 1.1 billion and there were fewer than 350,000 purchases of movies through video on demand or pay per view.

Nonetheless, the last few years have not been good to the video-rental market. As sales of DVD's exploded, thanks in large part to the aggressive pricing strategies of discount stores like Wal-Mart and Best Buy, fewer people felt the need to rent as much.

Depending on the company doing the tracking, the video rental business last year ranged from $8 billion to $8.9 billion. And according to the Video Software Dealers Association, that figure has been inching downward every year since its peak in 2001.

Now, in addition to the rise of DVD sales and Netflix, the traditional chains must cope with the video-on-demand option that cable operators, and soon the phone companies, are offering to their subscribers. The proposition does sound persuasive: no treks to the video store, no worries about not enough copies of the latest releases, even lower prices.

But one obstacle lies in the path of movies on demand, and that is the Hollywood studios. Unwilling to sacrifice the cash cow of home video sales, the studios have shown no desire to close the "window" - or the time lag of about 45 days - between releasing movies on DVD and making them available to the cable operators. Currently, the studios get about 60 percent of the list price of new DVD's, bringing in about $17 each. For each movie ordered by remote control, the studios get about $2.

And without the newest movies - the ones most popular with video renters - video on demand will be hard pressed to make a significant dent.

"Short term, I don't really see as much of a doomsday effect as other people do," said Ken Papagan, a vice president for Rentrak, an entertainment industry information service. "Because behaviors don't die easily."

Almost any product or service can be purchased online, by phone or through a click of the remote, said Mr. Papagan, who has spent about 25 years in the television and entertainment business. "But people still go to shopping malls in droves."

The two biggest chains are dealing with the changing and challenging business environment in different ways. Blockbuster, which reported a net loss of $57.2 million on revenue of $1.4 billion in the second quarter and also said it had to get a waiver on its debt covenants, is overhauling its traditional business model. Most of those losses stemmed from the costs of building up its year-old online subscription service to compete with Netflix and beginning its no-late-fee program, which gives customers a one- week grace period in addition to the usual rental period. Coming on the heels of its spinoff last fall from Viacom, the no-late-fee program alone meant a loss of $140 million in operating income during the second quarter, while the online project meant an investment of $30 million. For the year, the company is expecting to take a hit of $250 million to $300 million in lost income because of the no-late-fee program, and it will invest $120 million in Blockbuster Online.

By the end of the first quarter of 2006, it expects to have doubled the one million subscribers Blockbuster Online currently has. Netflix had 3.2 million subscribers at the end of June.

Knowing that it would be difficult to match Wal-Mart and Best Buy's prices on the sale of new DVD's without wreaking havoc on its margins, Blockbuster has instead decided to concentrate on the sales of used videos. Next year, the company plans to make that trading program and its video game operation priorities.

"We want to be the place where people can rent, buy or trade movies or games, in store or online," said John F. Antioco, chairman and chief executive of Blockbuster.

Movie Gallery, which had a net loss of $12.2 million on revenue of $504.7 million in the second quarter, is still digesting its acquisition of Hollywood Entertainment this year, when it beat out Blockbuster with a bid of $850 million. And its executives, unlike those at Blockbuster, said the slate of lackluster movies deserved most of the blame for the company's poor showing.

Movie Gallery executives have scoffed at the online subscription route, arguing that it will remain a niche market. And the company has no plans to abolish late fees, either. Instead, it is doubling down on the traditional rental model and aggressively rolling out its video game operation, Game Crazy.

Movie Gallery executives were not available for interviews. But in the conference call on Aug. 12, Joseph Malugen, the president and chief executive, told analysts that the video releases of movies like "Star Wars Episode III: Revenge of the Sith" and "Batman Begins" later this year, accompanied by cost-cutting as it marries the 1,200 Hollywood Video stores it acquired into the company, would restore the company's growth. "As high a respect as I have for our friends at Blockbuster, I disagree with their assessment of where the business is headed and I disagree with their marketing strategy," he said.

Blockbuster and Movie Gallery do share some, unenviable, characteristics: they have managed to frustrate the analyst community. They both missed consensus estimates by significant amounts and are chary with guidance.

"But more than a lack of guidance is a lack of communication, really," said Marla S. Backer, an analyst at Research Associates-Soleil. Ms. Backer, for example, said she first heard of Movie Gallery's plans to install A.T.M.'s for DVD's in stores during the conference call. While she said she understood the competitive issues, "they could be more forthcoming." (Research Associates-Soleil does not own any shares in Movie Gallery.)

Mr. Antioco, who this year has also had to deal with a proxy fight with the financier Carl C. Icahn that resulted in Mr. Icahn and two associates gaining board seats, said fair disclosure regulations limit what the company can say. "I've given up trying to reassure them," he said. "I'll let the numbers speak for themselves."

Even the analysts who are bullish on the companies register their enthusiasm through gritted teeth. In a recent note, Michael Pachter, an analyst with Wedbush Morgan Securities, which does not do any underwriting, offered up an alternate meaning for Movie Gallery's ticker symbol of MOVI: "Making Objective Valuation Impossible."

"They make Blockbuster look like they're courting investors," he said. Nonetheless, Mr. Pachter has buy ratings on both companies.
http://www.nytimes.com/2005/08/23/bu...rtner=homepage





Enter a Digital Publisher
Peter Keepnews

Amazon.com started life as an online bookstore before branching out into clothes, jewelry, electronics and more. In its latest venture, the Web behemoth returns to its book roots, this time as a publisher. The company has unveiled a program, Amazon Shorts, offering what it calls short-form literature — including personal memoirs, one-act plays and stories — by established authors like Danielle Steel, Pico Iyer and Tama Janowitz, Publishers Weekly said. The works cost 49 cents each and can be downloaded at Amazon.com/shorts and elsewhere on the site. Publishers Weekly reports that while some publishers had qualms about the program, many agents endorsed it, saying it could lead to an increase in traditional sales.
http://www.nytimes.com/2005/08/23/books/23amaz.html





ILN News Letter
Michael Geist

Federal Appeal CT. Reverses Storagetek DMCA Decision

The Federal Circuit Court of Appeals has reversed a lower court decision that blocked an independent service vendor who offered repair and maintenance on StorageTek machines. The court ruled that the DMCA cannot be used to sue such vendors when the repair and maintanence itself does not violate any rights under copyright law.
Decision at http://fedcir.gov/opinions/04-1462.pdf


Appeals Court Rules Falwell Critic Can Keep Domain Name

A three-judge panel on the US Court of Appeals for the Fourth Circuit has reversed a lower court's ruling and has ruled that a website with a domain name resembling Rev. Jerry Falwell's can continue to vent about the preacher's views. One of the major factors in trademark cases, the panel said, is whether use of a similar name creates a "likelihood of confusion" for those who read it. In this case, "it was so clear that his Web site did not create any likelihood of confusion about whether Falwell sponsored it." Coverage at http://news.com.com/2100-1030_3-5842795.html
Decision at http://www.citizen.org/documents/Lam...itDecision.pdf


Level 3 Blocks German Access To U.S. Site

The US IP carrier Level3 has blocked access by German customers to a website and the IP address that goes with it. The website in question is a commercial "Snuff Site" that without effective age limitation of any kind offers against payment videos of, for example, genuine executions or of people killed as a result of natural disasters.
http://www.heise.de/english/newsticker/news/63223


Australian Inquiry Considers Circumvention Exceptions

Australia's federal government has opened an inquiry likely to settle legal questions over the use of region-coding technology. The questions are likely to be addressed as part of a larger parliamentary inquiry which aims to find exceptions to new copyright laws Australia has agreed to pursue under its Free Trade Agreement with the US.
http://tinyurl.com/ad3d3


Utah Challenges Anti-Porn Law Suit

Utah state lawyers have filed legal briefs, arguing that the collection of bookstores, publishers and ISPs upset at new anti-porn legislation have missed the point. House Bill 260, passed earlier this year, requires Utah ISP's to provide pornography filters to customers who request it after Jan. 1, 2006. The lawsuit filed by the ACLU of Utah, King's English Bookstore, Sam Weller's Book Store, and others claim the new law violates the First Amendment.
http://www.sltrib.com/utah/ci_2967810


Florida Court Orders Site To Remove Offensive Posts

A judge has handed a Florida Sheriff a victory in his quest to quell what he says are inflammatory postings to an Internet message board used by law enforcement. The judge ordered the site's operators to remove certain offensive posts.
http://www.sptimes.com/2005/08/25/Hi...win_agai.shtml





Ask Jeeves Interested in Grouper File Sharing
Loren Baker

Om Malik spills the beans that Ask Jeeves is looking into acquiring Grouper the peer to peer file sharing social network. Om sees the acquisition as a channel for Ask Jeeves to bundle its download offerings as well as show its new sponsored search advertisements. Ask Jeeves acquired Bloglines last year in an attempt to corner the blog reading aggregation and search market. Like Bloglines, Grouper is an established cutting edge network of savvy users.

