Peer-To-Peer News - The Week In Review - November 5th, ’05

[JackSpratts]

"As this DRM system is implemented as a filter driver for the CD drive, just blindly removing it might result in an inaccessible CD drive letter. Instead, we recommend you contact Sony BMG directly via this web form and ask for directions on how to remove the software from your system. We've test driven this and they will provide you with tools to do this. However, they will install additional ActiveX components to your system while they are doing this so be advised." – Mikko


"We don't feel that the Czech legal system is mature enough to have intellectual property belonging to a Czech company." – Matthew Gertner


"To be honest with you, I don't even watch movies very often." – Fred Lawrence


"Judges are starting to realize that when it comes to surveillance issues, the Department of Justice has been pulling the wool over their eyes for far too long." – Kevin Bankston

























The DRM That Killed Sony

For at least the last six months Sony corp. has been quietly selling CD’s that surreptitiously install stealthware onto PC’s as part of an extremely ill advised digital rights management (DRM) initiative. These Trojan horses create hidden folders filled with secret files of a type normally used by hackers and may even be black-hat friendly, creating security nightmares for millions of users unlucky enough to have purchased Sony product. For a multitude of reasons this kind of behavior is totally unacceptable for anyone to engage in. That it comes from one of the gigantic worldwide media conglomerates is dispiriting and very dangerous, and must not be allowed to pass unchallenged. This is exactly the reason people elect lawmakers – to punish and prevent such behavior. That our system of government has become so perverse the lawmakers actually encourage such corporate misdeeds is reason enough to overhaul the system and throw the bastards out of office. But first things first. There are plenty of good reasons to reform copyright and encourage file-sharing, but Sony in it’s fathomless greed has forced upon us the most important argument yet: buying Sony CDs is now so hazardous reasonable people can consider no other option than to avoid it.

I will oblige. I trust you will too.

As for the lawmakers who kiss the corporate kleptomaniacs while they kick the common people, remember – Tuesday is Election Day. You have the vote. Use it wisely, and decisively.













Enjoy,

Jack.













November 5th, 2005





Milestones

AOL Founder Resigns From Time Warner

AOL founder Steve Case on Monday said he has resigned from the board of Time Warner Inc., ending a storied chapter in the history of the world's largest media company.

Case, who stepped down as chairman in 2003, was one of the original architects of the merger of AOL and Time Warner, which helped erase more than $200 billion in shareholder value from the stock and was the target of two government probes into its accounting.

Once viewed as an albatross to the owners of the Warner Brothers movie studio, HBO and Time Inc., AOL has emerged over the past year as the center of attention for top Internet companies looking to buy a stake in the division.

"I strongly believe that AOL - once the leading Internet company in the world - can return to its past greatness," Case said in a statement. "Over the past few months, I have been pleased to see a renewed focus on AOL at Time Warner, and the emergence of so many strategic alternatives."

Suitors such as Microsoft Corp., Google Inc., Comcast Corp. and Yahoo Inc. have held discussions with Time Warner to varying extents.

Although AOL continues to lose millions of dial-up Internet subscribers every year, the company made more of its programing available freely over its Web properties to attract online advertising.

Case said he was leaving to devote more time to his new company, Revolution, which provides health-care and wellness programing and services.
http://today.reuters.com/news/newsAr...TIMEWARNER.xml





DRM

Sony, Rootkits and Digital Rights Management Gone Too Far
Mark Russinovich

Last week when I was testing the latest version of RootkitRevealer (RKR) I ran a scan on one of my systems and was shocked to see evidence of a rootkit. Rootkits are cloaking technologies that hide files, Registry keys, and other system objects from diagnostic and security software, and they are usually employed by malware attempting to keep their implementation hidden (see my “Unearthing Rootkits” article from the June issue of Windows IT Pro Magazine for more information on rootkits). The RKR results window reported a hidden directory, several hidden device drivers, and a hidden application:

Given the fact that I’m careful in my surfing habits and only install software from reputable sources I had no idea how I’d picked up a real rootkit, and if it were not for the suspicious names of the listed files I would have suspected RKR to have a bug. I immediately ran Process Explorer and Autoruns to look for evidence of code that would activate the rootkit each boot, but I came up empty with both tools. I next turned to LiveKd, a tool I wrote for Inside Windows 2000 and that lets you explorer the internals of a live system using the Microsoft kernel debugger, to determine what component was responsible for the cloaking.

Rootkits that hide files, directories and Registry keys can either execute in user mode by patching Windows APIs in each process that applications use to access those objects, or in kernel mode by intercepting the associated kernel-mode APIs. A common way to intercept kernel-mode application APIs is to patch the kernel’s system service table, a technique that I pioneered with Bryce for Windows back in 1996 when we wrote the first version of Regmon. Every kernel service that’s exported for use by Windows applications has a pointer in a table that’s indexed with the internal service number Windows assigns to the API. If a driver replaces an entry in the table with a pointer to its own function then the kernel invokes the driver function any time an application executes the API and the driver can control the behavior of the API.

It’s relatively easy to spot system call hooking simply by dumping the contents of the service table: all entries should point at addresses that lie within the Windows kernel; any that don’t are patched functions. Dumping the table in Livekd revealed several patched functions:

I listed one of the intercepting functions and saw that it was part of the Aries.sys device driver, which was one of the images I had seen cloaked in the $sys$filesystem directory:

Armed with the knowledge of what driver implemented the cloaking I set off to see if I could disable the cloak and expose the hidden processes, files, directories, and Reegistry data. Although RKR indicated that the \Windows\System32\$sys$filesystem directory was hidden from the Windows API, it’s common for rootkits to hide directories from a directory listing, but not to prevent a hidden directory from being opened directly. I therefore checked to see if I could examine the files within the hidden directory by opening a command prompt and changing into the hidden directory. Sure enough, I was able to enter and access most of the hidden files:

Perhaps renaming the driver and rebooting would remove the cloak, but I also wanted to see if Aries.sys was doing more than cloaking so I copied it to an uncloaked directory and loaded it into IDA Pro, a powerful disassembler I use in my exploration of Windows internals. Here’s a screenshot of IDA Pro’s disassembly of the code that calculates the entries in the system service table that correspond to the functions it wants to manipulate:

I studied the driver’s initialization function, confirmed that it patches several functions via the system call table and saw that its cloaking code hides any file, directory, Registry key or process whose name begins with “$sys$”. To verify that I made a copy of Notepad.exe named $sys$notepad.exe and it disappeared from view. Besides being indiscriminate about the objects it cloaks, other parts of the Aries code show a lack of sophistication on the part of the programmer. It’s never safe to unload a driver that patches the system call table since some thread might be just about to execute the first instruction of a hooked function when the driver unloads; if that happens the thread will jump into invalid memory. There’s no way for a driver to protect against this occurrence, but the Aries driver supports unloading and tries to keep track of whether any threads are executing its code. The programmer failed to consider the race condition I’ve described. They’ll have to come up with a new approach to their rootkit sooner or later anyway, since system call hooking does not work at all on 64-bit versions of Windows.

After I finished studying the driver's code I rebooted the system. The cloak was gone as I expected and I could see all the previously hidden files in Explorer and Registry keys in Regedit. I doubted that the files had any version information, but ran my Sigcheck utility on them anyway. To my surprise, the majority did have identifying product, file and company strings. I had already recognized Dbghelp.dll and Unicows.dll as Microsoft Windows DLLs by their names. The other files claimed to be part of the “Essential System Tools” product from a company called “First 4 Internet”:

I entered the company name into my Internet browser’s address bar and went to http:// www.first4internet.com/. I searched for both the product name and Aries.sys, but came up empty. However, the fact that the company sells a technology called XCP made me think that maybe the files I’d found were part of some content protection scheme. I Googled the company name and came across this article, confirming the fact that they have deals with several record companies, including Sony, to implement Digital Rights Management (DRM) software for CDs.

The DRM reference made me recall having purchased a CD recently that can only be played using the media player that ships on the CD itself and that limits you to at most 3 copies. I scrounged through my CD’s and found it, Sony BMG’s Get Right with the Man (the name is ironic under the circumstances) CD by the Van Zant brothers. I hadn’t noticed when I purchased the CD from Amazon.com that it’s protected with DRM software, but if I had looked more closely at the text on the Amazon.com web page I would have known:

The next phase of my investigation would be to verify that the rootkit and its hidden files were related to that CD’s copy protection, so I inserted the CD into the drive and double-clicked on the icon to launch the player software, which has icons for making up to three copy-protected backup CDs:

Process Explorer showed the player as being from Macromedia, but I noticed an increase in CPU usage by $sys$DRMServer.exe, one of the previously cloaked images, when I pressed the play button. A look at the Services tab of its process propertieds dialog showed it contains a service named “Plug and Play Device Manager”, which is obviously an attempt to mislead the casual user that stumbles across it in the Services MMC snapin (services.msc) into thinking that it’s a core part of Windows:

I closed the player and expected $sys$DRMServer’s CPU usage to drop to zero, but was dismayed to see that it was still consuming between one and two percent. It appears I was paying an unknown CPU penalty for just having the process active on my system. I launched Filemon and Regmon to see what it might be doing and the Filemon trace showed that it scans the executables corresponding to the running processes on the system every two seconds, querying basic information about the files, including their size, eight times each scan. I was quickly losing respect for the developers of the software:

I still had to confirm the connection between the process and the CD’s player so I took a closer look at each process. Based on the named pipe handles I saw they each had opened when I looked in Process Explorer’s handle view I suspected that the player and $sys$DRMServer communicated via named pipes and so I launched Filemon, checked Named Pipes in the Volumes menu, and confirmed my theory:

At that point I knew conclusively that the rootkit and its associated files were related to the First 4 Internet DRM software Sony ships on its CDs. Not happy having underhanded and sloppily written software on my system I looked for a way to uninstall it. However, I didn’t find any reference to it in the Control Panel’s Add or Remove Programs list, nor did I find any uninstall utility or directions on the CD or on First 4 Internet’s site. I checked the EULA and saw no mention of the fact that I was agreeing to have software put on my system that I couldn't uninstall. Now I was mad.

I deleted the driver files and their Registry keys, stopped the $sys$DRMServer service and deleted its image, and rebooted. As I was deleting the driver Registry keys under HKLM\System\CurrentControlSet\Services I noted that they were either configured as boot-start drivers or members of groups listed by name in the HKLM\System\CurrentControlSet\SafeBoot subkeys, which means that they load even in Safe Mode, making system recovery extremely difficult if any of them have a bug that prevents the system from booting.

When I logged I discovered that the CD’s icon was missing from Explorer. Deleting the drivers had disabled the CDs. Now I was really mad. Windows supports device “filtering”, which allows a driver to insert itself below or above another one so that it can see and modify the I/O requests targeted at the one it wants to filter. I know from my past work with device driver filter drivers that if you delete a filter driver’s image, Windows fails to start the target driver. I opened Device Manager, displayed the properties for my CD-ROM device, and saw one of the cloaked drivers, Crater.sys (another ironic name, since it had ‘cratered’ my CD), registered as a lower filter:

Unfortunately, although you can view the names of registered filter drivers in the “Upper filters” and “Lower filters” entries of a device’s Details tab in Device Manager, there’s no administrative interface for deleting filters. Filter registrations are stored in the Registry under HKLM\System\CurrentControlSet\Enum so I opened Regedit and searched for $sys$ in that key. I found the entry configuring the CD’s lower filter:

I deleted the entry, but got an access-denied error. Those keys have security permissions that only allow the Local System account to modify them, so I relaunched Regedit in the Local System account using PsExec: psexec –s –i –d regedit.exe. I retried the delete, succeeded, and searched for $sys$ again. Next I found an entry configuring another one of the drivers, Cor.sys (internally named Corvus), as an upper filter for the IDE channel device and also deleted it. I rebooted and my CD was back.

The entire experience was frustrating and irritating. Not only had Sony put software on my system that uses techniques commonly used by malware to mask its presence, the software is poorly written and provides no means for uninstall. Worse, most users that stumble across the cloaked files with a RKR scan will cripple their computer if they attempt the obvious step of deleting the cloaked files.

While I believe in the media industry’s right to use copy protection mechanisms to prevent illegal copying, I don’t think that we’ve found the right balance of fair use and copy protection, yet. This is a clear case of Sony taking DRM too far.
http://www.sysinternals.com/blog/200...al-rights.html





Study of Sony Anti-Piracy Software Triggers Uproar

File-Hiding Technique Alarms Security Researchers; Developer Offers Patch
Brian Krebs

Irate music fans who posted to dozens of online blogs vowing to never again buy Sony CDs as long as the company keeps using a suddenly beleaguered anti-piracy software program may find that their outbursts have been partially rewarded today.

On the heels of the Internet uproar over security concerns with its copyright-protection measures, the company that developed the software for recording-industry giant Sony BMG Music Entertainment says it is providing computer users with a "patch file" that will mitigate some of the features that alarmed security researchers when they were discovered earlier this week -- especially the program's built-in ability to hide files on the user's system.

Privacy and security experts charged that the technology built into many of Sony's music CDs since March is unnecessarily invasive and exposes users to threats from hackers and virus writers.

"Here you have one of the biggest name-brand corporations on the planet getting into what many people in other circumstances would consider hacking," said Richard Smith, a security and privacy consultant based in Boston. "That's just not acceptable."