My sources tell me that Ask Jeeves has struck up a deal with P2P social sharing company, Grouper. Apparently, a co-branded Grouper client will be made available by Ask Jeeves. (Here is what I wrote about Grouper back in the day!) This client will embed Ask Jeeves desktop search, and web search. Ask Jeeves will also be able to show text-ads in this client, making it a possible revenue generator.

From what I understand, the client will also have the ability to do search local folders not on your desktop, but also on the folders that are shared by those in your network. This would be a nice way to leap-up in the desktop search business for Ask Jeeves, especially if News Corp decides to buy Blinkx and put its resources behind the tiny company. I am yet to hear back from both companies.

With Rupert Murdoch’s News Corp planning on buying up web properties (MySpace.com) and search engines such as Blinkx (rumored), what we may see developing is a second tier search property acquisition war as IAC and News Corp fight hand over fist to secure the interest of a oung and web active audience.
http://www.searchenginejournal.com/index.php?p=2107





Digital Artists Deserve the Right to Copy Movies

EFF Asks Federal Court to Save Fair Use on "Intermediate Copies"
Press Release

Yesterday the Electronic Frontier Foundation asked the Colorado Federal District Court to rule that copying an entire movie to a computer to make a new, lawful work is fair use. The case, Huntsman v. Soderbergh, involves the companies Family Flicks and Play It Clean Video, which make and distribute copies of movies with sexual and violent content removed. To make these "clean" copies of popular films, the companies must first make an "intermediate copy" of the entire movie on a computer in order to edit it.

Members of the Motion Picture Association of America (MPAA), along with several prominent film directors, claim that copying movies in order to make them "clean" is copyright infringement. In a friend-of-the-court brief, EFF argues that as long as making clean movies is not itself an infringing activity, the practice of making intermediate copies should be considered non-infringing also.

This is a important point, because intermediate copies are crucial to the process of creating new copyrighted works. A documentary filmmaker, for instance, might need to make temporary intermediate copies of movies in order to get footage for a film. In the software industry, the process of duplicating a copyrighted work to make an original work is known as reverse engineering, and it has been ruled a fair use in several courts.

"People who make movies should have the same rights software engineers have had for years," said EFF Staff Attorney Jason Schultz. "Fair use makes new art possible."

Contacts:

Jason Schultz
Staff Attorney
Electronic Frontier Foundation
jason@eff.org

http://www.eff.org/news/archives/2005_08.php#003927





Will Google Skype In
Chuck Russell

I’ve been doing a lot of thinking about Skype and Google lately. Of course Skype is a peer-to- peer (P2P) voice over IP (VOIP) Company that provides free digital telphony between members of its network over a broadband connection. It’s like Vonage and other VOIP companies in that you can call out to (Skype Out) and receive calls from (Skype In) traditional voice devices for an additional fee. The Skype client provides messaging, file transfer and voice communications between users on Linux, Mac OS, Windows and Windows CE.

Several weeks ago Bob Cringley reported that Rupert Murdoch was possibly in discussions to acquire Skype for approximately 3 billion dollars. As it turned out Skype didn’t sell.

Google announced this week plans to raise an additional 4 billion dollars through a public stock offering. That’s enough additional cash to fund further
organic expansion; Google already has 3 billion in reserve. So the question arises: what are they going to do with $7 BB in cash reserves?

Google has recently started to leak plans related to “network construction”. I don’t mean IP or

broadband, I’m talking about P2P. Up until now Google has focused on edge products for the networked masses. Products like search, ad placement, mapping, blogging and mail just to name a few. Sure they’ve built a subscriber base surrounding these technologies but what they lack is the real-time connection between these subscribers. The likely next ‘network’ step is for Google to erect a P2P network a la AOL, MSN & Yahoo. The question is not if but how; do they build or buy.

That’s the Skype connection. Skype was founded by Niklas Zennström and Janus Friis, the gentleman who built the Kazaa P2P file sharing network. Skype has been downloaded over 152 MM times since its release about 14 months ago. At the moment there are 3.2 million Skype users online.

Since its inception Skype has been running on venture money. The company is generating a small amount of revenue (estimates of about $26MM) through their Skype In/Out services. This run rate, while impressive for an early stage company, isn’t going to provide sufficient organic growth to compete in the long term with the VOIP enable telcos on their turf.

So it’s logical for Google to pursue Skype. The $3BB offer that Murdoch purportedly made can be sweetened as needed. It’s a marriage that would be perfect for both camps. Skype provides Google with the network it needs to transport ads to other network touch points like mobile devices. Google provides Skype with a similar culture and the proclivity for innovation and execution.

The next step for Google is to ride on top of the emerging Wireless broadband network. Skype on phones networked within a meshed WiMax (or similar) network. They may build, buy or partner in order to get that done. Regardless, it will come and why shouldn’t Google provide it?

With several strategic acquisitions Google can extend their market penetration to compete Verizon, SBC and the other telcos while entering turf that is now controlled by AOL, Microsoft and Yahoo. As an emerging giant Google has the ability to fly well below the radar screens of the FTC and achieve something Microsoft can’t. It’s probably time for Google to spend some of its financial and political capital in order to grow.

What do you think?
http://www.my-collective.com/archive...google_sky.htm





Number of Internet-Phone Consumers Soars
Brian Bergstein

The number of consumers bypassing the traditional phone network and opting for Internet voice service is soaring beyond expectations.

An analysis by the TeleGeography research group found 2.7 million subscribers nationwide in the second quarter, compared with just 440,000 a year earlier.

The technology, known as Voice over Internet Protocol, or VoIP, requires a broadband Internet line but generally offers inexpensive calling plans and novel features such as the ability to manage voice mail on a Web page.

The revenue generated from consumer VoIP services remained relatively small, at $220 million, but that is expected to change quickly. TeleGeography forecasts annual VoIP revenue hitting $3 billion in two years.

The biggest factors in the numbers are cable TV companies, which are using VoIP to bundle phone service with their TV offerings in hopes of staving off competition from incumbent phone companies that are just beginning to get into the TV business.

Time Warner Inc.'s cable division is now the nation's second-largest VoIP carrier, trailing only Vonage Holdings Corp., one of the earliest commercial providers of the service. Vonage is estimated to have 750,000 U.S. subscribers, more than three times its level a year ago.
http://www.washingtonpost.com/wp-dyn...081701753.html





DSL, Cable Providers Spar With Vonage
Declan McCullagh

Executives at broadband providers said on Monday that there's no need for the federal government to ensure that companies treat all Internet sites equally.

"Are we going to dream up all the problems that might happen and regulate in advance of that or are we going to see if the problem does arise?" Peter Davidson, a senior vice president at Verizon Communications, said at a conference here. "You can quickly do something that addresses a problem that's real."

Tech firms such as Amazon.com and Apple Computer have been warning for years that some broadband companies might ink marketing deals and block certain Web sites or favor some Internet destinations over others. Because Yahoo and SBC have an alliance to sell DSL connections, for instance, SBC could theoretically choose to favor Yahoo.com over Google.com--though that has never happened.

Few real-world problems have arisen. One example--of a small DSL provider blocking access to voice over Internet Protocol (VoIP) phone calls made with Vonage--was quickly put to a stop by the Federal Communications Commission.

But a handful of liberal advocacy groups and VoIP providers have been calling for preventive rules, saying that waiting until a widespread problem exists would be too late. Such formal regulations could come from Congress or the FCC.

Three U.S. broadband providers have blocked Vonage calls, according to a Vonage representative. In the latest case, a mid-Western operator charges customers $10 a month extra if they use Vonage, the representative said. Otherwise, the Vonage service doesn't work.

"A customer has to have the access to a certain baseline of service," Jeffrey Citron, chairman and chief executive of Vonage, said at a Progress and Freedom Foundation conference here. The government should enforce a "broadband bill of rights" including a minimum service level, the ability to connect to any lawful Web site and the ability to connect any device to the Internet, Citron said.