Earlier this week, computer security researcher Mark Russinovich published an analysis showing that some new Sony CDs install software that not only limits the copying of music on the discs, but also employs programming techniques normally associated with computer viruses to hide from users and prevent them from removing the software.

Russinovich's findings -- posted on the Web site (http://www.sysinternals.com/) that he runs with another researcher -- indicated that the CDs in question use software techniques that behave similarly to "rootkits," software tools that hackers can use to maintain control over a computer system once they have broken in.

He found that traditional methods of uninstalling the program would not work, and that attempts at removing it corrupted the files needed to operate his computer's CD player, rendering it useless.

Sony spokesman John McKay said the technology has been deployed on just 20 titles so far, but that the company may include it on additional titles in the months ahead.

The music industry is aggressively defending its works from Internet and other forms of piracy, going so far as to sue individuals alleged to be trading large numbers of song titles online. The industry loses roughly $4.2 billion worldwide to piracy each year, according to the Recording Industry Association of America.

Russinovich discovered that the techniques employed by the Sony program to conceal its files from the user and to make them harder to remove could also be used by virus writers and hackers to hide malicious files on any computer running the anti-piracy program.

In response to criticisms that intruders could take such advantage, First4Internet Ltd. -- the British company that developed the software -- will make available on its Web site a software patch that should remove its ability to hide files, chief executive Mathew Gilliat-Smith said.

Russinovich called the offer of a patch "backpedaling and damage control in the face of a public-relations nightmare" and emphasized that users who try to remove the files manually after applying the fix will still ruin their CD-Rom drives.

Sony's move is the latest effort by the entertainment companies to rely on controversial "digital rights management" (DRM) technologies to reverse a steady drop in sales that the industry attributes in large part to piracy facilitated by online music and movie file-sharing networks like Kazaa and Limewire.

DRM technologies by their very nature need to be secretive, according to Peter Ullman, a partner with Woodcock Washburn, a Philadelphia law firm that specializes in intellectual property matters.

"If the software is put there to protect valuable content from being misused, then the software has to be able to protect itself from being subverted, so the companies that produce this security technology tend not to want to publicize how their technology works," Ullman said.

At issue is whether Sony has provided customers with adequate notice about what they can expect when installing the software, said Ari Schwartz, deputy director of the Washington-based Center for Democracy and Technology.

"Sony needs to be more transparent in how and what they're installing so that consumers can make informed decisions," Schwartz said.

Windows users cannot listen to tracks on the CD without agreeing to install the anti-piracy program, which merely advises that "it will install a small proprietary software program" that will remain there "until removed or deleted."

But according to Mikko Hypponen, director of research for Finnish antivirus company F-Secure Corp., users who want to remove the program may not do so directly, but must fill out a form on Sony's Web site, download additional software, wait for a phone call from a technical support specialist, and then download and install yet another program that removes the files.

Hypponen agreed that Sony's software could help hackers circumvent most antivirus products on the market today. He added that installing the Sony program on a machine running Windows Vista -- the beta version of the next iteration of Microsoft Windows -- "breaks the operating system spectacularly."

While the anti-piracy software allows consumers to make a limited number of additional copy-protected discs, it also imposes compatibility and portability constraints. Users of Apple Inc.'s iPod -- the dominant portable media player on the market -- have no way of transferring tracks from protected Sony CDs to their device, since Apple has not yet licensed its own DRM technology for use with copy-protected discs.

"We're still in this new digital era where the entertainment industry wants to protect ... their content, without due consideration of the consumer's right to use that content in a fair way," Russinovich said. "We need to have an open discussion as to where we should draw the line."

David Eisner, a blogger and software developer at the University of Maryland's Computer Aided Life Cycle Engineering Center, believes the record label's actions will ultimately backfire and drive otherwise legitimate customers to download pirated music from the online file-sharing networks.

"The people they're trying to stop from stealing their music are always going to find a way around these types of technologies," Eisner said. "Sony is just hurting people who obtain their products legally, and many of these same people are now going to think twice about doing so."
http://www.washingtonpost.com/wp-dyn...110202362.html





Is Sony Trying to Kill the CD Format for Music?
Andrew Brandt

By now, you've probably heard the news that Sony, the media giant, has been quietly installing hidden software on PCs, when people buy music albums published by Sony BMG Music, and try to play them on their computers. The software, called Extended Copy Protection (or XCP) uses rootkit techniques similar to those used by viruses, Trojan horse programs, and spyware to hide the fact that it is installed from the user.

The discovery, by security expert Mark Russinovich (whose outfit, Sysinternals.com, makes several free Windows utilities I find invaluable in diagnosing spyware infestations), details how Sony uses commercial software that automatically installs itself when you put a music CD in a Windows PC's CD drive.

Russinovich's own anti-rootkit software, Rootkit Revealer (a free download), as well as the Blacklight rootkit detection utility (made by F-Secure, an antivirus company, free until the end of the year), now detect the software used by Sony, which was licensed from a British firm called First 4 Internet.

The bigger question people have got to ask is, does Sony not respect the integrity of the computers of its customers? This cavalier act of sneaking software onto PCs not only violates our own Prime Directive -- it's our PC, dammit -- but threatens the entire music industry.

After all, if you suspect that a commercial CD will install software secretly, which you won't be able to remove and which, itself, may increase the already-great security problems of your Windows PC, would you continue to buy CDs?

I'll tell you right now, I won't. I'd much rather buy an unrestricted copy of a song electronically, using iTunes, or Rhapsody, or one of the other music services that offer this feature, than take a chance that some music disc will stick some hidden files in my Windows folder, which I can't see or remove.

Sony has dealt itself a serious blow, and the best thing it -- and the rest of the music publishers -- can do right now is condemn this practice, apologize to the customers that were affected, provide a method to get this junk off affected PCs, and make declarations that they will never, ever do this again.

I don't think they will. And if they don't, I simply won't buy CDs anymore. Period. From any publisher. And I recommend that you don't, either. As a fan of music who respects the need for artists to make a living, and a security-savvy PC user, I'm incensed that Sony -- any company -- would think it's OK to do this. It's not. But the only way (I can see) to send that message effectively to Sony BMG executives is to vote against CDs with my wallet.

Sony was crucial in creating the CD format more than 25 years ago. In this age where every purchasing choice we make affects the level of control we have over our PCs, they seem to be committed to killing it.
http://blogs.pcworld.com/staffblog/archives/001051.html





The "Sony Rootkit" Case
Mikko

There's been some recent developments in digital rights management systems (DRM) that have security implications. Some DRM systems have started to use rootkit technology. Rootkits are normally associated with malware but in this case a rootkit is used to enforce the copy control policies of audio CDs!

Rootkit is technology that hides software from the user and security software. This kind of technology is normally used by malware authors that want their presence to remain undetected in the system as long as possible. DRM software is not malicious but it has other reasons for hiding from the user. DRM software restricts the user's ability to make copies of a record and for that reason uses technology that prevents removal and modification of the software.

Sony BMG is currently using a rootkit-based DRM system on some CD records sold in USA. As far as we know, this system has been in use since March 2005. We've made some test purchases for Sony BMG records from Amazon.com and can confirm that they contained this technology.

When you insert such a CD to a Windows-based PC, the record will display a license agreement and then it will seem install a song player software - while it really installs a rootkit to the system. Once the rootkit is there, there's no direct way to uninstall it. The system is implemented in a way that makes it possible for viruses (or any other malicious program) to use the rootkit to hide themselves too. This may lead to a situation where the virus remains undetected even if the user has got updated antivirus software installed.

F-Secure has implemented an anti-rootkit scanner in F-Secure Internet Security 2006. The F-Secure BlackLight scanner is able to detect both this Sony DRM rootkit system and any malware that hides using it.

We've just published a technical description on this rootkit, with details on how to distinguish hidden items belonging to the DRM system from potentially harmful malware.

So: if you've recently used CD releases from Sony BMG that state that they are content protected on your Windows computer, the "Scan for Rootkits" function in our product will detect this program on your system. Same happens with our free BlackLight beta that you can download from our web site.

If you find this rootkit from your system, we recommend you don't remove it with our products. As this DRM system is implemented as a filter driver for the CD drive, just blindly removing it might result in an inaccessible CD drive letter. Instead, we recommend you contact Sony BMG directly via this web form and ask for directions on how to remove the software from your system. We've test driven this and they will provide you with tools to do this. However, they will install additional ActiveX components to your system while they are doing this so be adviced
http://www.europe.f-secure.com/weblog/#00000691





New DVD Watermark Has Pirates In Its Sights
Barry Fox

Hollywood has unveiled a powerful new technology which it hopes will help kill the pirating of movies. The system relies on sound – not vision – and was unveiled at a conference held by the international DVD Forum in Paris, France last week.

The opportunity for a novel copyright protection system arose because the Forum is now finalising the standards for the new High Definition DVD system that goes on sale early in 2006. The details of the system were explained by Alan Bell, executive vice-president of advanced technology with Warner Brothers in California, US.

All HD-DVD players will have a sensor that looks for inaudible watermarks in the soundtrack of movies. The watermarks will be included in the soundtracks of all major movies released to cinemas.

If a DVD player detects the telltale code, the disc must be an illegal copy made by copying a film print to video, or pointing a camcorder and microphone at a cinema screen. So the player refuses to play the disc.
Subtle variations

The mark is made by slightly varying the waveform of speech and music in a regular pattern to convey a digital code. The variations are too subtle to be noticeable to the human ear, but are easily recognised by the decoder in the player.

A variation of the system can also prevent the playback of discs made by pointing a camcorder at a home screen while it is playing a legitimate disc sold to individual consumers.

The consumer discs will also have an audio watermark, which differs from the cinema mark. If an HD-DVD player senses the consumer watermark it will check whether the disc is a legal, factory-pressed version and, if not, shut down.
Children’s parties

Alan Bell believes the DVD Forum has done all it can to prevent foul-ups. “We know that there might be a Hollywood movie in the background during a children’s party, and if Dad takes a home movie the watermark might end up on the sound track,” he says. “So the player will only shut down if it is continuous for quite a long time.”

Fred von Lohmann, an intellectual property attorney at the Electronic Frontier Foundation in San Francisco, California, says: “Few may object if you're only talking about the blue-laser DVD drives, but the trouble with watermarking schemes is the scope of the technology."

"For any watermarking scheme to be effective, technology companies have to be forced to re-engineer playback devices to detect the watermarks," he told New Scientist. "The risk is that Hollywood starts dictating the redesign of existing DVD drives, CD drives, hard drives, and personal computers, all to buttress the watermark."
http://www.newscientist.com/article.ns?id=dn8247





Data Security Laws Seem Likely, So Consumers and Businesses Vie to Shape Them
Tom Zeller Jr.

It has been a bad year for data security.

The Privacy Rights Clearinghouse, a consumer advocacy group in San Diego, has counted 80 data breaches since February, involving the personal information of more than 50 million people. The sensitive data - names, Social Security and credit card numbers, dates of birth, home addresses and the like - have either been lost by or stolen from companies and institutions that compile such data.

In February, ChoicePoint, the big data broker, raised public awareness of the problem when it announced that thieves had fraudulently obtained information on 145,000 consumers. In August, even the United States Air Force reported a data breach - a hacker may have gained access to a military management database and personal information on 33,000 officers.

In response, more than a dozen bills have been introduced in Congress this year.

Companies that compile, trade and store consumer data, while largely resigned to the idea that new legislation will hold them to a higher standard for security, want to minimize the impact of any new law, maximize their discretion when it comes to notifying consumers of breaches and limit their liability when they do spring leaks.

A bill introduced by Senator Jeff Sessions, Republican of Alabama, for instance, simply requires businesses to improve security on the data they carry and to notify consumers only if there is a "significant risk of identity theft."

But proving a "risk of identity theft" is nearly impossible, said Chris Jay Hoofnagle, senior counsel with the Electronic Privacy Information Center in Washington, a public interest research center.

Mr. Hoofnagle and other consumer and data privacy groups want strict new security standards that would require notification whenever data is inappropriately viewed or acquired.

They also want to give individuals the right to see and correct information that companies have collected on them and the ability to freeze their credit, that is, to prevent new credit accounts from being opened in their names without authentication.

Senator Charles E. Schumer, a New York Democrat, introduced a far-reaching bill earlier this year that addressed many of these points, but it failed to gain bipartisan support.

The existing batch of state laws - including California's data security notification law, which is largely credited with forcing companies nationwide to tell consumers about data breaches - also present a sticking point. The data brokering industry wants to ensure that any new federal law pre-empts state laws and limits the ability of states and individuals to sue in the event of a breach.

Consumer and data privacy groups, figuring that any law passed by Congress is likely to be less restrictive, want to preserve the ability of state and local governments to make and maintain tough laws.

"Industry hopes to use the furor over breaches as a way to pass a modest federal reform that just happens to also permanently restrict the states from passing virtually any financial privacy or identity theft laws," said Edmund Mierzwinski, the consumer program director for the United States Public Interest Research Group in Washington.

Whether any bill will pass this year is an open question, though the pressure is on. Just last week, 47 state attorneys general sent a letter to Congress urging the creation of a tough, far-reaching bill that would include many of the components that advocacy groups seek.

And on Wednesday, Representative Clifford B. Stearns, Republican of Florida, introduced the Data Accountability and Trust Act, which proposes tough new regulations for data brokers. The bill would force companies handling consumer data to, among other things, appoint a data security officer, draft explicit security policies and submit them to the Federal Trade Commission, offer consumers access to their own files and create a procedure for correcting errors.

The bill would also require companies to notify not just consumers of a breach, but also the F.T.C., which would then be permitted to audit the company's security program.

"But it needs better enforcement language," said Joseph Ansanelli, the chief executive and co-founder of Vontu, an information security company in California, who has frequently testified before Congress on issues of consumer privacy protection.

Mr. Ansanelli says the biggest problem with data security is the patchwork of laws governing too many narrowly sliced industries and too many different situations, when it is really all about the data.

"Confusion," he said, "is the enemy of consumer protection."
http://www.nytimes.com/2005/11/01/business/01theft.html





Spy Agencies Told to 'Bolster the Growth of Democracy'
Douglas Jehl

A new strategy document issued Wednesday by the Bush administration ranks efforts to "bolster the growth of democracy" among the three top missions for American intelligence agencies.

John D. Negroponte, the director of national intelligence, said the rankings were intended to align the work of intelligence agencies with the administration's broader national security goals. The top two "mission objectives" are efforts to counter terrorism and weapons proliferation.

At a briefing, Mr. Negroponte said he did not believe that the priorities reflected a significant change from those in place before the overhaul of intelligence agencies and the establishment of his post six months ago. But another senior intelligence official, speaking at the same briefing, said the emphasis reflected an acknowledgment that American agencies needed to do "a better job" in understanding the role played by "soft power."

The Bush administration has seized upon the expansion of democracy abroad as a central theme of foreign policy, especially since President Bush devoted much of his second inaugural address to pledging support for democratic movements "in every nation and culture."

Among other things, the strategy says that "collectors, analysts and operators" within the 15 American intelligence agencies should seek to "forge relationships with new and incipient democracies" in order to help "strengthen the rule of law and ward off threats to representative government." The strategy, published on www.dni.gov, is unclassified, and the officials said it was not intended to apply in any way to any covert action that might be undertaken by the United States.

The document provided few specifics, and Mr. Negroponte said it could take as long as two years before its goals were fully reflected in intelligence budgets. But the second intelligence official said it would be prudent to expect to see funds shifted away from classified technical intelligence programs, some of which Mr. Negroponte's office has already selected for cuts, and toward human spying.

"Without prejudging anything, that's where they keep the money," the second official said, referring to the multibillion-dollar budgets controlled by the National Security Agency, the National Reconnaissance Office, and the National Geospatial-Intelligence Agency, which build, launch and operate reconnaissance and eavesdropping satellites.

The second official spoke on condition of anonymity, under ground rules set by Mr. Negroponte's office.

While counterterrorism was listed first among intelligence priorities, the second official suggested that Mr. Negroponte's office was still reviewing how intelligence agencies were organized to wage that effort.

A new National Counterterrorism Center has been designated the "mission manager" by Mr. Negroponte, but the C.I.A. maintains its own such center, and the two sometimes compete for resources.
http://www.nytimes.com/2005/10/27/politics/27intel.html





China To Promote Peer-To-Peer

The Chinese government has announced an initiative to promote commercial exploitation of peer-to-peer technologies.

The P2P Application Promotion Alliance has been set up by the Internet Society of China and will encourage the development of P2P technologies, regulate their use and protect intellectual property rights. In other words, no file sharing.

'ISC plans to help regulate Chinese companies' activities to ensure that illegal activities are not spawned by P2P in China,' reports ChinaTechNews.

The initiative follows the first successful criminal prosecution for file sharing in Hong Kong. China appears determined to take a hard line on file sharing, doubtless with the intention to assure software makers, movie studios and record labels that they can do business there.
http://www.pcpro.co.uk/news/79478/ch...eertopeer.html





China Luring Scholars to Make Universities Great
Howard W. French

When Andrew Chi-chih Yao, a Princeton professor who is recognized as one of the United States' top computer scientists, was approached by Qinghua University in Beijing last year to lead an advanced computer studies program, he did not hesitate.

It did not matter that he would be leaving one of America's top universities for one little known outside China. Or that after his birth in Shanghai, he was raised in Taiwan and spent his entire academic career in the United States. He felt he could contribute to his fast-rising homeland.

"Patriotism does have something to do with it, because I just cannot imagine going anywhere else, even if the conditions were equal," said Dr. Yao, who is 58.

China wants to transform its top universities into the world's best within a decade, and it is spending billions of dollars to woo big-name scholars like Dr. Yao and build first-class research laboratories. The effort is China's latest bid to raise its profile as a great power.

China has already pulled off one of the most remarkable expansions of education in modern times, increasing the number of undergraduates and people who hold doctoral degrees fivefold in 10 years.

"First-class universities increasingly reflect a nation's overall power," Wu Bangguo, China's secondranking leader, said recently in a speech here marking the 100th anniversary of Fudan, the country's first modern university.

The model is simple: recruit top foreign-trained Chinese and Chinese-American specialists, set them up in well-equipped labs, surround them with the brightest students and give them tremendous leeway. In a minority of cases, they receive American-style pay; in others, they are lured by the cost of living, generous housing and the laboratories. How many have come is unclear.

China is focusing on science and technology, areas that reflect the country's development needs but also reflect the preferences of an authoritarian system that restricts speech. The liberal arts often involve critical thinking about politics, economics and history, and China's government, which strictly limits public debate, has placed relatively little emphasis on achieving international status in those subjects.

In fact, Chinese say - most often euphemistically and indirectly - that those very restrictions on academic debate could hamper efforts to create world-class universities.

"Right now, I don't think any university in China has an atmosphere comparable to the older Western universities - Harvard or Oxford - in terms of freedom of expression," said Lin Jianhua, Beijing University's executive vice president. "We are trying to give the students a better environment, but in order to do these things we need time. Not 10 years, but maybe one or two generations."

Nonetheless, the new confidence about entering the world's educational elite is heard among politicians and university administrators, students and professors.

"Maybe in 20 years M.I.T. will be studying Qinghua's example," says Rao Zihe, director of the Institute of Biophysics at Qinghua University, an institution renowned for its sciences and regarded by many as China's finest university. "How long it will take to catch up can't be predicted, but in some respects we are already better than the Harvards today."

In only a generation, China has sharply increased the proportion of its college-age population in higher education, to roughly 20 percent now from 1.4 percent in 1978. In engineering alone, China is producing 442,000 new undergraduates a year, along with 48,000 graduates with masters' degrees and 8,000 Ph.D's.

But only Beijing University and a few other institutions have been internationally recognized as superior. Since 1998, when Jiang Zemin, then China's leader, officially began the effort to transform Chinese universities, state financing for higher education has more than doubled, reaching $10.4 billion in 2003, the last year for which an official figure is available.

Xu Tian, a leading geneticist who was trained at Yale and still teaches there, runs a laboratory at Fudan University that performs innovative work on the transposition of genes. On Aug. 12 his breakthrough research was featured on the cover of the prestigious journal Cell, a first for a Chinese scientist.

Beijing University drew on the talents of Tian Gang, a leading mathematician from M.I.T., in setting up an international research center for advanced mathematics, among other high-level research centers. Officials at Beijing University estimate that as much as 40 percent of its faculty was trained overseas, most often in the United States.

The president of Yale University, Richard C. Levin, interviewed in Shanghai, where he was the featured guest at Fudan's centennial celebration in late September, also had high praise for China's students.

"China has 20 percent of the world's population, and it is safe to say it has more than 20 percent of the world's best students," he said. "They have the raw talent."

But Mr. Levin also noted that China's low labor costs simplified the effort to upgrade. He said he had been astounded by the new laboratories at Jiaotong University in Shanghai, which he said could be built in China for $50 a square foot, compared with $500 a square foot at Yale.

Some critics say that the country is trying to achieve excellence in too many areas at once and that the plans of the 30 or so universities selected for heavy state investment duplicate efforts, sacrificing excellence. Even Mr. Levin tempered his enthusiasm with a warning that the "top schools have expanded much too fast and are diluting quality."

In many cases, though, the toughest criticism comes from people who have worked in the system.

"It is important for different universities to have different qualities, just like a symphony," said Yang Fujia, a nuclear physicist and former president of Fudan. "But all Chinese universities want to be comprehensive. Everybody wants to be the piano, having a medical school and lots of graduate students."

Mr. Yang, who leads a small experimental university in Ningbo, also criticized the lack of autonomy given to many Chinese researchers.

"At Princeton one mathematician spent nine years without publishing a paper, and then solved a problem that had been around for 360 years," Mr. Yang said, a reference to Andrew J. Wiles and his solution to Fermat's last theorem in the early 1990's. "No one minded that, because they appreciate the dedication to hard work there. We don't have that spirit yet in China."

Similarly, Ge Jianxiong, a distinguished historical geographer at Fudan, said Chinese culture often demands speedy results, which could undermine research. "In China projects are always short-term, say three years," he said. "Then they want you to produce a book, a voluminous book. In real research you've got to give people the freedom to produce good results, and not just the results they want."

Mr. Ge added that education suffered here because "it has always been regarded as a tool of politics."

Dr. Yao said he had expected to concentrate on creating a world-class Ph.D. program but had found surprising weaknesses in undergraduate training and had decided to teach at that level. "You can't just say I'll only do the cutting-edge stuff," he said. "You've got to teach the basics really well first."

But the biggest weakness, many Chinese academics indicated, is the lack of academic freedom. Mr. Yang, the former president of Fudan University, warned that if the right atmosphere was not cultivated, great thinkers from overseas might come to China for a year or two, only to leave frustrated.

Gong Ke, a vice president of Qinghua University, said universities had "the duty to guarantee academic freedom."

"We have professors who teach here, foreigners, who teach very differently from the Chinese government's point of view," he added. "Some of them really criticize the economic policy of China."

Li Ao, a writer in Taiwan, visited Beijing University in September and gave a speech calling for greater academic freedom and independence from the government. The next day, after reportedly coming under heavy official pressure, he delivered a far tamer version elsewhere. .

The Chinese government also censors university online bulletin boards and discussion groups, and recently prevented students at Zhongshan University in Guangzhou from conversing freely with visiting elected officials from Hong Kong.

Students here are not encouraged to challenge authority or received wisdom. For some, that helps explain why China has never won a Nobel Prize. What is needed most now, some of China's best scholars say, are bold, original thinkers.

"The greatest thing we've done in the last 20 years is lift 200 million people out of poverty," said Dr. Xu. "What China has not realized yet, though, if it truly wants to go to the next level, is to understand that numbers are not enough.

"We need a new revolution to get us away from a culture that prizes becoming government officials. We must learn to reward real innovation, independent thought and genuine scholarly work."
http://www.nytimes.com/2005/10/28/in...versities.html





Kansas Fight on Evolution Escalates
Jodi Wilgoren

Two leading science organizations have denied the Kansas Board of Education permission to use their copyrighted materials as part of the state's proposed new science standards because of the standards' critical approach to evolution.

The rebuke from the two groups, the National Academy of Sciences and the National Science Teachers Association, comes less than two weeks before the board's expected adoption of the controversial new standards, which will serve as a template for statewide tests and thus have great influence on what is taught.

Kansas is one of a number of states and school districts where the teaching of evolution has lately come under assault. If adopted, its change in standards will be among the most aggressive challenges in the nation to biology's bedrock theory.

The copyright denial could delay adoption as the standards are rewritten but is unlikely to derail the board's conservative majority in its mission to require that challenges to Darwin's theories be taught in the state's classrooms.

In a joint statement yesterday, Ralph J. Cicerone, president of the National Academy, and Michael J. Padilla, president of the teachers' group, said: "Kansas students will not be well prepared for the rigors of higher education or the demands of an increasingly complex and technologically driven world if their science education is based on these standards. Instead, they will put the students of Kansas at a competitive disadvantage as they take their place in the world."

In the statement and in letters to the state board, the groups opposed the standards because they would single out evolution as a controversial theory and change the definition of science itself so that it is not restricted to the study of natural phenomena. A third organization, the American Association for the Advancement of Science, echoed those concerns in a news release supporting the copyright denial, saying, "Students are ill served by any effort in science classrooms to blur the distinction between science and other ways of knowing, including those concerned with the supernatural."

Though the complaints of the National Academy and the teachers' group focus on just a handful of references to evolution, their copyrighted material appears on almost all 100 pages of the standards, which are an overview of science subjects taught in kindergarten through high school. In Kansas, as in most states, local school districts decide on curriculums and choose textbooks, but the state standards guide those decisions.

"In some cases it's just a phrase, but in some cases it's extensive," Steve Case, the chairman of the board's standards-writing committee, said of the differences required by the copyright denial. "You try to keep the idea but change the wording around; the writing becomes horrifically bad."

Dr. Case, a research professor at the University of Kansas who opposes the proposed standards, said removing the copyrighted material could take several months. But Steve Abrams, the board's president and leader of its 6-to-4 conservative majority, said it could approve the standards on Nov. 8 as planned, with a caveat directing a copyright lawyer to edit out direct references to the groups' materials.