Otherwise, Citron predicted, companies will "block application providers that provide other services on top" of a broadband connection.

Representatives of both DSL and cable modem providers disagreed.

"It's not a problem. I don't know how many ways to say it," said Kyle McSlarrow, president of the National Cable & Telecommunications Association. "If you're going to write down the rules and make them mandatory, you're going to hand over a lot of wealth creation to lawyers...We should be very careful before stepping into this space--we should not panic."

Cable companies have long pledged their commitment to the "net neutrality" concept. As long ago as February 2003, the NCTA wrote to federal regulators and promised not to block access to Web sites.

Forrest Miller, president of SBC Communications, also urged a laissez-faire approach. "You have a somewhat self-policing market mechanism built-in," he said.

On Aug. 5, the FCC adopted a "policy statement"--an informal set of guidelines, not a formal regulation--that said broadband providers should follow "net neutrality" guidelines.
http://news.com.com/DSL%2C+cable+pro...3-5841741.html





New Taxes Could Slam Net Phone Users
Anne Broache

A new proposal to federal regulators has once again raised the possibility of new taxes being levied on Internet phone users.

Buried in a 27-page public notice released last week by the Federal Communications Commission's federal-state joint board on universal service is a call to force more companies to pay taxes into the Universal Service Fund.

"It is imperative that...all carriers that utilize the public switched telephone network are required to contribute to the USF as soon as possible," Robert Nelson, a now-retired Michigan Public Service commissioner, wrote in his proposal. "The dramatic decrease in traditional long-distance wireline traffic and the increase in the use of VoIP and the deployment of IP networks has changed the dynamics of USF so irrevocably that immediate attention to the issue is required."

That would effectively mean new taxes on customers of Net telephone companies that don't currently pay into the USF. Companies that already pay into the fund indirectly may have to raise their rates because their contribution would likely have to increase, Nelson said in a phone interview Tuesday.

Internet-based chat programs and utilities that do not link up with the public telephone network--such as voice-enabled instant-messaging programs-- would continue to be exempt from USF taxes, according to his proposal.

The USF, which is used to subsidize services in rural and high-cost areas, is currently funded by a fixed percentage of revenues from long-distance, wireless, pay phone and telephone services. The companies generally pass on those costs to their customers, often in the form of extra charges stuck onto the end of phone bills.

FCC Chairman Kevin Martin has said that any new regulations should require anyone with a phone number to pay into the fund at the same rate, regardless of whether their phone service comes from a cable provider, VoIP provider, or a wireless or wireline provider.

"We should place all broadband providers on equal footing so that they can fairly compete in the marketplace," he said in statement before a late-July meeting of the National Association of Regulatory Utility Commissioners.

Some VoIP customers already see charges linked to the USF on their bills, because many providers have to pay fees to the telephone companies whose wires they use. Vonage, for instance, imposes what it calls a "regulatory recovery fee" of $1.50 on each phone number it distributes. Such fees are "very common" among large VoIP companies, said Jim Kohlenberger, executive director of the Voice on the Net Coalition.

But, thanks to murky regulations, "not all of the VoIP companies are yet paying into the universal service fund, because it's not clear that they have to," said Jim Smith, a telecommunications attorney in Washington, D.C. "And so they're not doing it yet, and they're hoping the FCC won't come back and say, 'This is retroactive, and here's your bill for the last two years.'"

The FCC has not yet made any official moves to change the USF regulations, though it is now accepting comments on the four recent proposals.

Congress could also play an important role. Earlier this summer, a group of rural members of the U.S. House of Representatives charged that the base of USF contributors should include "all providers of two-way communications, regardless of technology used, to ensure competitive neutrality."

That issue is likely to be raised again when federal lawmakers are beginning the process of rewriting the Telecommunications Act of 1996, which gave the FCC the power to create the fund but did not account for the monumental role the Internet would ultimately play.
http://news.com.com/New+taxes+could+...3-5842237.html





Internet Phone Cos. May Cut Off Customers
Bruce Meyerson

Providers of Internet-based phone services may be forced next week to cut off tens of thousands of customers who haven't formally acknowledged that they understand the problems they may encounter dialing 911 in an emergency.

The Federal Communications Commission had set the Monday deadline as an interim safeguard while providers of Internet calling, also known as "VoIP" for Voice over Internet Protocol, rush to comply with an FCC order requiring full emergency 911 capabilities by late November.

Vonage Holdings Corp., the biggest VoIP carrier with more than 800,000 subscribers, told The Associated Press Wednesday that 96 percent of its customer base have responded to the company's notices about 911 risks. But that still means as many as 31,000 accounts would need to be shut off as early as Tuesday.

Other leading carriers declined to quantify the response rate beyond the updates they were required to file with the FCC two weeks ago. AT&T Corp. spokesman Gary Morgenstern said customer acknowledgments are now "significantly higher" than the 77 percent figure it reported to the FCC on Aug. 10.

The FCC issued its order in May after a series of highly publicized incidents in which VoIP users were unable to connect with a live emergency dispatch operator when calling 911.

Vonage, AT&T and other carriers have indicated that they plan to comply with the FCC deadline to disconnect customers.

"There is no way to know just how close (to a 100 percent customer response) we will get by Monday," Vonage spokeswoman Brooke Schulz said.

She added that the company has been meeting with the FCC weekly "to seek their guidance as to how to implement the approaching Aug. 29 cutoff date."

But Time Warner Cable, the biggest VoIP provider in the cable TV industry with more than 600,000 users, has told the FCC it sees no need to disconnect anyone.

The division of Time Warner Inc. said in its FCC filing that all customers have already been adequately informed about the risk of losing 911 service in a power outage - the primary issue for cable-based VoIP services - and that all have already acknowledged that risk.

Some VoIP users have expressed anger on Web forums at what they perceive as a heavy-handed approach by the FCC, while others have mistakenly seen the disconnection warnings as an arbitrary policy adopted by their service providers.

Compared with many vague government pronouncements, the wording of the FCC order is clear-cut on the disconnections, which could create a situation where some VoIP users suddenly find themselves with no phone service at all during an emergency rather than a functioning phone with inferior 911 service.

The FCC declined to say how it might enforce or check up on compliance with the order, which originally called for disconnections in late July before the agency pushed the deadline to Aug. 29. The agency also declined to discuss whether it might allow another temporary reprieve.

Unlike the traditional telephone network, where phone numbers are associated with a specific location, VoIP users can place a call from virtually anywhere they have access to a high-speed Internet connection.

That "roaming" flexibility, while generally viewed as a benefit, can make it more complex to connect VoIP accounts to the computer systems that automatically route 911 calls to the nearest emergency dispatcher and instantly transmit the caller's location and phone number to the operator who answers the call.

As a result, most VoIP providers have only been able to offer a watered-down version of 911 service that often directs emergency calls to a general administrative phone number at a local public safety office. In many cases, those lines are not staffed by emergency operators, and some may even play only a recording or go unanswered, particularly during non-peak hours.

In addition, while traditional phone lines generally keep working during a blackout, VoIP users might not be able to dial 911 during a power outage because the high- speed Internet modems, phone adapters and personal computers needed for VoIP calling rely on electrical outlets and batteries.

Cable-based VoIP services have avoided the roaming issue by tying each phone number to a specific location and emergency dispatch center.

But VoIP providers who allow their customers to use their numbers in multiple locations face major challenges. They need to adopt a technology that will patch their customers into a disparate national patchwork of 911 call-routing systems and databases. That means they must reach an interconnection agreement with each of the more than 1,000 local phone companies who maintain and operate those 911 systems.
http://customwire.ap.org/dynamic/sto...08-24-21-33-55





Surveillance

Wireless Wiretapping
Trey Popp

The Federal Communications Commission (FCC) announced earlier this month that it intends to expand a mid-1990s ruling that allows law enforcement officers to wiretap conventional phone lines.

Now it wants to apply the ruling to certain broadband and voice-over-Internet (VOIP) providers as well.

The FCC announcement has outraged not only civil libertarians, but also a coalition of broadband providers and Internet associations, who are worried that the government's move could actually threaten national security, as well as dampen industry innovation.

Enacted in 1994, the Communications Assistance for Law Enforcement Act (CALEA) empowered the FBI to dictate technical standards for phone companies’ built-in wiretapping capabilities. The current proposed expansion comes on the heels of requests from the FBI, Department of Justice, and Drug Enforcement Administration to include broadband.