"The impact is minimal - it won't change the concepts," said Dr. Abrams, a veterinarian. "They obviously don't have copyrights on concepts."

The copyright skirmish is not a surprise: the two science groups took similar steps in 1999, when the Kansas board stripped the standards of virtually any reference to evolution, a move that was reversed when conservative members were ousted from office. (Critics of evolutionary theory regained a majority last year.)

Sue Gamble, a board member who opposes the changes, acknowledged that the science groups' dissent would do little to halt the standards' adoption but said it could lead to a backlash.

"Nothing is going to stop these six members from doing what they're going to do," she said of the board's conservative majority, four of whom are up for re-election in 2006. "It won't make any difference, but I think it will make a difference next year in the election."
http://www.nytimes.com/2005/10/28/sc.../28kansas.html





Elsewhere in the SEC

University of Florida

Independent Florida Alligator—

The University of Florida’s homegrown network-monitoring software has become a point of contention for students who say the program prevents them from legal downloading activities and infringes on their rights.

ICARUS, which is largely responsible for the prevention of peer-to-peer software usage on campus, has outraged a number of students who claim it violates their rights.

But despite protest, the patent-pending program may soon be available to universities nationwide.

In creating ICARUS, UF’s initial inclination was to develop a program that would solve network congestion, said Mark Hoit, the interim associate provost for information technology.

“Based on that bandwith needed, we looked at the Web traffic and determined that a lot of it was due to illegal file sharing,” Hoit said.

Zachary Harper, who is part of the facebook.com group STOP ICARUS, said he feels UF should permit the usage of legal peer-to-peer, or P2P, file-sharing programs like BitTorrent.
http://www.theplainsman.com/vnews/di.../43694a77e6226





FCC Delays Vote On Telecoms Mergers Vote
Jeremy Pelofsky

The U.S. Federal Communications Commission said it postponed until Monday a meeting to vote on Verizon Communications' $8.6 billion purchase of MCI Inc. and SBC Communications Inc.'s $16 billion acquisition of AT&T Corp.

The FCC had tried to schedule votes several times on Friday, but sources close to the matter said the commissioners and staff were still reviewing and negotiating conditions the agency may require before clearing the deals.

The agency plans to take up the mergers at a public meeting that is scheduled to start at 11 a.m. (1600 GMT) Monday. An FCC spokesman declined to comment on the reason for the delay.

FCC Chairman Kevin Martin had proposed approving the deals without any conditions. The agency is split with two Republicans and two Democrats so Martin must convince at least one Democrat to support his decision or reach a compromise.

One seat on the commission has been vacant since March when then-FCC Chairman Michael Powell stepped down and President

George W. Bush has yet to name anyone to fill the position.

The lack of a Republican majority for Martin has caused problems before. He was unable to launch a new review of media ownership restrictions because of a disagreement between Republicans and Democrats.

One source close to the matter said some of the conditions under consideration include freezing for two years or more the wholesale rates that SBC and Verizon charge competitors for leasing parts of their networks.

Other conditions could include forcing Verizon and SBC to offer high-speed Internet service without requiring customers to also sign up for local telephone service and ensuring a subscriber can surf where they choose on the Internet, said the source who declined to be identified.

Competing telephone companies have pushed for price controls for wholesale access to Verizon's and SBC's networks. Consumer advocates have urged that the two carriers be forced to offer customers high-speed Internet service without subscribing to local telephone service.

Consumer groups have warned that SBC and Verizon's acquisitions of AT&T and MCI, respectively, would doom competition for customers, lead to higher prices and result in poorer service.

SBC spokesman Michael Balmoris said "we're confident the FCC recognizes the benefits of our merger with AT&T, and we look forward to a favorable vote."

Verizon spokesman David Fish declined to comment.

The U.S. Justice Department's antitrust division approved the two transactions on Thursday on the condition they each offer long-term leases to competitors for extra lines into some buildings.
http://today.reuters.com/news/newsAr...archived=False





At SBC, It's All About "Scale and Scope"

CEO Edward Whitacre talks about the AT&T Wireless acquisition and how he's moving to keep abreast of cable competitors

SBC Telecommunications' financial performance of late hasn't been much to write home about. For the third quarter, it just reported flat earnings of $1.2 billion on revenue of $10.3 billion, up a scant 0.3% over the same period last year. But given the onslaught of competitors eating away like pigeons at SBC's (SBC ) bread-and-butter landline business, scant growth is better than the alternative. "Is [our] revenue growth great? No -- it's terrible," says CEO Edward Whitacre, who adds, "but it's a lot better than losing."

The truth is, Whitacre hates losing. He has always been primarily concerned with spurring the company to further growth, creating "scale and scope," as he likes to say, and generating market value. First, he bought Pacific Telesis and Ameritech in the late 1990s, and then AT&T Wireless last year (see BW Online, 8/ 31/05, "So Long AT&T? Not So Fast").

Now, with his acquisition of AT&T nearing approval -- it requires not only federal approval, which is expected any day now, but the sign-off from state regulators, expected in November -- Whitacre has created the largest communications company in the nation (see BW, 10/31/05, "Storm Warnings for Kevin Martin").

Competitive Verification. Such moves have prompted even his biggest rivals, including Verizon (VZ ) and Comcast (CMCSA ), to strike similar deals just to keep pace.

"It's kind of verification that maybe we're doing the right thing," Whitacre says of his competitors. Dapper in his coat and tie, and cheerful despite the swirl of market forces facing his company, the SBC CEO sat down with BusinessWeek Chicago Bureau Chief Roger O. Crockett in Chicago to talk about how his company stacks up against the competition. Edited excerpts of theirr conversation follow:

Given that we've entered a new era in telecom where the Internet rules, how would you describe your strategy now?
It's still about scale and scope. It's about owning the assets that connect customers. The assets that probably can't be duplicated except maybe by the cable companies. We have that, Verizon has that, BellSouth (BLS ) has some of that. The cable companies have it. It's the numbers of customers you can get to. So it's scale and scope.

How much do you expect to compete against Verizon?
Well, a lot in wireless. They're going to have essentially the same capabilities that Cingular [SBC's wireless joint venture with BellSouth] has in a lot of locations. So I would think Verizon is going to be a big competitor. I think the cable companies will be the biggest competitor across the footprint.

In what other areas will you compete with Verizon?
In voice. We're clearly going to be fierce competitors in the big enterprise space. I suspect we'll compete in the small- and medium-business space, and for the consumer too.

For the consumer? How?
As Voice over IP gets bigger, they will have the capability to come into our so- called geographical footprint, and we'll have the same capability to go into theirs. I suspect over time there will be a lot of that.

Do you have a timeline for when that competition will heat up?
Over the next four or five years, I would think it will pick up a lot.

Some analysts believe that the new SBC won't be able to fully utilize AT&T to win business in the south as long as SBC is in its joint venture with BellSouth. Do you agree?
No. BellSouth and SBC have a fiduciary duty to make that business do as well as we can. In order for Cingular to do good, it's going to want to utilize everything that it can. One of the things it's going to utilize is this relationship with AT&T.

Won't BellSouth be concerned about losing some of its business customers to you, its wireless-venture partner, once your merger with AT&T is approved?
Well, they might be. BellSouth already competes against us in the enterprise space. And sure, we'll go and compete for some of their enterprise customers, and we'll sure use Cingular Wireless in doing it. But they can do the same thing. I just don't think it's the deal everybody is making it out to be.

Is it a possibility that SBC would acquire BellSouth?
It sure would be nice, but it doesn't have much chance of happening because of market power, size, etc. I think it would be real hard to do. I don't think the regulators would let that happen, in my judgment.

Have you made an overture?
I wouldn't say we haven't done that in the past, but I'm not going to do it now. I've certainly thought about it a few times, and I'm sure Bell South has thought about it too.

How concerned are you about Internet upstarts like Google (GOOG ), MSN, Vonage, and others?
How do you think they're going to get to customers? Through a broadband pipe. Cable companies have them. We have them. Now what they would like to do is use my pipes free, but I ain't going to let them do that because we have spent this capital and we have to have a return on it. So there's going to have to be some mechanism for these people who use these pipes to pay for the portion they're using. Why should they be allowed to use my pipes?

The Internet can't be free in that sense, because we and the cable companies have made an investment and for a Google or Yahoo! (YHOO ) or Vonage or anybody to expect to use these pipes [for] free is nuts!

What's your approach to regulation? Explain, for example, the difference between you and Verizon in how you are approaching regulatory approval for Telco TV [digital-TV service offered by telecoms].
The cable companies have an agreement with the cities: They pay a percentage of their revenue for a franchise right to broadcast TV. We have a franchise in every city we operate in based on providing telephone service.

Now, all of a sudden, without any additional payment, the cable companies are putting telephone communication down their pipes and we're putting TV signals. If you want us to get a franchise agreement for TV, then let's make the cable companies get a franchise for telephony.

If cable can put telephone down their existing franchise I should be able to put TV down my franchise. It's kind of a "what's fair is fair" deal. I think it's just common sense.

What if the regulators don't agree?
Then there won't be any competition -- there will be a cable-TV monopoly.

I know you're a competitive person. Who are your biggest competitors?
Our big competition in the future is with the cable companies. Verizon's going to be a player, and certainly I want to compete. And I want our shareowners to do better than anyone else.

How have you managed to turn losses into growth?
We've worked our asses off. We've bundled, we've got new products.

How do you feel the business is performing overall?
I'm not real pleased now. It's not a good industry for stock holders because of all the uncertainty. But we're growing revenues again.

Portions of our business are pretty strong. We're doing pretty good on the data side, on the Internet side, on the broadband-pipe side, on the wireless side. So I'm feeling better than I've felt in a long time.

Edited by Patricia O'Connell

http://www.businessweek.com/@@n34h*I...5/b3958092.htm





Telefónica of Spain to Buy British Mobile Phone Concern
Heather Timmons

Telefónica of Spain agreed Monday to buy the British mobile phone company O2 for $31.5 billion in a deal that could spur greater competition in Europe's more established markets.

"My view is that Telefónica is in aggressive acquisition mode," said Satyajit Chatterjee, a credit analyst with Société Générale in London, referring to the price offered for O2.

With the O2 deal, Telefónica swings its attention fully back to Europe from Latin America, where it paid $5.85 billion for the wireless assets of BellSouth last year, and where it has established a broad presence with billions of dollars in acquisitions since the 1990's.

Telefónica also spent 3.6 billion euros earlier this year to acquire 69 percent of Cesky Telecom, the Czech Republic's largest telecommunications company.

Telefónica offered 200 pence, or $3.54, a share for O2, a 22 percent premium to the company's closing price Friday. Shares of O2 jumped 41.5 pence Monday, or 25 percent, to 205.75.

The board of O2 gave its support to the hastily negotiated offer, which was put together in just a week. Unless a counterbid emerges, the deal will close in January.

The merged company would bring together 25 million O2 customers in Britain, Germany and Ireland with Telefónica's 145 million customers, most of them in Spain and Latin America, and would create Europe's second-largest telecommunications company by market value, behind Vodafone.

Analysts think Telefónica, with its deep pockets, could bring more competition to Britain and Germany, Europe's largest mobile phone markets, by cutting prices.

O2, which was spun off by the fixed-line company BT of Britain in 2001, has been considered an attractive takeover target for some time because of its strong brand presence and fast growth. The company earned £341 million ($602 million) in operating profit in the year ended in March, up 114 percent from the year before.

Deutsche Telekom and Royal KPN of the Netherlands considered buying O2, and said in August that those talks had ended. At the time, the two companies had been expected to offer 160 to 170 pence a share.

Monday's deal forces Deutsche Telekom to decide whether to put forward a higher bid for O2.

Deutsche Telekom will "have to make up its mind if it is going to pass, or think long and hard about what it wants to pay for O2," Robert Grindle, a telecommunications analyst at Dresdner Kleinwort Wasserstein, said.

"The bar has been raised substantially."

Telefónica's chairman, César Alierta, said O2 was a "high-quality asset on its own," and its acquisition would have a positive financial impact in its first year.

The deal would bring Telefónica one of the "highest-growth mobile operators in Europe," he said, and give the Spanish company economies of scale.

The management of O2 would stay in place and receive two seats on the Telefónica board. The company would continue to be run from Britain.

Many cash-rich telecommunications companies like Telefónica have been pondering acquisitions in recent months, but many have been content to return money to shareholders instead.

Some investors and analysts warned Monday that the deal, with its premium of more than 20 percent, could signal a return to the ambitious mergers of the late 1990's, which left the telecommunications industry saddled with debt and forced several players into bankruptcy.

Telefónica is financing the deal with a £18.5 billion loan from Citigroup, the Royal Bank of Scotland and Goldman Sachs.
http://www.nytimes.com/2005/11/01/bu...ss/01tele.html





Sprint Launches Music Service, Fast Network
Sinead Carew

The No. 3 U.S. mobile service, Sprint Nextel Corp., on Monday introduced a wireless music download service using phones from Samsung Electronics Co. Ltd.and Sanyo Electric Co. Ltd..

Sprint Nextel also said it expects a new high-speed data network it is building to have coverage for 130 million people by the middle of the month. The network can send music and video at speeds similar to some home broadband networks.