The proposal's critics argue that, given the enormous amount of data and critical infrastructure now carried on the Internet -- including information on gas and oil pipelines and electrical grids -- building snoop-friendly "back doors" jeopardizes security measures a decade in the making.

Until now, civil liberties groups have succeeded in exempting the Internet from the original legislation. And they're not giving in. A raft of technology companies and industry associations have lined up against the rule change (see Notebook) -- and are prepared to challenge it in federal court.

They're also quick to point out that their argument against expanding CALEA doesn’t stem from an ideological opposition to wiretapping.

"We’re not suggesting that law enforcement shouldn’t have access to Internet communications," says John Morris, staff counsel for the Center for Democracy and Technology (CDT), which has filed a lengthy legal brief opposing the FCC’s action. "Our focus is arguing that CALEA is a bad way of going about getting that access."

Sun Microsystems engineer and security specialist Susan Landau lays out the national security argument: "What applying CALEA to VOIP means is not that law enforcement can do wiretaps under legal authorization, but that government officials have the right to design the standards for wiretapping...That means they’re in the Internet protocols. It doesn’t matter whether you use the publicly switched Internet or private networks that use the Internet protocols -- you’ve introduced a vulnerability."

Landau believes this vulnerability endangers national security because the same wiretapping capabilities provided for government law enforcement officials could be used by others -- including criminals or terrorists.

To make the point, Landau cites recent attacks on Taiwan’s Internet infrastructure, originating from China and Korea. Although they weren't linked to government surveillance, Landau says they underline the challenge of keeping networks secure.

"What you will get is [attacks from] organized crime and well-funded organizations like Al-Qaeda that come on infrastructure," Landau says.

Others worry about possible repercussions in two additional areas: innovation and economics. CDT's John Morris fears that some day entrepreneurs may have to hire lawyers and navigate FBI labyrinths to win approval for new devices before they can bring them to market.

"That is guaranteed to slow down innovation on the Internet -- and even more guaranteed to drive innovation offshore," says Morris

The full-text FCC ruling, which is scheduled to released later this month, does not cover technical issues, only compliance. The commission plans to develop its technical guidelines within the next two months and release a second order.

In the broader perspective, some critics see this rule expansion as a result of law enforcement’s misunderstanding of broadband technologies. They argue that a qualitative difference exists between traditional telephone networks, which route communications through central hubs, and VOIP systems, such as Skype, that employ a peer-to-peer model. People may use VOIP as a substitute for land-line calls (which is the legal reasoning behind the FCC’s ruling) -- but the underlying technologies are vastly different: VOIP is a portable technology that’s untethered from underlying networks and sometimes doesn't even involve a fixed telephone number.

"I would hope that there’s no expectation that you’re going to be able to route all voice communications through central control points in order to accommodate the potential need for wiretapping," says Mark Uncapher, senior vice president and counsel for the Information Technology Association of America. "It would be a real impediment to have to operate that way."

Uncapher and other VOIP advocates point out that, ironically, by focusing on CALEA, law enforcement agencies may be missing a more promising quarry: the new technology’s digital storage potential, which could change the nature of surveillance.

"Law enforcement is used to looking at it in a certain way. With VOIP we need to get beyond that," says Jim Kohlenberger, executive director of the Voice on the Net Coalition, which represents companies ranging from Skype to Intel to AT&T. “Rather than having those guys out there in truck with cold coffee and headphones on, imagine if they could automatically get that conversation right to their desktop, stored and routed just like e-mail. It would give them better and more capabilities.”

When the full FCC proposal is released later this month, a court battle seems imminent. If a legal challenge is successful, federal law enforcement agencies may well petition Congress to pass dedicated legislation to accomplish the same end.

Meanwhile, the shifting clouds of CALEA hang over broadband providers. As the CDT has observed in its legal brief: "Regulatory uncertainty is the enemy of innovation."
http://www.technologyreview.com/arti...082205popp.asp





Lockheed Martin to Build Security System for N.Y. Transit
Sewell Chan and Shadi Rahimi

A new world of transit security in New York City began to take form this morning, as officials disclosed plans to saturate the transit system with 1,000 video cameras, 3,000 motion detectors and a wide array of sophisticated gadgets, all intended to buffer the city's subways, bridges and tunnels from a terror attack.

The Lockheed Martin Corporation, a company best known for military hardware like land-to-air missiles and antitank systems, was formally awarded a three-year, $212 million contract today by the Metropolitan Transportation Authority to create a surveillance and security system for its sprawling subway and bus system, along with its two commuter railroads and nine bridges and tunnels.

Under contract extensions, Lockheed Martin, which prevailed over two other consortiums of military contractors to win the work, could continue to maintain the system through September 2013. The total program could cost hundreds of millions of dollars.

The authority also announced that on Monday, it would request proposals from telecommunications concerns to build a wireless network in underground subway stations that would allow cellphones to be used. The proposals are due on Oct. 12.

Previously, the authority had suggested that building such a network would be too costly and risky. But officials said they decided that the ability to use cellphones would ultimately improve safety by allowing passengers and workers to call 911 operators, not to mention family and friends, in emergencies.

The authority's decision to hire military firms to create a security system is a fateful step in its counterterrorism efforts, which have proceeded haltingly since the Sept. 11, 2001, attacks.

For the past 18 months, the authority has meticulously surveyed its universe of existing security devices, which include thousands of closed- circuit television cameras, many of them antiquated or even obsolete. It produced reams of specifications and ultimately narrowed down the bidders to three teams, which submitted final proposals on July 22.

The authority's executive director, Katherine N. Lapp, cautioned that there was no fail-safe way to prevent a terrorist attack, but she and her security director, William A. Morange, hailed Lockheed Martin's approach of relying on extensive electronic surveillance, backed by a dense computer network.

Mr. Morange, a longtime city police commander before he joined the authority, said Lockheed Martin had experience "in complex and fast- moving environments" and expertise in "command, communications and control infrastructure."

"We understand the need for immediate action that will protect the M.T.A. operations yet expedite the movement of people and goods throughout metropolitan New York," said Judy F. Marks, executive vice president of the company's Transportation and Security Solutions unit, based in Rockville, Md.

Lockheed Martin will oversee the work of a half-dozen partners, including SYSTRA Engineering, a transportation engineering company in Bloomfield, N.J.; the Intergraph Corporation, a software and data management firm in Madison, Ala., and the Cubic Corporation of San Diego, a transportation and military business that helped establish the MetroCard system in the subways in the 1990's.

While the computer systems are being set up, Lockheed Martin will already have begun installing 1,000 cameras focused on particularly sensitive or critical sites in subway stations and elsewhere. The cameras, which can zoom and pivot, will be centrally controlled and cost about $1,200 each.

The authority and Lockheed Martin showed off a bank of video screens that will be part of a new computer-aided dispatch system. They demonstrated how officials could respond to two scenarios.

In one, a person tries to enter a secure facility using an expired electronic access card; the computer detects the attempt to enter and directs officials to send a security officer to check out the situation.

In the second scenario, a briefcase is left behind on a busy Midtown subway platform. As the camera beams live images of passengers moving about, software can differentiate the moving people from the motionless package, sending off an alert that a suspicious object has been left unattended.

The system has its limits though. The cameras cannot determine whether a suspicious object has been left behind in a garbage can, for example. The authority has begun to reduce the number of trash cans in subway stations, but has decided not to eliminate them altogether, as has occurred in London and Washington, because of the need to keep stations, trains and tracks clean.
http://www.nytimes.com/2005/08/23/ny...ne r=homepage





Software Wiz Follows Dream Out Of College
Erika Lovley

Rarely does dropping out of college beef up a resume. But for 22-year- old Haverhill High alum Wayne Chang, leaving the University of Massachusetts at Amherst for the professional world of computer science has brought him success that most college students can only dream of.

Chang's swift ascension to the post of director of corporate communications at Pacific Northwest Software, a Seattle-based developer of high-end software, is just the latest development in a career that has gained him national recognition in the world of software writing -- as well as a little notoriety.

In elementary school, he created his first computer game. In high school, he was hired by a dot-com after he managed to hack into its system. ''My family didn't really know what I was doing," he said. ''They just thought I was on the computer a lot."

But Chang is best known as the founder and creator of i2hub, which he started from his UMass dorm room in 2003. The online peer-to-peer (P2P) collaboration system allows students to download and share files -- many of them pirated MP3s -- using the lightning-fast speed of Internet2, a consortium run by more than 200 US universities.

I2hub has become wildly popular on college campuses across the country, with students swapping thousands of songs, movies, and other illegal files. It has also become the target of regulatory ire, with the Recording Industry Association of America filing lawsuits against 83 Massachusetts students for sharing up to 13,000 songs on i2Hub. The defendants included students at Harvard, MIT, and UMass.

I2hub itself may also be vulnerable to lawsuits, after the US Supreme Court's ruling in June that companies could be held responsible for encouraging copyright infringement, and could be held liable for their customers' piracy.

While some companies are backing down for fear of lawsuits, Chang is working to improve his system, arguing that i2hub has in no way encouraged students to break the law. ''I feel that the ruling doesn't really apply to us," said Chang. ''We've always been built on collaboration. We didn't build the network to foster illegal . . . trading."

He also pointed out that the system has a less controversial use: education. ''Students have found homework help, classmates, and even significant others," said Chang.

At his new job, it's not unusual for Chang to spend one day closing a deal with a major airline, and another discussing his work at a symposium in Costa Rica. His company's client list range from Microsoft to the US Postal Service.

It may seem strange for someone barely old enough to drink to be closing multimillion dollar deals, but it's an every day reality for Chang.

''We're not afraid of putting young people in positions of responsibility," said Pacific Northwest President John Taves. ''But they've got to be good and very impressive."

Born in Taiwan, Chang was sent to live with relatives in the Bradford section of Haverhill at the age of 6 by his parents, who hoped to give their son a better life. That same year, Chang received his first computer, an Apple2e or ''green-screen" monster with limited functioning. Within a year, he had created his first computer game.

By the age of 15, Chang had created several programs used across the world, such as Instant Profiler, the first AOL Instant Messenger service. But it was Chang's knack for finding security loopholes in major software programs that turned him into a Robin Hood-figure of sorts, exposing the glitches he found with the software he wrote.

As a high school freshman, his program, MyAdvantage, revealed defects in the program of a large dot-com company called AllAdvantage, which paid Internet users for displaying ads on their computer screens.

''He was more like a hacker," said Taves, whose company worked on AllAdvantage. ''He found security problems with a program."

When AllAdvantage discovered Chang's program, Chang says they originally wanted to sue him. ''But when they found out I was only a 15- year-old kid, they gave me a job instead," he said.

Throughout his years at Haverhill High, Chang helped develop software for companies like Napster, working for as many as eight at a time. Carrying a cellphone to school, he often darted from class into the boys' bathroom to take conference calls. After school, Chang would work until 2 a.m. on the computer, logging an average of four hours of sleep a night. Homework, if done at all, was completed in-between classes and during lectures.

Chang's uncle, Richard Yee, owner of the China Blossom in North Andover, noticed Chang was not like his cousins. ''All the kids spent time on the computer, but Wayne was somehow different. He always seemed concentrated on something, or some program, just like an inventor," said Yee. ''Maybe Wayne found a new world through his computer."

He was voted ''Most Likely to Succeed" in the 2001 senior superlatives at Haverhill High, but Chang's success has not come without a cost. ''I have basically given up life," he said. ''I feel like I've given up a lot of my childhood and teen years to work, but I wouldn't be where I am now."

A computer science major at UMass, Chang left last December because he felt there was little left for him to learn and he realized software companies would hire him without a degree.

Despite his demanding schedule, Chang always makes time for his Boston-area family members and his girlfriend of almost two years, a UMass student. He also still has family in Bradford. However, Chang has lost nearly all contact with his parents, and hasn't seen them in almost 15 years.

As for his education, Chang says it will have to wait. Business is booming, and he's determined to snatch it up.

''I got everything I could out of school," he said. ''I may want to get a degree at some point, but to me, it's more of a retirement place -- it's a lot of fun there."
http://www.boston.com/business/techn...ut_of_college/





Pay to Peer: A New Spin on Music Sharing
John R. Quain

When is it okay to share copyrighted music files online? When you pay for them, of course. So several services are aiming at ways for legitimate peer-to-peer (P2P) systems to work. One group has a novel answer: Pay users for referrals.

The service is Wurld Media's Peer Impact, and the company has already signed up EMI, Sony BMG, Universal, and Warner to offer over a million songs. You buy tracks as you would from iTunes, except that files can be stored on your machine and purchased and downloaded from your machine.

If a Peer Impact user recommends a song and another person buys it, the original buyer can earn up to five percent of the song's price as credit for further purchases.

Peer Impact's tunes are primarily in the protected Windows Media format—so iPod users can't participate. The big difference between typical download stores and Peer Impact, says Wurld Media CEO Greg Kerber, is that P2P delivery systems offer greater bandwidth and storage efficiencies.

"We knew it wasn't enough to sell one thing a million times," explains Kerber. "You needed to sell a million things one time." So through the use of a technology similar to BitTorrent's, files can be split up among participating hosts and downloaded quickly.

"Peer-to-peer is a really good thing," says Adam Klein, an executive VP at EMI. "It's the illegal use of peer-to- peer that's not a good thing."
http://www.pcmag.com/print_article2/...=158093,00.asp





Better use BT

Microsoft Issues Security Bulletin on Simple File Sharing and ForceGuest

Microsoft issued a security bulletin today to clarify a potential risk for Windows XP users with Simple File Sharing and ForceGuest. When you enable Simple File Sharing, the Guest account is also enabled and given permission to access the system through the network. Because the Guest account is a valid account when it is enabled, and is given permission to access the system through the network, an attacker could use the Guest account as if they had a valid user account.

While there is no known attack that currently takes advantage of the security flaw and users of XP who have applied the update for Security Bulletin MS05-039 are also protected the chances of a virus attacking this flaw are high.
http://hostsearch.com/news/microsoft_news_3469.asp





Facing The Music

Recently, three Singapore netizens were arrested for illegally distributing MP3 music. But have other illegal downloaders got the message?
Chua Hian Hou

Mr Andrew Tan (not his real name) smirked when he read about the three men arrested last week for distributing MP3 digital music files online using an Internet chat program. 'I know how to get away with it,' said the tech- savvy 30-year-old professional confidently, adding that he would continue to download pirated music and movies.

'I don't use popular P2P (peer-to-peer) software like IRC (Internet relay chat) or Kazaa. I download only from people I know are real pirates, or go to private file-sharing sites.'

Another file-sharer I spoke to said that he only uses 'safer' peer-to-peer systems like BitTorrent to download files. 'I use directories like The Pirate Bay which are hosted in countries where the local laws allow such activities, so I doubt police here can make them reveal my identity to them,' said the 29-year-old accountant.

Then there are other users who have gone fishing for legal loopholes. For example, in popular local IT forum Hardwarezone, a veteran forum user who called himself Blankies speculated that as long as you do not distribute complete files, you are not breaking the law.

However, it doesn't work that way - distributing a song is an offence even if you only distribute one per cent of it.

Popular peer-to-peer software BitTorrent allows users to distribute parts of a file instead of its entirety. In this way, the user can keep his 'upload ratio' high. This refers to the number of files that others download from you. Keeping that ratio high means other file-sharers can download at a higher speed.

Last week's unprecedented enforcement anti-piracy action against home users was very effective in reducing casual piracy - half the chat rooms which offered illegal downloads monitored by the Record Industry Association of Singapore closed down the day after the news of the arrests broke. The association represents several big record companies such as Sony BMG, EMI Music, Warner Music and Universal Music.

What, me worry?

But Singapore's hardcore pirates are still unfazed and unlikely to change their habits.

These pirates know their technology, they pay attention to global trends in piracy and enforcement action, and they think they know the law.

To curb piracy, international cooperation among law enforcement agencies is needed because many suppliers hide in countries with softer copyright regimes.

Sites like The Pirate Bay thumb their noses at warning letters from rights owners.

It may even require more arrests, preferably of 'someone like me, who has taken all the right precautions, yet still got caught', said Mr Tan candidly, when asked what would make him stop his illegal downloads.

And, perhaps, to continue the current education campaign to change the commonly held view that it is all right to pirate copyrighted works.

Make no mistake, last week's arrests showed that Singapore is serious about cracking down on copyright infringement - whether it is syndicates wanting to make a quick buck, or home users who think that sharing digital music files or movies is all right.
http://it.asia1.com.sg/newsdaily/news001_20050825.html





How Label-Backed P2P Was Born
John Borland

Andrew Lack wasn't like the other record label honchos, file-swapping maverick Wayne Rosso thought as he left Lack's swank office in a midtown Manhattan skyscraper.