Sprint Nextel and its bigger rivals, Cingular Wireless and Verizon Wireless, already sell phones that can store and play music users transfer from their computers, but this is the first U.S. service that lets customers buy songs on the go.

Cingular Wireless and Verizon Wireless have said they plan to launch similar services next year.

Wireless service providers hope such services will boost revenue by getting customers to use their handsets for more than phone calls. Music is seen as one of the next big things in phones, most of which already sport cameras and Web browsers.

Sprint Nextel said it would send full songs to consumers' handsets for $2.50 each under the new service, two and a half times Apple Computer Inc.'s 99 cent price tag for songs bought on computers through its popular iTunes music service.

Consumers can also play the songs they buy through Sprint on their computer and also copy them onto a compact disc.

Sprint and some of its rivals believe consumers would pay a premium to buy music while on the move, many analysts have been skeptical about whether this would work.

The U.S. wireless music download market is expected to be worth $1.5 billion in five years, compared with $104 billion for the total U.S. mobile services market in 2004, according to Ovum.

"Music could certainly be much bigger if pricing was more in line with what you find on the Internet," Ovum analyst Roger Entner said.

Sprint's Chief Operating Officer Len Lauer said he is "confident" the service will be a success, citing strong demand in Asia and Europe for services with similar fees.

Sprint is also looking at adding features that would integrate music more closely, including the option of having a favorite song play as the user turns on their phone.

"We will be offering services next year with more integration of music into the user interface," he said.

Sprint Nextel, which also streams radio channels to phones using content from Sirius Satellite Radio Inc., would also like to let its customers easily buy a song they have have just heard on Sirius, Lauer said, but he would not say if agreements are being made for such a service.

The new music service uses software from privately-held Groove Mobile, on Sanyo's MM-9000 and Samsung's MM-A940.

The phones run on Sprint's the high-speed network, based on EV-DO technology. Sprint plans to expand to cover 150 million people, or half the U.S. population, by early 2006.

Verizon Wireless has been selling services based on this technology to consumers since February and to business users since 2003 and Cingular plans to have a high-speed network in about 20 markets by year end.

Sprint said it would charge $15 to $25 a month for unlimited use of data services such as video and digital radio, with more video clips included in higher-priced plans. Verizon's high- speed service also starts at about $15 a month.

Cingular, a venture of SBC Communications Inc. and BellSouth Corp., in September began selling a Motorola Inc. <MOT.N> phone that runs Apple's music-playing iTunes software, but the phone has met a lukewarm reception.

Verizon Wireless is a venture of Verizon Communications and Vodafone Group Plc.

Sprint shares were up 38 cents, or 1.6 percent, at $23.62 in afternoon trading on the New York Stock Exchange.
http://today.reuters.com/news/newsAr...archived=False





To Battle the Telephone Giants, Small Internet Providers Choose Wi-Fi as a Weapon
Matt Richtel and Ken Belson

With cable providers and the Bell telephone companies dominating the market for residential high-speed Internet service, smaller Internet access providers are desperately trying to find a new way to connect with consumers. They say they may have found it in wireless technology that avoids the need to build expensive underground networks.

The most prominent example is EarthLink, once a leader in dial-up Internet service. The company made a big leap into the wireless market this month when it won the right from Philadelphia to provide inexpensive Wi-Fi Internet connections citywide. Last week, the company also won an exclusive franchise to build a wireless network for the city of Anaheim, Calif.

The wireless option is attractive because it does not require building or leasing costly underground lines, and the cost of Wi-Fi equipment and installation is falling rapidly, said Donald B. Berryman, president of a new division of EarthLink, called EarthLink Municipal Networks.

"There is so much going on" in the wireless market, Mr. Berryman said. "We see this as a huge opportunity to grow our business."

As part of the agreement with Philadelphia, EarthLink obtained public rights-of-way to build a wireless network covering the city's 135 square miles. The company will pay the construction costs, which Mr. Berryman said could be as little as $10 million, compared with the hundreds of millions of dollars EarthLink would have to spend to lay copper or fiber cables for a conventional broadband network.

EarthLink is not alone in betting on Wi-Fi. Many smaller telecommunications players are bidding for Wi-Fi contracts with big cities like Minneapolis and New York, which are eager to attract new businesses, give residents alternatives to the cable and phone companies and make it possible for lower-income residents to get an Internet link.

In smaller cities like Grand Haven, Mich., and Rio Rancho, N.M., start-ups like Azulstar Networks have struck out on their own, obtaining right-of-way agreements. In San Francisco, Google is considering building a free citywide network. Google would make money by selling advertising that reached the Wi-Fi users.

The Philadelphia network, which EarthLink hopes to complete by next year, will operate in a mesh of Wi-Fi access points, or hot spots, like those found in airports and cafes. High-capacity data connections to the Internet will be beamed from central offices to smaller Wi-Fi antennas on streets, in parks and atop buildings. The antennas, which have a range of about 600 feet, are positioned so that the signals overlap to prevent dropped connections when users move from one hot spot to another and to ensure that signals reach inside buildings.

Even with municipal Wi-Fi contracts, smaller Internet providers face an uphill battle against the likes of Comcast and Verizon, which have huge marketing budgets, bundles of products that include voice, video and television, and the ability to sharply cut prices.

And wireless networks are far from perfect. Though several times faster than dial-up services, they are still slower than conventional cable or D.S.L. broadband connections. They are also vulnerable to privacy and security problems. In hilly cities, coverage can be spotty. And heavy network use can slow connection speeds.

"It's an opportunity for the EarthLinks and AOL's of the world to generate new revenue," said Patrick Zerbib, an industry analyst at Adventis, a telecommunications consultancy. "But it's unclear whether the new Wi-Fi business can offset the decline in their other businesses."

Even so, the Bells and cable companies are fighting wireless incursions into their territory. They see the municipal projects - or anything that circumvents their expensive and extensive in-ground networks - as a threat. They are lobbying state and federal lawmakers to curtail publicly funded networks, arguing that publicly sanctioned services could deter the Bells from investing in their own networks.

But for providers like EarthLink, there's little choice but to forge ahead. On Oct. 20, the company said the number of its dial-up customers fell 8.1 percent in the third quarter, compared with the same period in 2004.

EarthLink, however, said it expected the Philadelphia project to give the company a lift. Mr. Berryman said EarthLink would charge Philadelphians about $20 a month to use the service. Under the company's agreement with the city, low-income residents will be offered discounted service at $10 a month (the city will determine eligibility for the discount).

The speed for the service, at around 1 megabit per second to download information, is about a quarter the speed of most cable broadband connections.

Because of that, Mr. Berryman does not expect these connections to displace the cable and phone companies. Instead, he said, EarthLink wants to get faster Internet connections to people with dial-up access or no connections at all.

The Bells and cable companies, however, are setting their sights on those customers, too. Verizon and SBC, for instance, now sell broadband service for as little as $14.95 a month, 25 percent less than EarthLink plans to charge in Philadelphia. Meanwhile, Cablevision and other cable companies are bundling their digital phone and television services with superfast data lines.

Some companies say they wonder whether cheap wireless broadband makes financial sense. T-Mobile, which operates the world's largest collection of Wi-Fi hot spots, did not bid on the Philadelphia project because it felt it would have a hard time making money on it.

Despite the financial challenge, some fledgling providers are moving ahead. The start-up Azulstar has been selling wireless Internet connections for the past year in Grand Haven, which covers about six square miles. Customers can get a connection for $19.95 a month, just a few dollars more than SBC's lowest-priced plan, which is faster. With an encrypted password, customers can log on to the Internet almost anywhere in the city, according to Azulstar's chief financial officer, Les Lewis.

Mr. Lewis declined to say how many subscribers Azulstar had signed up, but he said that wireless providers could compete with the Bells and cable companies by offering Internet phone and other services.

"It's not just going to be an Internet connection, but it's going to be like electricity where people develop more than light bulbs," he said.

NeoReach Wireless, a subsidiary of the MobilePro Corporation, which is based in Bethesda, Md., took a different tack. The company has created a wholesale wireless network that other companies can lease. The local cable provider, Cox Communications, is considering becoming a customer in Tempe, Ariz., said John T. von Harz, a vice president at NeoReach.

For some companies, building a wireless network is a means to an end, not an end in itself.

Google, for example, recently bid on a Wi-Fi project in San Francisco. Its executives said the company wanted to help start-ups and other companies move into the Internet access business.

Google also wants to see if it can support, or at least subsidize, its Wi-Fi business by getting local companies to pay a premium to advertise to people who are logged on to a Google hot spot. A person sitting at a cafe surfing the Web on a laptop, for instance, might receive ads for a nearby business.

Despite Google's ambition, Chris Sacca, the head of the company's municipal Wi-Fi effort, said it was "very hard to say" whether wireless networks would spawn a new generation of providers capable of challenging the phone and cable giants.

For independent Internet providers facing the Bells and cable companies, the only choice may be to take the plunge and find out.
http://www.nytimes.com/2005/10/31/te...gy/31wifi.html





Wireless Demand Helps Verizon Beat Estimates
Ken Belson

Verizon Communications said yesterday that it earned a better-than-expected $1.9 billion in the third quarter, helped by strong demand for its broadband and wireless products.

Verizon also received approval from the Justice Department yesterday for its purchase of the long distance carrier MCI, a major hurdle toward completing its deal. Verizon must still get approval from the Federal Communications Commission and several state regulators.

The earnings came in at 67 cents a share, and compared with a profit of $1.8 billion, or 64 cents a share, a year earlier. Analysts surveyed by Thomson Financial expected profit of 64 cents a share.

Sales grew 5.4 percent, to $19 billion from $18.1 billion.

Like its peers, SBC Communications and BellSouth, Verizon has been losing local phone customers. But it has been making up the difference by selling its other customers more long distance services, high-speed data transmission and now television, which has been introduced in some markets in Texas.

The cellphone division, Verizon Wireless, is also the strongest in the industry. Sales at Verizon Wireless, which added 1.9 million customers in the quarter, rose 14 percent, to $8.4 billion. Customers at Verizon Wireless, which is jointly owned by the Vodafone Group, used more data services with their cellphones in the quarter.

Revenue from data services now makes up 8.4 percent of sales thanks to the introduction of networks that allow for faster connection speeds. The company said customers had been sending more text messages and pictures and downloading more games and ring tones.

Even so, the average amount that customers spend a month dipped 2.8 percent from the third quarter last year, to $50.13.

The strong performance at Verizon Wireless continues to ignite speculation that Verizon will buy out its partner, Vodafone. When asked by investors on a conference call when that might happen, Verizon's chairman, Ivan Seidenberg, said that he was interested in expanding fast- growing businesses, whether they were wireless or otherwise.

Verizon expects to spend $2 billion over three years to integrate its businesses with MCI, and another $1.5 billion to $2 billion on capital investments related to MCI. Verizon said it planned to reduce the number of workers at MCI by 7,000 as well.

Verizon's shares rose 17 cents, to $30.76 yesterday.
http://www.nytimes.com/2005/10/28/te...28verizon.html





High Court Won't Hear Wireless Radiation Appeal
Jeremy Pelofsky

Class-action lawsuits against wireless telephone providers and manufacturers over radiation emissions will be able to go forward, after the U.S. Supreme Court on Monday declined to hear an appeal by the companies.

The high court rejected hearing an appeal by companies like Nokia and Cingular Wireless challenging a decision by a U.S. appeals court that reinstated the lawsuits that argued manufacturers knew about and hid the risks of radiation emissions wireless phones posed to users.

Wireless phones are radios that emit frequency radiation and in the United States the Federal Communications Commission must approve any device that sends out such radiation.

Exposure to high levels of radiation can cause adverse health effects, but it is less clear the impact on a wireless phone user who is exposed to low levels of radiation when a phone is held to an ear directly.

Health advocates have expressed concerns about radiation causing problems ranging from headaches to tumors. But the wireless industry has pointed to U.S. government statements that scientific evidence so far has not shown any health problems associated with wireless phone use.

Five class-action lawsuits were filed in state courts seeking damages, including money for wireless users to buy a headset or reimburse those who had already had purchased one.

A U.S. district court judge dismissed the five lawsuits on the grounds that state regulation of wireless phone emissions was preempted by the FCC, but the U.S. Court of Appeals for the 4th Circuit overturned that decision and reinstated the cases.

"The court was satisfied that the issues had been treated responsibly by the Fourth Circuit," said Harley Thomas Howell, a lawyer at Howell & Gately who represents those who sued the manufacturers.

Nokia spokeswoman Arja Suominen said the company was disappointed by the decision, but declined further comment. Cingular, the largest U.S. wireless carrier, declined to comment.

The wireless industry is worried about being required to adhere to numerous different emissions requirements imposed by states, something the service providers and manufacturers argue would wreak havoc on the industry and consumers.

"This court's intervention is necessary to prevent the balkanization of network standards ... which will, if uncorrected, undermine the ability of consumers to use an FCC-approved wireless telephone in every state of the union," they said in their appeal to the court.

Other companies that joined in the appeal include Motorola Inc. and Qualcomm Inc. Cingular Wireless is a joint venture of BellSouth Corp. and SBC Communications Inc.

As a result of the top court's action, one lawsuit will go forward in federal court while the four other lawsuits will advance in state court.