That Lack, the chief executive of Sony BMG Music Entertainment, was even talking to Rosso showed he was more open-minded than most industry executives. That he was talking up the benefits of working together--even schmoozing with the man who used to run controversial peer-to-peer service Grokster--was downright amazing. "'I'm going to make you a millionaire,'" Rosso remembers Lack telling him.

"So I told him, 'I'm all ears.'"

There was no more an unlikely pair in the music and technology business in early 2004. But behind the scenes, their growing camaraderie became one of the most important bridges between the warring recording industry and peer-to-peer companies.

Their relationship led to the creation of Mashboxx, a new kind of peer-to-peer company that's expected to go live in mid-September. Mashboxx is one of several avowedly law-abiding, peer-to-peer companies trying to thrive in the wake of June's landmark Supreme Court decision that found Grokster potentially liable for copyright infringement.

At the time of their meeting, Lack's label was suing Rosso's former employer, Grokster. And record industry executives commonly viewed file swappers as renegades who had helped destabilize their industry.

Rosso, 56, was certainly no peacemaker, either. At the time, he was running a Spanish peer-to-peer software company called Optisoft and was fond of comparing label executives to the iron-fisted dictator Josef Stalin.

Mashboxx and the other label-friendly companies--which include Napster creator Shawn Fanning among their executive ranks--hope to meld traditional file-swapping technology with copyright-friendly filters that will replace unauthorized downloads with copies of songs that must be purchased in order to be played.

None of their ambitious plans has been tested in the marketplace. And skeptics predict that file-swap aficionados will avoid filtered services like Mashboxx and stick with competitors. Law-abiding music downloaders, on the other hand, may simply stick to Apple Computer's iTunes.

Mashboxx CEO
But that this new generation of cleaned-up peer-to-peer companies exists at all shows how, despite a still-toxic legal environment and uncertainty in the courts, record labels and tech start-ups are finding increasing room for experimentation and collaboration.

"We said for a long time, and no one believed us, that we were serious that peer to peer could play a role in the distribution of music," said Mitch Bainwol, chief executive officer of the Recording Industry Association of America. "Our beef was not with the technology but with the people who wanted to use our products as start-up capital."

The loudmouth and the TV guy
By the time Lack, 58, suggested his idea for a filtered network in early 2004, Rosso had been meeting with him on and off for almost a year--long before the Grokster case made it to the Supreme Court.

Rosso, a heavyset, bearded former music publicity agent, was the president of Grokster when they first met in early 2003, and was widely known as the man with the biggest mouth in the peer-to-peer software business. He started his career sweeping floors in the United Artists warehouse in 1970, ultimately working his way up over 25 years to represent acts ranging from the Beach Boys to Branford Marsalis.

In the mid-1990s, Rosso found his way into a series of Internet start-ups and eventually landed at Grokster in 2002. A natural headline-grabber, he delighted in thumbing his nose at the record industry, calling its top executives lunatics, even dubbing labels' lawsuits against individual file swappers the "death rattle" of a dying business.

Sony BMG CEO
Lack was more insider than maverick, even if his experience was outside the music business. A former actor in television commercials, he moved behind the camera in the mid-1970s, landing a producer's role at "60 Minutes" and ultimately creating in 1985 "West 57th," a CBS news magazine show controversial for adding show-biz glitz to news. In 1993, he was tapped to lead NBC's news division and was instrumental in shaping the MSNBC and CNBC cable channels before leaving to head Sony Music in early 2003.

He hadn't personally lived the scorched-earth warfare between file swappers and record labels and could call his own shots. That made him a perfect person to pitch, Rosso thought.

When Rosso cold-called Lack in early 2003, the record executive surprisingly called back and suggested they meet. A month later, they sat in a conference room on the 32nd floor of Sony's office and, over twin Styrofoam bowls of popcorn, chatted.

"I told him, 'I shoot my mouth off in the press, but it's all marketing.' He did the same thing, taking a certain stance in public," Rosso said. He has been fiercely loyal to the executive since that meeting, often attacking critics of Lack with all the overwrought rhetoric he typically reserved for record industry leaders.

They agreed that they would look for ways to work together, but initially found little practical room. Rosso left Grokster for Optisoft soon after. But it wasn't until a separate group of technologists began bringing swap-stopping technology to the labels' attention that their relationship started to show sparks.

Building the swap walls, brick by brick
The first company to try building a peer-to-peer network that filtered out record company's copyright products was the original Napster, under the strict orders of the federal courts. It didn't work well, and the company ultimately shut down its service. Its name and assets were sold to software company Roxio, which now uses the Napster name for its online music service.

But Napster founder Fanning learned from the experience. The day after the company declared bankruptcy, he and several of the original Napster figures began brainstorming. The result was Snocap, a new company aimed at providing a full infrastructure to turn unauthorized downloads on peer- to-peer networks into sales.

In early 2003, they began meeting with the same top record executives who, barely months before, celebrated putting Napster out of business.

"I remember how Shawn came in, how he had obviously been converted to the legitimate version of the world," said Thomas Hesse, Sony BMG's president of Global Digital Business, who at that time was chief strategic officer at BMG Music. "He is, I think, the ultimate conversion. He has seen the way forward, and in that sense we are all grateful to him."

But through 2003, there was little Snocap technology to see, only plans and a rudimentary demonstration. BMG and other major labels signed what amounted to an endorsement of Fanning's idea to help him find funding, saying they would be interested in exploring his work but making no commitment to using it.

Fanning wasn't the only one thinking along these lines.

Another company called Audible Magic was already marketing audio "fingerprinting" technology that could identify songs as they were sent through ISP networks or were burned to disc in a manufacturing plant. In late 2003, founder Vance Ikezoye gave RIAA executives a demonstration of how this could be plugged into a piece of file-swapping software, stopping downloads in their tracks.

RIAA executives quickly set up meetings for Ikezoye on Capitol Hill to show Congress that peer-to-peer software could be modified to protect their copyrights. Other record label executives, including Lack, got their own demonstrations, and by March 2004 he was impressed enough that he could tell Rosso that he'd seen filtering technology work as advertised.

Ikezoye's technology led to one immediate contract with iMesh, a company that would ultimately be Mashboxx's most immediate rival.

The RIAA had sued the Israel-based iMesh file-swapping company in September 2003, and executives at that company quickly decided that a settlement was better than fighting an expensive lawsuit.

By late the following spring, iMesh executives were meeting in Sony's headquarters with lawyers and businesspeople from all the major labels, as well as Audible Magic. iMesh President Talmon Marco remembers the meetings were supposed to be under a veil of absolute secrecy, even within the labels themselves--or so he thought until stepping out of the elevator in Sony's headquarters one day to see huge hand-drawn signs announcing "iMesh settlement talks," with an arrow pointing them in the right direction.

iMesh announced that it had settled with the RIAA in July 2004. It wasn't public knowledge for at least another eight months that Audible Magic was trying to turn iMesh's unregulated swapping network into the kind of filtered download service that Lack and Rosso were also discussing.

Preaching the gospel of filters
When Rosso left Lack's office after that 2004 meeting, he still had no plans to launch his own company. The better way, both agreed, would be to persuade existing peer-to-peer companies to adopt filters.

Trouble was, most of the well-known file-swapping companies were adamantly and publicly opposed to filters, questioning whether they were even possible to use. Rosso himself had publicly dismissed the idea in the past, and the P2P United lobbying group that he belonged to had contested Audible Magic's claims on Capitol Hill.

But Rosso, like Fanning a new convert, started lobbying on behalf of Lack's idea with his own Optisoft, a company set up to market file-swapping software created by a 24-year-old Spanish programmer named Pablo Soto.

He talked to Soto, and a month later returned to Lack's office to hold a conference call with the young programmer along with Sony Music's then-chief technology officer, Phil Wiser. Rosso and Wiser flew to Spain afterward to discuss a transition to a label-approved service, with filters.

They met in Wiser's hotel suite in Madrid. With his dreadlocked hair and casual clothes, Soto looked like a "Spanish communist hacker" working with the clean-cut Wiser, Rosso said.

Wiser and Soto spent a day sketching technical details for how to turn the Optisoft network, called Blubster, into a label-approved endeavor. At the end of the day, the three of them retired to a traditional Spanish restaurant, and Rosso and Wiser smoked Cuban cigars to celebrate what seemed to be a meeting of the minds. They code-named the project Tapas, in honor of their dinner, Wiser said.

But not long after, Soto changed his mind, and an exasperated Rosso quit the Spanish company.

For the next several months, Rosso helped set up meetings between Sony executives and other major file-swapping companies, including a four-month set of discussions with eDonkey President Sam Yagan. Some dismissed the idea out of hand; others, like Yagan, took it seriously but ultimately decided that filtered downloads would drive away their users.

With no takers for the filtering plan, and Lack growing increasingly frustrated at the lack of progress, Rosso made a decision: "I know you're not getting anywhere with these guys," he called to tell the Sony executive about a year ago. "I know you want to get a major name to convert.

"But with your permission, I'll do it myself."

Legal shifts, and development mode
Over the last year, Rosso's Mashboxx and rival iMesh have been feverishly working on technology while simultaneously trying to land licenses to distribute music from all the record labels.

Rosso initially planned to follow iMesh's lead and sign up with Audible Magic for the filtering technology, but a last-minute pitch from Fanning's Snocap persuaded him to adopt that technology instead. As of today, he remains Snocap's only announced customer.

Both services saw the Supreme Court's Grokster decision in late June this year providing a boost for their businesses. But Rosso remains bitter about the other peer-to-peer companies' rejections of Lack's overtures. He predicts they'll have trouble finding new funding or customers following the court's ruling.

"Only a psychopath is going to invest money in a company that's going to have to go to trial," he said.

But Sony BMG executives say they are willing to keep experimenting--including keeping the door open to other peer-to-peer companies.

"Andy (Lack) really wants Sony BMG to be out there and a leader in this (digital) space, free of any sort of prejudice and preconception," Hesse said. "It is incredibly important that we get it right."
http://news.com.com/How+label-backed...3-5840310.html





Yahoo, Verizon Launch Internet Service
Greg Sandoval

Verizon Communications Inc. and Yahoo Inc. have teamed up to launch a cheaper high-speed Internet service designed to compete against cable operators and dial-up service providers.

For $14.95, subscribers will be able to download Web pages via a digital subscriber line at speeds of up to 768 kilobits and upload data at 128 kilobits. The cheaper service, which requires a one-year contract, offers Yahoo premium services, such as antivirus protection, on-demand music videos and unlimited photo storage, according to an advertisement on Yahoo's site.

Sunnyvale-based Yahoo was expected to announce formally the Verizon launch Tuesday, but an advertisement found on the company's Web site Monday night detailed the DSL offering. John Reseburg, a Yahoo representative, confirmed the accuracy of the ad.

When it comes to transmission speed, Verizon is far behind SBC Communications, which launched a $14.95 DSL service with Yahoo in June. SBC transmits data at up to 1.5 megabits, twice as fast as Verizon's.

Verizon will continue to offer faster DSL for higher prices. According to the ad on Yahoo's site, Verizon customers can pay between $19.95 and $37.95 to obtain transmission speeds comparable to SBC's.

Verizon and other telephone companies are cutting prices to stave off cable companies, which can offer faster data delivery and at greater distances than DSL.

Still, Verizon's low-cost DSL is speedier and cheaper than America Online's $23.90- monthly dialup service.

For Yahoo, the partnership is another chance to collect a share of monthly subscriber fees as well as increase its profile as an Internet-service provider.
http://customwire.ap.org/dynamic/sto...stomwir e.htm





REVIEW: New Bluetooth Stereo Headphones
Ron Harris



For my money, Bluetooth technology has long been little more than a spotty solution in search of problem. Getting rid of wires around the house is an admirable goal, but Bluetooth-enabled devices invariably cost a bit more, have limited range and require extra connectivity doodads that I've been unwilling pay for.

Until now.

In October, Plantronics Inc. will start selling the Pulsar 590, a pair of rechargeable Bluetooth-enabled headphones. The company sent me a pair to try and suddenly I can't live without them.

They offer nice styling and killer sound quality extended over a range of about 50 feet from a small transmitter that can be connected to the miniplug audio output jack of any device.

The headphones cost $150 alone, $200 with the transmitter. Devices already compatible with new technology called Advanced Audio Distribution Profile, or A2DP, don't require the transmitter, but few such devices are on the market right now. More on that later.

After charging the headphones and the transmitter on a sleek silver base, I synchronized them by simultaneously holding down two buttons on the headphones. Blinking red and blue lights appear once the headphones were successfully paired with the transmitter.

I then plugged the transmitter into several devices for testing, starting with my DVD player. I cranked up one of my favorite monster flicks, "Deep Rising," and nestled onto the couch with the headphones on. The explosions, growls and gunshots sounded crystal clear, and I could crank up the volume without disturbing anyone.

Even better was my ability to do some loud Xbox gaming without worrying about my dog stepping on the cord and yanking it out of my ears.

The other day, I connected the transmitter to a small digital music player, pressed "play" and threw both into a backpack. I put on the headphones and went for a nice long walk, listening to tunes without worrying that my swinging arm or elbows would jerk some earbuds out of my ear.

And in an odd use of this device, I attached a small stereo signal splitter to my wife's music player and sent the sounds to both her headphones and my transmitter. As she sat in a park and listened to music on her earbuds, I played fetch with the dog nearby and listened to the same tunes via the Bluetooth headphones.

Geeky, sure, but it worked like a charm.

The battery life of the unit was outstanding, as was the sound quality. I fully charged the unit and started playing music at 9:45 a.m. one morning. I kept replaying and changing playlists, tweaking the volume up and down, and the headphones and transmitter were still going strong at 5:30 p.m.

The headphones have "track forward" and "track back" buttons that serve little purpose for now. But they will, Plantronics says, once more device manufacturers begin to incorporate the aforementioned A2DP technology.

When that happens, users should have better control over headphones like these because they won't have to fiddle with the player to switch songs. Some industry analysts expect widespread adoption of this technology over the next few years, but right now the pickings are slim to none, and none of my devices supports it.

Nonetheless, Plantronics has done an outstanding job with these headphones, effectively streamlining the experience of sound - sans wires.
http://customwire.ap.org/dynamic/sto...customwire.htm





Copyright Office Criticized for Browser Bungle
Jay Lyman

The U.S. Copyright Office is facing harsh criticism after proposing a rule for pre-registration of copyrights over the Internet that would require Microsoft's Internet Explorer browser to guarantee a successful application. The move leaves a significant swath of Web users excluded and triggered objections from a number of technology experts, including the World Wide Web Consortium (W3C) and Sir Tim Berners-Lee, often considered the father of the Internet.

In an open letter to the U.S. Copyright Office, which asked for comment on whether the Explorer- only support for copyright pre-registration would be a problem, Berners-Lee complained that the rule set to take effect in October goes against not only the spirit of the Internet as an open, equally accessible form of communication, but also against U.S. government policy.

Ari Schwartz, associate director of the Center for Democracy and Technology (CDT), told TechNewsWorld that government directives prescribe the adoption of open standards by government offices and agencies. He suggested the problem extends beyond the Copyright Office to the Office of Management and Budget (OMB), which oversees government contracts for technology and services.

"The key is that they should write to the standard," Schwartz said. "That's what the government policy should be, and that's what it is, actually."

Standard or Stuck

Although Microsoft dominates 90 to 95 percent of the browser market with Internet Explorer, there have been and continue to be a large number of Internet users who utilize several alternatives, including Apple's Safari, AOL's Netscape, open source options Opera and Firefox, and dozens more.

These browsers are often packaged or compatible with other non-Windows operating systems. They are also an increasing choice for Web users wary of security holes in Explorer, which is tightly integrated to the Windows OS.

Richard Stiennon, vice president of threat research for anti-spyware maker Webroot, told TechNewsWorld that companies and government agencies should be wary of developing software that supports a single vendor's solutions instead of standards.

"The motive behind limiting what browser you develop for is laziness," he said. "If you develop Web applications, you must develop to the W3C standards. You do not use Microsoft's proprietary capabilities because you'll get caught in it later."

You've Got No Access

Stiennon observed that the Copyright Office would be excluding large numbers of users of all kinds by supporting only Explorer for registration of copyrights, which holds some irony, since the intent of copyright law is to encourage, not limit, innovation.

"Is the Copyright Office not going to accept AOL users?" Stiennon asked.

Part of the exclusionary approach reportedly arose from government vendor Siebel Systems' inability to guarantee support for other browsers, something Stiennon said indicated a lack of investment in supporting multiple browsers as a result of the most recent economic downturn.

"But it's a dynamic space," he said. "It's not going to consolidate to Microsoft completely, ever. Publishers don't get to choose what browsers users are using."