Nokia shares closed up 53 cents, or 3.25 percent, to $16.82 on the New York Stock Exchange.
http://today.reuters.com/news/newsAr...T-WIRELESS.xml





Dell Cuts Third-Quarter Forecasts
Philipp Gollner

Dell Inc., the world's biggest personal computer maker, posted preliminary third-quarter earnings below expectations amid weaker sales to U.S. consumers and in Britain.

Dell, whose shares fell as much as 5.1 percent in after-hours trade, also said it would take charges of about $450 million in the third quarter for costs of repairing some computer systems for customers, cutting jobs and restructuring units.

The company in August missed analysts' second-quarter revenue growth forecasts because it lowered prices aggressively on its entry-level U.S. personal computers.

Dell, based in Round Rock, Texas, said it expects fiscal third-quarter profit per share of 39 cents before one-time items, missing analysts' average estimate of 40 cents per share, according to Reuters Estimates.

The $450 million charge cuts net income by a further 14 cents per share to 25 cents.

The company said it expects to report revenue of $13.9 billion, below its earlier forecast of $14.1 billion to $14.5 billion and analysts' $14.3 billion estimate. U.S. consumer and British unit sales "fell short of expectations," Dell said.

"They were seeing some weakness in desktop and strength in notebooks, but not enough to offset the weakness in desktop," analyst Shaw Wu of American Technology Research said after Dell's announcement. "Dell's problem is that it's not differentiated enough" from competitors.

Dell had earlier forecast third-quarter earnings per share of 39 cents to 41 cents before items.

Shares of Dell were down 3.8 percent at $30.67 in extended trade on Inet. They have slumped 24 percent in the past three months on concern over its U.S. personal computer business. The stock has underperformed the Nasdaq composite index by 20 percent in that period.

The company said $300 million of the charge was due to repairing systems that included a part from a vendor that did not perform to Dell's specifications.

The problem affects "a small percentage" of older OptiPlex desktop systems used by businesses, Dell said. Charges also cover the costs to cut an unspecified number of jobs in Texas and the U.K., spokesman Jess Blackburn said by phone. A "very limited" number of jobs were cut in the Asia-Pacific region, he said.

"It's a very small percentage of our overall workforce that was impacted," Blackburn said, adding that the cuts were made last week.

The technical problem involves potentially faulty capacitors on Dell's GX270 and GX280 desktops used by business customers, Blackburn said. He declined to name the company that supplied the capacitors, which are on the computers' motherboards, the chassis on which computer components are assembled. No recall has been announced, he said.

"The cost is associated with the labor to do the field work" to replace the motherboards, he said. "There's no safety risk, no data loss, but there's frustration that the system may not power up."

The head of U.S. consumer business, Michael George, also is leaving the company to become chief executive of Liberty Media Corp.'s QVC Inc. unit, Liberty Media announced on Friday.

(Additional reporting by Duncan Martell in San Francisco)
http://today.reuters.com/news/newsAr...LL-OUTLOOK.xml





Microsoft Acquires File-Sharing Service
Antone Gonsalves

Microsoft Corp. on Thursday said it has acquired file-sharing service FolderShare, a move that's part of the software giant's recently announced strategy of making its products available as Web services. Financials details were not disclosed.

FolderShare, owned by Austin, Texas-based, ByteTaxi Inc., allows subscribers to create a private peer-to-peer network to synchronize files across multiple devices and access or share files with other people. The service, which is available at no charge and requires a software download, is marketed as an easier way to share files than through email, uploading to a Web site or burning them to CDs or DVDs.

On Tuesday, Microsoft chairman Bill Gates told a San Francisco news conference that the company was developing a new wave of "live software" that would be available over the Web as a service. Microsoft is betting that it can make money by offering software supported by advertising instead of licensing. The company would continue to also sell packaged software.

Microsoft is feeling the pressure from growing companies that are offering software as a service, like Google Inc. and Yahoo Inc. on the consumer side, and Salesforce.com and NetSuite Inc. on the business side. The software giant's first products under its new strategy include Windows Live, which is being tested and would include FolderShare.

Windows Live combines a portal that features search, email, instant messaging, online maps and Internet telephone with other applications. In announcing the service, Gates said it would automatically update files and preferences across any number of devices users chose to use for access.

“I’m thrilled with the acquisition of FolderShare and the opportunity to offer this technology with Windows Live software and services," Blake Irving, corporate vice president of the MSN Communication Services and Member Platform group at Microsoft, said in a statement. "FolderShare technology will help customers access their information anytime, anywhere and on multiple devices, unifying their overall experience.”

Microsoft planned to continue operating FolderShare for new and current subscribers.

The acquisition was the second announced on Thursday. The Redmond, Wash., software maker said it had acquired Switzerland-based Media-streams.com AG, which builds Internet telephony applications that integrate with Microsoft's Outlook and Exchange email software.
http://www.techweb.com/wire/software/173402814





Microsoft Says Profit Rose 24%
John Markoff

Microsoft rode a wave of global strength in the personal computer market to report growth in profit and sales in the first quarter of its 2006 fiscal year, slightly exceeding analysts' expectations.

Microsoft, the world's largest software publisher, said Thursday that quarterly revenue was $9.74 billion, 6 percent higher than $9.19 billion in the quarter last year. Earnings rose 24 percent, to $3.14 billion, or 29 cents a share, from $2.53 billion, or 23 cents a share, a year earlier.

The results in the most recent quarter, which ended Sept. 30, included a charge of 2 cents a share stemming from the antitrust settlement that the company reached with a rival, RealNetworks. The year-earlier quarter included a charge of 3 cents a share as a result of an antitrust settlement with Novell Inc.

Excluding the charge, Wall Street analysts had expected the company to earn 30 cents on revenue of $9.78 billion, according to Thomson Financial.

Despite Microsoft's continued strong financial performance, the stock has remained largely stalled over the last four years. On Thursday the shares declined 26 cents, to $24.85, in Nasdaq trading, and in after-hours trading, after the results were released, they fell further.

Several analysts said a 17 percent increase in global shipments of personal computers for the September quarter, which was reported recently by the International Data Corporation, was a crucial factor in Microsoft's growth. Microsoft said it expected revenue growth of 10 to 12 percent for the full year.

"I think we're going to see very strong reports for both Dell and H.P.," said Mark Stahlman, a financial analyst at Caris & Company in New York. "All the evidence suggests that PC's, including servers, are selling surprisingly well."

Despite its strengths, Microsoft issued its typically cautious forecasts that were below analysts' expectations for the current quarter. The company forecast earnings per share of 32 to 33 cents a share on revenue of $11.9 billion to $12 billion; analysts had forecast earnings of 35 cents a share on revenue of $12.29 billion.

While the company's traditional businesses - like its Windows desktop and its server and Office business - continued to show strength, Microsoft again lost money in new businesses like home and entertainment, mobile and embedded devices, and business solutions, which aims at small businesses.

Although its mobile software business showed a loss, revenue in the segment increased to $75 million from $49 million.

The company said that its brightest segment continued to be its server and tools business aimed at corporate customers, which grew 12.8 percent in the quarter.

The desktop Windows business grew 7 percent. Including the Office business, the three core businesses grew by an average of 8 percent in the quarter.

The gap between the industry's 17 percent growth and the smaller growth of the desktop Windows business caused several analysts to speculate that Microsoft might have experienced some erosion of market share in the quarter.

"I wonder if it isn't the impact of Apple and other players," said Brendan Barnicle, a financial analyst at Pacific Crest Securities in Portland, Ore.

Microsoft's executives pointed to a significant new product pipeline that the company believes will expand its business both in the second quarter and in 2007.

"Over all, it was a good quarter," said Chris Lidell, Microsoft's chief financial officer. "There is clearly a big product pipeline coming up."

He pointed to the xBox 360 game player and to the new version of the SQL Server database program and the Visual Studio software development system, available in November, as well as the desktop operating system, Windows Vista and Office 12, which will be available next year. The company said it expected to sell 4.5 million to 5.5 million xBox game consoles in the first year.

But Mr. Lidell said that he did not expect early profits in the home and entertainment business. Analysts said the company was investing heavily in the introduction of a new system, which is coming before a similar next-generation system from the Sony Corporation.

The home and entertainment business declined steeply from a year ago, however. Mr. Lidell said that was to be expected as consumers waited for the next-generation xBox introduction, which is planned for Nov. 22.

Revenue in the closely watched MSN business, which includes its advertising-based search service, declined to $564 million from $588 million during the last two quarters.

Several analysts on the company's financial earnings conference call pointed to the decline in light of strong earnings and revenue growth shown by its two principal search competitors, Google and Yahoo. Mr. Lidell said the company was counting on new advertising recruitment technology to bolster the declining search business.

Microsoft, based in Redmond, Wash., also said that it intended to accelerate its stock buyback program, repurchasing an additional $19 billion worth of shares no later than December 2006.
http://www.nytimes.com/2005/10/28/te...gy/28soft.html





LG Abandons Tube TVs in Europe
Lucas van Grinsven

LG Electronics, South Korean maker of products from fridges to cell phones, said on Friday it had almost completely stopped selling tube TVs in the European market as it bets the future on thin televisions.

The firm is currently selling its remaining stock. In the future, it will restrict itself to the top end of the market for cathode ray tube (CRT) TVs, such as a new range of ultra-slim CRT TVs built with thinner glass tubes, LG Electronics' European chief James Kim told Reuters in an interview.

"We will sell those at a 15 to 20 percent premium. But otherwise we have said, 'As an early innovator, let's forget CRT. We don't sell CRTs anymore'," Kim said.

LG's main supplier of glass tubes, LG.Philips Displays, could not immediately specify the consequences for its two remaining production sites in France and the Czech Republic, but the 50-50 joint venture LG has with Philips Electronics is preparing another restructuring because of falling demand.

"The market is much weaker than we estimated earlier this year. We cannot avoid more restructuring to bring capacity in line with lower demand," a spokesman said.

Market researchers estimate that demand for CRT TVs in Europe will drop around 20 percent this year, more than twice the decline that LG Electronics forecast at the beginning of the year, as consumers switch their preferences to liquid crystal display and plasma screen TVs.

"By the fourth quarter, CRT TVs will still be 73 percent of the volume of the TV market but less than half of the value," said analyst Bob Raikes at Britain-based market researcher Meko.

The biggest reason for the market decline is that retailers are not interested in tube TVs, except for the very basic and cheap models that do not take up much shop floor space.

"There's no premium market left for CRT. It's all about cost," Raikes said.

Become No 2 Or 3

LG's move to abandon the CRT market is part of its strategy to focus on premium, higher-priced products in mobile phones, TVs, fridges and washing machines in an attempt to boost its ranking from fourth or fifth biggest in the European market to second or third.

If premium products generate around 30 percent of sales in the consumer electronics market, Kim said, LG's aim is to be above that mark with closet-sized fridges with integrated TVs, steam washing machines and 3G cell phones shaped like racing cars that can analyze your breath after a few alcoholic drinks.

In 2004, Kim's first year in Europe, sales more than doubled to 3,847 billion won from 1,788 billion in 2003, helped by an aggressive push into the European mobile handset market. First- half 2005 European sales of the world's No. 4 mobile phone maker were up 17 percent at 1,950 billion won.

This fourth quarter it will, for the first time, launch cell phones that will be sold through independent retail outlets, rather than through telecoms carriers deals.

Only by testing consumer preferences in this retail market can LG continue to gain market share, said Kim, who ran the firm's global cell phone business before he came to Europe.

LG's market share gains slowed in recent quarters after years of 60 percent annual growth. It needs to grab at least 10 percent of the global cell phone market, versus its current 7.4 percent, if it wants to survive and deliver healthy profits, Kim added.

Unlike Europe's top consumer electronics maker Philips, LG is still investing in its own production facilities. LG is in talks to open a second plant in Poland that will employ up to 3,000 staff and may involve $100 million of investments.

If discussions with Polish authorities are concluded successfully, the plant where LG plans to assemble 3.5 million flat-screen televisions and 500,000 refrigerators every year will be based near the university town of Wroclaw.

LG Electronics earlier this month started production at a new TV and monitors plant in the Polish town of Mlawa, but LG expects demand to rise so fast that it will need to expand capacity.
http://today.reuters.com/news/newsAr...archived=False





Apple Sells A Million Videos In New Service

Apple Computer on Monday said its iTunes online service has sold a million videos in under 20 days, sending shares up almost 5 percent.

iTunes, the most popular online music store, began selling about 2,000 music videos and episodes of ABC's "Desperate Housewives" and "Lost" for $1.99 (1.12 pounds) on October 12.

The debut coincided with the launch of a new generation of Apple's iPod digital music player that can play video on its 2.5-inch color screen.

Technology, media and Wall Street analysts are eyeing Apple's performance for validation that a market for legal downloading of videos exists.

Topping the list of big sellers were music videos by Michael Jackson, Fatboy Slim and Kanye West, as well as episodes of ABC shows.

"Selling one million videos in less than 20 days strongly suggests there is a market for legal downloads," Steve Jobs, Apple CEO, said in a statement. "Our next challenge is to broaden our content offerings."

At the service's launch, Walt Disney's ABC was the only nonmusic programming provider aside from Jobs' Pixar Animation Studios, which is also providing short films for the service.