No Bias Intended

In response to a request for comment, the U.S. Copyright Office said in a statement that the Siebel software being used for pre-registration of copyrights -- required under new anti-piracy legislation -- might support other browsers, but had not been tested for them.

While the Office indicated support for other browsers will come in "an upcoming release," it also suggested it may use non-electronic pre-registration options such as a paper-based fee and application processing in order to provide non-Explorer alternatives.

In terms of charges that the proposal is vendor-biased, the Office simply said there was no intent to endorse a particular vendor.

"The Office's goal is to make the system available to everyone, and therefore to enable frequently used browsers," said the statement sent to TechNewsWorld.

Standard, Standard, Standard

CDT's Schwartz said use and promotion of standards is compulsory for government contracts just as cost estimates, business plans and acknowledgement of privacy and other issues are required as well.

"Part of [government contracts] is open standards, but they're obviously not looking at it close enough," he said. "If it's not standards-compliant, that's a problem, because the government shouldn't be favoring one vendor over another," he added, noting that Microsoft itself had pledged support for open standards recently.

"Also, it's about promotion of standards," Schwartz continued. "Then, the companies not making their browser to the standard are the problem. That's the way it should be."
http://www.technewsworld.com/story/c...-Bungle.xhtml#





Legal Machine Helped Inventor Gain Wealth
Adam Goldman

Robert Shillman knew that Ford Motor Co. would never let some skinny, lone inventor rape it for millions. Ford was tough, tougher than Jerome Lemelson.

Shillman was founder, chairman and chief executive of Cognex Corp., a leader in machine vision technology, and he had watched as one company after another had crumbled before Lemelson's lawyers. Lemelson would claim that he had invented machine vision and held the patents; when he threatened to sue, companies would pay him off.

When Ford decided to topple Lemelson and prove he didn't invent the technology car makers had used for decades to build vehicles, Shillman exulted.

But then, Ford buckled. A U.S. District Court judge ruled against the company. And once a higher court declined to hear its appeal, Ford joined Chrysler and GM in deciding to settle and pay royalties to Lemelson.

"You have to do what's right from a business standpoint," Roger May, Ford's lawyer, said. "You can't just spend money because it's the cause celebre."

Shillman disagreed.

"Ford caved," he said. "Let's call it what it is. They gave in to extortion."

Of the 979 companies that Lemelson lawyer Gerald Hosier would wangle into paying royalties, 800 came after the Ford case concluded.

Lemelson was a hero in the tight-knit community of inventors.

"He was kicking their butts," said Ronald Riley, Lemelson's friend and a fellow inventor. "He had this huge litigation hammer hanging over their head. They knew he would chew them up and spit them out if they didn't ante up."

By 1998, when Ford settled, Lemelson was dead. But the legal machine that made him a supremely wealthy and much feared inventor rolled on. Hosier was sending letters to Cognex's clients, the companies which used machine vision technology, accusing them of infringing Lemelson's patents.

These companies wanted Cognex to protect them against Hosier's claims, a costly proposition for a company with about $122 million in revenues at the time.

This, Shillman could not abide.

Against the advice of his most trusted associates, Shillman decided to go forward with a lawsuit in September 1998. The suit, filed in Massachusetts, said the Lemelson patents were invalid, unenforceable and not being infringed by Cognex.

"If evil is being acted upon in the world, everybody has an obligation, especially if only you had the power. Only we understood the technology. Only we could defeat this guy," said Shillman.

---

Three weeks after Cognex filed suit, Hosier, an accomplished pilot, flew one of his private jets to New York City, for a meeting at the Fish & Neave law firm.

Inside the skyscraper, the parties gathered in a narrow conference room overlooking the city. Hosier, who came to the meeting with one of his lawyers, sat at the long table with his back to the window.

This was the first time Hosier had laid eyes on the garrulous Shillman, an ebullient man, prone to jumping, fidgeting and gesticulating when illustrating points. His excitability masks a deep intelligence - he earned his doctorate in machine vision and artificial intelligence from the Massachusetts Institute of Technology.

Hosier, on the other hand, is staid and very fit from his time spent skiing on the slopes near his Aspen mountaintop home. He is deliberate. His words are calculated and delivered carefully. He's a lawyer's lawyer.

"A brilliant but evil genius," according to Shillman.

The meeting turned confrontational almost immediately. Voices were raised and expletives detonated.

Hosier was perplexed.

Why was Cognex suing the Nevada-based, for-profit foundation that was created in 1993 to license Lemelson's patents? He had never gone after Cognex, only its clients. The companies that made the technology were not worth suing - their revenues too small. The companies that wielded it, however, had much deeper pockets.

If Cognex lost the case, he could bankrupt it. Cognex had more to lose than gain by taking on the Lemelson partnership.

"Nobody rational would have made the decision," Hosier said. "I think the man is certifiably insane."

Shillman explained his demands. Hosier had to stop asking for royalties from its customers, and put $30 million in escrow so Cognex could protect itself against liability claims that its clients were threatening.

Nobody gave Hosier ultimatums. It was like the mouse taunting the cat.

Hosier's face reddened. Later, he would say he considered reaching across the table, grabbing Shillman by the throat and telling him, "We're going to destroy you."

Instead of throttling Shillman, Hosier walked out.

In March 2000, U.S. District Judge Philip Pro in Las Vegas consolidated the Cognex lawsuit with one filed by Symbol Technologies and six other manufacturers of bar code technology, another putative Lemelson invention that had inspired many lawsuits.

The high stakes court battle to decide Lemelson's legacy would be played out not far from the gambling casinos of Las Vegas.

---

The media paid little attention when the trial began on Nov. 18, 2002. The hordes of reporters that usually accompany sensational cases were absent at the federal courthouse in downtown Las Vegas.

But lots of people were watching. Lots of them. Hosier had sued some 400 companies for patent infringement in Phoenix, Ariz., in 2000. If Hosier failed, he would lose those cases, which had been put on hold, and perhaps $1 billion more in royalties.

Hosier said it wasn't about the money. He was protecting Lemelson's name.

Cognex said it was fighting for something else.

"Everybody felt pressure," said Bill Silver, Cognex's chief of technology. "Everybody wanted to win. (Lemelson's) legacy was on the line, and Cognex's very existence was on the line."

There would be no jury. The decision was left in the hands of Judge Pro.

The trial came down to the numbing testimony of 20 witnesses, more than 1 million legal documents and a staggering 1,300 exhibits. Over 27 days, the two sides hammered each other.

More than a year would pass before Pro issued his decision, and when he did, it sent shock waves throughout the patent world.

Lemelson - and the for-profit partnership that carried on his business - lost. Resoundingly.

The court found that 14 critical patent claims by Lemelson were unenforceable under a rare defense called prosecution laches - an unreasonable delay or negligence in pursuing a right.

The judge also said the claims were invalid for lack of a written description, and a person of ordinary skill could not build the inventions using Lemelson's patents as his own experts had asserted. He added that "Symbol and Cognex products do not work like anything disclosed and claimed by Lemelson."

The companies did not demonstrate that Lemelson had "intentionally stalled" getting the patents, the judge ruled. But he did say that "decades of delay preceded the assertion of patent claims, and Lemelson has offered no adequate explanation for that delay."

Hosier was skiing in Canada when he received word he had lost. He couldn't believe it. He would later deride the judge's decision as superficial; the lawyers have since filed an appeal, and the U.S Court of Appeals for the Federal Circuit heard oral arguments this June.

"I think he basically said that this thing (the patent infringement claims) took too goddamn long and they made a lot of money on it," Hosier said.

For the family it was a wrenching loss. They received condolences from friends, one of whom said Lemelson must surely be turning over in his grave.

"He wasn't even around to defend himself," said his son, Rob.

But this was a great victory for Shillman. He had long since made Lemelson's defeat a personal crusade. When his alma mater, MIT, accepted a huge Lemelson gift to endow a professorship and a $500,000 award for inventors, he vowed he would never give the school another cent.

Now, he was ecstatic. He threw a party at his office in Massachusetts, and he sent out a flurry of e-mail messages, crowing about Lemelson's defeat.

One found its way to the inventor's family.

"Your worst nightmare has just come true!" Shillman wrote. "The gravy train has come to a full stop. And, it's only a matter of time before your victims (oh, excuse me, licensees) come after you.

"God Bless America!"
http://hosted.ap.org/dynamic/stories...TAM&SECTION=US
















Until next week,

- js.


















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