Sources have said Apple is in discussions to lure more U.S. television networks to provide programming.

Apple shares gained $2.63, or 4.8 percent, to $57.10; Shares of RealNetworks, which operates a rival online music service, gained 37 cents, or 4.9 percent to $7.87 on the Nasdaq in afternoon trade.
http://today.reuters.com/news/newsAr...EDIA-APPLE.xml





Napster for Almost Nothing

The digital music specialist posts a narrower loss than expected, but it's still a loss.
Rick Aristotle Munarriz

Remember when music fans associated Napster(Nasdaq: NAPS) with getting the latest digital tunes for free? The rebellious peer-to-peer network peaked with tens of millions of users swapping MP3 tracks before the crunch of legal liability had Shawn Fanning's file-sharing revolution cashing out at the hands of a major label.

No, you can't get free tunes on Napster anymore. It's in its third incarnation, existing now as a fast- growing subscription service for paying -- yes, paying -- members. However, shareholders can get pretty close to living in those early freeloading ways. That's because the stock, trading for less than $4 a stub these days, has a balance sheet blessed with $2.96 per share in cash and a small stake in Sonic Solutions(Nasdaq: SNIC).

Unfortunately, though, there is no free lunch. Napster's balance sheet was packing $3.90 per share in greenery at this time last year. And mounting losses as the company continues to nurture its pay-for-music service may keep the dowry dwindling until the company joins its peers in profitability.

Yes, online music rivals like RealNetworks(Nasdaq: RNWK) and Apple Computer(Nasdaq: AAPL) are in the black. Other companies doling out digital downloads, such as Microsoft and Yahoo!(Nasdaq: YHOO) have rich enough margins in their bread-and-butter businesses to keep the digital music party going for as long as they want.

Will Napster turn the corner before its sugar daddy of a balance sheet runs dry? That remains to be seen. Yesterday, Napster posted a hearty 151% spike in fiscal second-quarter revenues. The company did post a loss for the period, but it should be noted that it was a narrower loss (both sequentially and year over year), and the results came in well ahead of the market's grim expectations.

You have to like many of the deals that the company has been brokering lately. Napster has partnered with everyone from BellSouth(NYSE: BLS) to XM Satellite Radio(Nasdaq: XMSR) to college campuses to grow its reach beyond the obvious outlets. Now if only the company could either wind its way toward becoming a free cash flow entity -- or at least spend its money smarter so its balance sheet isn't left hemorrhaging. If it could do that, it would be music to even a value investor's ears.
http://msnbc.msn.com/id/9911454

[JackSpratts]

The World According to Hollywood

Pushing the reality envelope.
Edward Jay Epstein

On Sept. 4, 2005, the New York Times printed the following intriguing correction:

An article last Sunday about film piracy included incorrect revenue data supplied by the Motion Picture Association of America. Hollywood's global revenue in 2004 was $44.8 billion, not $84 billion. Of the total, $21 billion, not $55.6 billion, came from sales of DVDs and Videos.

The correction was the result of a Times reporter, Timothy L. O'Brien, asking the Motion Picture Association of America to furnish the combined global take of the major studios in 2004. The six major studios submit their revenue reports to the MPAA, which, in turn, compiles the total revenue received from theatrical distribution, video sales (now mainly DVD), and television licensing. These data are then circulated among top executives in the All Media Revenue Report. (Click here to read the actual report.)

Instead of supplying the New York Times with the actual numbers, the MPAA sent bogus figures. Hollywood's DVD revenue alone was inflated by more than $33 billion, possibly to make the MPAA's war against unauthorized copying appear more urgent. Of course, the reporter had no way of knowing these impressive-sounding numbers were inaccurate and published them in an otherwise accurate story on film piracy. Such are the perils of Hollywood reporting. Since Hollywood is an industry dedicated to perpetrating illusion, its leaders often assume they have license to take liberties with the factual elements that support the movies they make. This practice is euphemistically described by marketing executives as "pushing the reality envelope."

The way in which Hollywood crosses the boundary between the make- believe and the real world takes myriad forms. Consider, for example, 20th Century Fox's creation of an "Extraterrestrial Highway" in Nevada. In 1996, in preparation for a publicity campaign for the movie Independence Day, Fox executives persuaded Nevada Gov. Bob Miller to officially dedicate Nevada's Highway 375 as a safe haven for extraterrestrials who landed their spaceships on it. Fox then placed a beacon on the highway near the town of Rachel, Nev., pointing to "Area 51"—which it described in a news release as the place where the U.S. military operates "a top secret alien study project." To make sure that the story received wider circulation than just Fox News, the studio arranged for busloads of reporters to see the putative periphery of "Area 51." Even though there is no such military base or "Area 51," the "Extraterrestrial Highway" resulted in hundreds of news stories about alien visitors. Not only did this help publicize Independence Day, but it fed into the long-standing paranoid fantasy about government machination to conceal space invaders from the public. (A fantasy that Steven Spielberg, for one, has brilliantly mined in such films as Close Encounters of the Third Kind, E.T.: the Extra-Terrestrial, Men in Black, and the miniseries Taken.)

Hollywood has pushed the reality envelope in other creative fashions, ranging from a studio creating a fake corporate Web site, as Paramount did with the Manchurian Global Corporation for its remake of The Manchurian Candidate, to counterfeiting a film critic, as Sony Pictures did with the nonexistent "David Manning." It's a given that studios will alter the off-screen lives of stars, as in the case of the unmarried actor Raymond Burr, whose official biography included two imaginary dead wives and a dead child. There's also the common practice of scripting fake anecdotes for stars to recite on talk shows, as, for example, Lucy Liu's vivid description of her co-actress Drew Barrymore clinging to the hood of a speeding car going about 35 miles an hour without a safety cord during the making of Charlie's Angels: Full Throttle.

Nor is it surprising that the culture of deception is so deeply entrenched in Hollywood. The industry, after all, derives much of its wealth and power from its ability to get audiences to suspend disbelief in movies and television programs—even so-called reality shows. Further, to realize full profitability, these illusions must be convincing enough to be sustained in other products—such as videos, theme-park rides, games, and toys—for years, if not decades. So, pushing the reality envelope is simply seen by the entertainment press and the players themselves as just part of show biz.
http://www.slate.com/id/2129112/





Now Playing: Your Home Video
Scott Kirsner

Captain Jack is an atypical movie star. A blind Chihuahua rescued from a shelter, he does not have a B-list celebrity owner or a craving for tacos. And he can be a bit cantankerous, according to his companion, Deborah Tallent. "He didn't like me at first, until I gave him a piece of chicken," she said.

But on the Internet, Jack is one well-known dog, the star of a minor motion picture called "Capt. Jack: The Movie." It's available on ClipShack, one of a new generation of video-sharing sites that offer camcorder Coppolas and cellphone Scorceses a place to upload videos and make them available to friends, family members and the world at large.

Users of the sites, like Ms. Tallent, say that they offer a simpler alternative to sending large video files by e-mail, burning them onto a DVD or posting them on a personal Web site. And, if users opt to make their videos publicly available, they can be viewed - and commented on - by a wider audience.

The entrepreneurs who have started companies like ClipShack, Vimeo, YouTube and Blip.tv are betting that as consumers discover the video abilities built into their cellphones and digital still cameras, and get better at editing the often-lengthy video from their camcorders, they will be eager to share video on the Web. While most of the services are free today, the entrepreneurs eventually hope to make money by selling ads or charging fees for premium levels of service.

Sharing video on the Web is still a new notion. "A lot of people haven't really come to terms with the idea that they can publish their own video online," said Jakob Lodwick, the founder of Vimeo, based in Manhattan. "For the longest time, video has always been connected to a physical tape or a disc. There are still a lot of people who aren't even comfortable sharing their photos online yet."

But many early users of video-sharing services have encountered frustrations with other means of distribution. Ms. Tallent, who lives in Marina del Rey, Calif., said she had tried posting videos directly on her personal Web site, but that was cumbersome, and she ran afoul of her Internet provider's limits on file size.

Paul Krikler, who works for an investment bank in Manhattan, got tired of creating DVD's for his family members so they could enjoy videos of Mr. Krikler's 10-month-old son, Benjamin, chortling at the camera or being fed.

"Making DVD's would've been a less frequent process," Mr. Krikler said. Using ClipShack, "I can put up a couple new clips on a Saturday or Sunday every week, and people can go in and see new clips on a Monday."

Mr. Krikler chooses to allow only his circle of friends and family to view his videos, and says there are about 50 people in that group, including one friend in Australia. He shoots the videos using a digital camera from Canon that is designed mainly to take still pictures, and sends the videos to ClipShack.

Users of the services can upload cinéma vérité directly from the camera, or painstakingly edit the videos using software like iMovie from Apple or Windows Movie Maker from Microsoft. Some services, like Phanfare, charge a monthly fee, and most, with the exception of Google Video, limit the size of videos.

BLIP.TV Service for users who want to integrate video clips into their blogs. www.blip.tv

CLIPSHACK Basic, simple user interface. Limit of 50 megabytes of storage. www.clipshack.com

GOOGLE VIDEO Accepts clips of unlimited length and makes them searchable. video.google.com

OURMEDIA.ORG Stores videos in the Internet Archive, which is intended to be a permanent online trove. www.ourmedia.org

PHANFARE $6.95 monthly fee covers unlimited video posting, but individual videos may not exceed 10 megabytes. www.phanfare.com

VIMEO Circles of friends and family members can easily keep up with and comment on one another's clips. www.vimeo.com

YOUTUBE Site keeps track of most-viewed, most-discussed and best-rated videos; organizes similar clips into "channels," like sports or humor. www.youtube.com

None of the sites should be considered a reliable sole archive for personal video, however, since many do not allow users to download their original file once it has been uploaded. And there is always the possibility that a site may vanish overnight.

At least two sites, Blip.tv and OurMedia.org, promise more permanence by uploading a copy of each video submitted to the Internet Archive, which is run by a San Francisco nonprofit organization whose mission is long-term preservation of digital material.

Graham Walker, who posts his travel videos to OurMedia.org, views that as a benefit. Some of his videos made during a trip to Tibet capture the changes in that country as China exerts a greater impact on its culture. "With your video in the Internet Archive, you feel that you're leaving something for the future," said Mr. Walker, a video producer who lives in Prague.

"Of course, some people may not want that," he added. "Do you really want your new girlfriend to find all the videos you made when you were with your old girlfriend?"

Some video sharers simply want to make their latest clips accessible to a defined group of family members and friends, but others relish making their work public and the serendipity of allowing those who come across it to share their reactions. (Some enjoy both aspects of the services.) Vimeo can even send a user an e-mail or text message when someone else has posted a new comment about his video.

One of Andrew Long's videos on that site, "sugar rush," has been viewed nearly 2,500 times and has inspired 21 comments. (A typical one: "the first few seconds were the awesomest.") It features a friend of Mr. Long's stuffing blue cotton candy into her mouth on a visit to Coney Island. Mr. Long appreciates the social aspect of publishing his video on Vimeo. "I like being able to see what my friends shoot, and comment on it, and have them comment on my stuff," he said. "It's really gratifying."

Since many of the video-sharing sites have not yet established their business models, some users worry what will happen if their favorite site starts charging, or begins placing ads on its pages before the videos themselves. "I'm not against having a commercial on my video," says Schlomo Rabinowitz, a San Francisco bar owner who posts videos using Blip.tv. "But I'm against having just any commercial on it. I would want to have a say, and get some of the money." One of his recent videos chronicles a trip by private plane to a restaurant in Coalinga, Calif., to a try steak house that raises and slaughters its own beef.

None of the major photo-sharing sites, like Snapfish and the Kodak EasyShare Gallery, permit users to upload videos. "Too bad for them," said Cynthia Francis, a founder of ClipShack. Her site allows users to upload either type of media, and Mr. Krikler, a ClipShack user who had been using Snapfish for his still photos, plans to start using ClipShack for both photos and video soon.

Some believe that the video-sharing moment has not yet arrived. Jeff Hastings, general manager of Pinnacle Systems, which makes video-editing software for PC users, says his company's internal research shows that most mainstream users still prefer to save their videos on DVD's. While an earlier version of Pinnacle's Studio software had a feature that allowed users to upload finished videos to a Web site run by the company, that video-sharing feature has vanished from the latest version, Studio 10.

Others, though, are already looking ahead to the next wave of enhancements to online video-sharing sites. One possibility is allowing a user to weave together snippets of video taken at the same event by different people, producing a "master" version of homecoming weekend, for instance. Another idea is creating a queue of interesting video clips that can be watched on a television, said Ms. Francis, perhaps on a TiVo-like set-top box.

The future may also hold a sequel to "Capt. Jack: The Movie," which has been viewed 41 times so far on ClipShack. "He's doing great," Ms. Tallent said of her dog. "He has become somewhat of a local celebrity." Next time around, though, the Captain may demand his own trailer and a share of box-office revenues.
http://www.nytimes.com/2005/10/27/te...iLs4AzUPhp1ucg





A Big Gorilla Weighs In



Sharon Waxman

In hiring Peter Jackson, the Oscar-winning director of the "Lord of the Rings" trilogy, to remake the monster classic "King Kong," Universal Pictures took a daring leap, paying him $20 million to direct, produce and be the co-writer of the film.

With seven weeks to go before the movie's release, the risks are becoming clearer. After seeing a version of the film in late September at Mr. Jackson's studio in New Zealand, Universal executives agreed to release "King Kong" at a length of three hours.

The film is substantially longer than Universal had anticipated and presents dual obstacles: the extra length has helped increase the budget by a third, to $207 million, while requiring the studio, owned by General Electric, to reach for the kind of long-term audience interest that made hits out of three-hour movies like "Titanic" and the films in Mr. Jackson's "Rings" trilogy.

Hollywood blockbusters have increasingly relied on big releases that bring in as much as half of their ticket sales on the first weekend. But long films receive far fewer showings per day, and the most successful ones, like "Lord of the Rings: The Fellowship of the Ring" (2001) by Mr. Jackson, which took in $315 million at the domestic box office for New Line Cinema, have remained in theaters for well over half a year.

The film industry and Universal could use a big seller.

Hollywood has been struggling this year at the box office, with overall revenue down more than half a billion dollars, about 8 percent, from last year's total, according to Box Office Mojo, an online tracking service. Industry experts attribute the decline to a migration of audiences to other forms of electronic entertainment, whether television, DVD's, video games or the Internet. Universal has had a mediocre year at the box office. The studio had a hit in the summer with the comedy "The 40-Year-Old Virgin," but has endured disappointments, like the drama "Cinderella Man," and has had lackluster results with films like "The Perfect Man," "Kicking and Screaming" and "Doom," which opened last week to a tepid $15 million.

Asked about the length of "King Kong," Universal executives said they saw it as an advantage in an era when jaded moviegoers are hungering for something extraordinary.

"This is a three-hour feast of an event," said Marc Shmuger, vice chairman of Universal Pictures, who described the film as a tragic love story between the ape and Naomi Watts, who plays Ann Darrow, an actress. "I've never come close to seeing an artist working at this level."

Set for release on Dec. 14, "King Kong" retells the classic beauty-and-the-beast tale first filmed in 1933, with its lasting image of Kong atop the Empire State Building, and remade in 1976. Along with Ms. Watts, it stars Jack Black, Adrien Brody and a 25-foot, computer-animated gorilla.

This time around, the picture depends upon another oversize talent in the person of Mr. Jackson, who was granted an unusual degree of control at a time when studios are trimming costs and tightening their grips on most productions. Not only did Mr. Jackson produce and direct, and also write with his longtime partner, Fran Walsh, and Philippa Boyens, but his companies Weta Digital and Weta Workshop also created the physical and computer special effects in the film at Mr. Jackson's studio in New Zealand.

Twentieth Century Fox and Paramount took a risk in granting the director James Cameron a similar degree of control over his famously overbudget 1997 film "Titanic," and eventually came up winners. In that case, Mr. Cameron's three-hour epic, a love story set in the midst of the ship's sinking, went on to break box-office records and win 11 Oscars. With "King Kong," Universal executives say they are convinced that they have an epic of comparable worth, even though they were surprised by the length.

"I anticipated it would be long, but not this long," the Universal chairwoman, Stacey Snider, said. As recently as late September, she expected about two hours and 40 minutes, she said. But on Wednesday she expressed delight with the picture she's got: "This is a masterpiece. I can't wait to unveil it."

The increased length, Ms. Snider said, means that the movie will cost $32 million more than planned, adding to expenses that had already gone up $25 million from an original $150 million production budget.

Who will pay for these budget overruns has been the subject of intense negotiations over the last two weeks, with representatives of the studio and the director haggling over who was responsible, according to those involved in the negotiations.

Ms. Snider said that as of Wednesday, all had been resolved, with the studio more or less splitting the $32 million expense with Mr. Jackson.

In an e-mail message, Mr. Jackson appeared to disagree, saying instead that he would be paying for those expenditures, which were mainly associated with extra digital-effects shots. Referring to his partner, Ms. Walsh, Mr. Jackson wrote: "Since Fran and I believed in the three-hour cut and wanted to take responsibility for the extra length, we offered to pay for these extra shots ourselves. That's what we're doing." He did not say how much that would be, but said the extra effects shot would cost "considerably below $32 million."

A spokesman for Universal responded, "We are working together to cover overages."

In granting Mr. Jackson immense latitude, Universal relied not just on his skills, but also a huge fan base, much of which has followed the production through the director's frequent communications on a Web site, www.kongisking.net.

But few elements of the film have been seen by the larger public, and even Universal executives saw a finished version of King Kong's face - with its expressive eyes, broadly fierce nose and mane of computer-generated hair - only in recent days.

Universal lost an opportunity to capitalize on a "Kong" revenue stream when an anticipated deal to release the film on Imax screens in December, at the same time the movie would appear in regular theaters, failed to materialize, and Imax chose to show Warner Brothers' new "Harry Potter" film, "Harry Potter and the Goblet of Fire."

"We think 'King Kong' will be a big movie," Richard L. Gelfond, co-chairman of Imax, said, "but unfortunately we could not agree on deal terms, including the box-office split."

Ms. Snider said Imax could not guarantee space in its theaters at the time of Kong's release, and acknowledged that both the studio and Mr. Jackson were disappointed.

A spokeswoman for NBC Universal said Bob Wright, the chairman, has been told of the rising cost and length of "King Kong." "Bob is more than aware of what is going on with this production and other major productions, and he has enormous confidence in the leadership team at Universal Studios," said the spokeswoman, Anna Perez.

Ms. Snider said she did not think the three-hour length would be an obstacle for moviegoers. Three-hour epics, she said, are Mr. Jackson's "brand."

Exhibitors have long complained that very long films make it harder to draw audiences, though in this difficult year at the box office, they have complained louder about not having enough good films to show. Paul Dergarabedian, president of Exhibitor Relations, which tracks the box office for theater owners, agreed that long movies posed problems. "But if it's a really fine film, it won't be a detriment to its success," he said.
http://www.nytimes.com/2005/10/27/mo...ilm.html?8hpib





Digital Revolution Set To Sweep India's Bollywood
Narayanan Madhavan

Digital cinema is about to take off in India, home of the world's most prolific film industry, but not without some twists and turns worthy of a "Bollywood" melodrama.

In the United States, a digital roll-out has stalled while Hollywood studios and theater owners fight over who pays for top-quality computer-based projection systems that cost $80,000 to $100,000 per screen.

But in the Mumbai-based film industry known as Bollywood, entrepreneurs are willing to settle for a bit less quality at one-third the cost. They use cheap digital cinema in remote towns to cash in on blockbusters -- and in the process, beat back video pirates, too.

"Piracy can be completely prevented when the entire industry goes digital," said Senthil Kumar of RealImage Media Technologies, a start-up in Chennai (Madras) that makes digital video players.

But as with mobile phones, India opts for value over top quality, a strategy that makes sense in an industry where only one in 12 movies has made a solid profit since 2001.

Industry officials say low-cost digital cinema, called "E-Cinema" in contrast to the top-quality "D-Cinema," is just what Bollywood needs. Though less than 2 percent of the country's 13,000 cinemas are digital, 2006 should see some big roll-outs in India.

"E-Cinema is what is going to be appropriate for countries like India," Kumar says.

India, led by Bollywood, produces about 1,000 films a year and Kumar calls the industry "pure Las Vegas" because producers often gamble on a single blockbuster to make up for several flops. But transporting celluloid prints to remote towns costs more and gives video pirates enough time to mint cheap copies, cutting into profits.

And that is where start up companies like RealImage come in.

Theaters On Rentals

Amit Khanna, chairman of Reliance Entertainment, an arm of India's biggest private group, Reliance, said digital cinema could help the industry make quick profits.

"The idea is saturation release. There is too much content chasing too many eyeballs," Khanna said.

While it takes around 70,000 rupees to make a celluloid print, RealImage rents out digital copies to cinema owners at less than 400 rupees.

Using inexpensive digital copies, a theater can run a movie for four weeks at less than 10 percent of the cost of a print, taking the edge off cinematic flops.

RealImage, which takes an upfront security deposit, but no equipment rentals from cinema owners, is now serving 40 screens in its home state of Tamil Nadu, and there are plans for 100 more across India by December, Kumar said.

Mumbai-based UFO Moviez, a service provider, uses satellites to download movies and last month ordered 500 projectors from U.S.-based Digital Projection International.

UFO now serves 50 cinemas and plans to reach 500 screens by March, a company official said.

Chennai-based Pyramid Saimira Theater Ltd., which uses RealImage players, is also looking to satellites. The company, which has management contracts with cinema owners, is running cheap digital movies in 28 cinemas in Tamil Nadu, and plans to have 100 by the end of November.

UFO said on its Web site that digital systems can track every playback and set an audit trail to check pirates.

Multiplex owner Adlabs Films Ltd. got into digital early with a 100-strong E-Cinema chain, but it did not do well because its single-microchip players offered lower quality. Kumar said the scene has now changed because new E-Cinema players use three microchips made by Texas Instruments Inc. that give Bollywood a better trade-off between cost and quality.

But there are still doubters.

"I don't want to be a mover or shaker in this," Shravan Shroff, managing director of multiplex owner and distributor Shringar Cinemas Ltd., which runs 22 screens.

"I would be a fence-sitter till someone else does it. I can always go and buy the technology later."
http://today.reuters.com/news/newsAr...archived=False





HK Film Circle Welcomes First Conviction Of Peer-To-Peer Infringer
Xinhua

Hong Kong film and television circles have expressed their welcome to the world first criminal conviction of a peer-to-peer infringer.

Chan Nai-ming, 38, was arrested on Jan. 12 for illegal distribution of three Hollywood movies on the Internet through BitTorrent file sharing technology.

He was found guilty of three counts of copyright infringement at Tuen Mun Magistracy on Monday.

The Hong Kong film circle believed that the conviction of the infringer may help deter the acts of copyright infringement and promote the sense of copyright among the public.

Super star Jackey Chan said one of the most important things at present is to adopt detailed regulations on punishing the copyright infringers.

Film Director Er Dongsheng said the problem was brought about by the fast development of science and technology. The illegal loading involves not only the films, but also music and other creative industries. This is a challenge that must be encountered.

Crucindo Hung, president of Federation of Motion Film Producers of Hong Kong, expressed thanks to Hong Kong Customs and Exercise Department which used "three golden hours" to ferret out the suspect.

He said Hong Kong Special Administrative Region (HKSAR) has done a good job in intellectual copyright protection since Hong Kong's return to the motherland eight years ago.

Hung said the conviction of the case set a good example for other countries and regions to follow suit, in a bid to crack down on the internet infringements. If the suspect is to be sentenced next month, it will be the best gift from the government to the film sector.

In a separate development, Hong Kong Secretary for Commerce, Industry & Technology John Tsang has warned the public not to infringe on copyrights, following the first conviction of a peer- to-peer infringer on Monday.

Tsang welcomed the verdict, adding that the posting of copyright materials on BitTorrent in Hong Kong has dropped 80 percent since Chan's arrest. He said the verdict will deter infringers, and called on the public, particularly young people, to respect intellectual property.
http://english.people.com.cn/200510/...25_216715.html





Movie Downloads Could Cost Racine Man Up To $600,000

Retiree faces suit over grandson's home computer file sharing
Bob Purvis

A Racine man who says he doesn't even like watching movies, let alone copying them off the Internet, is being sued by the film industry for copyright infringement after his 13-year-old grandson downloaded four movies on their home computer.

The Motion Picture Association of America, on behalf of three major Hollywood studios, filed a federal lawsuit Tuesday against Fred Lawrence, a 67-year- old retiree. The suit seeks as much as $600,000 in damages for downloading four movies over iMesh, an Internet file-sharing service.

The lawsuit comes after Lawrence, a former employee of Snap-on Inc. and seasonal worker for the City of Racine, refused a March offer to settle the matter by paying $4,000.

"First of all, like I say, I guess I'd have to plead being naïve about the whole thing," said Lawrence. He said his grandson, then 12, downloaded "The Incredibles," "I, Robot," "The Grudge," and "The Forgotten" in December, not knowing it was illegal.

Lawrence said his grandson downloaded the movies out of curiosity. The family already owned three of the four titles on DVD, and his grandson deleted the computer files immediately, he said.

"I personally didn't do it, and I wouldn't do it. But I don't think it was anything but an innocent mistake my grandson made," Lawrence said.

He hasn't settled because he doesn't have the money, and a lawyer said the settlement was likely a scare tactic that wouldn't result in a lawsuit. Now he doesn't know what he's going to do.

"I can see where they wouldn't want this to happen, but when you get up around $4,000 . . . I don't have that kind of money," Lawrence said. "I never was and never will be a wealthy person."

The movie industry readily concedes it won't gain public sympathy suing someone like Lawrence, but a spokesperson said that's not the point.

"We're not asking for anyone's sympathy. We are asking for people to understand the consequences of Internet piracy," said Kori Bernards, vice president of corporate communications for MPAA.

Bernards said the problem is the movies Lawrence's grandson downloaded were then available to thousands of other users on the iMesh network.

"Basically what you are doing when you use peer-to-peer software is you are offering someone else's product that they own to thousands of other people for free, and it's not fair," Bernards said. "People need to understand that when they are swapping movies online they are not anonymous, and that they will face consequences like this lawsuit."

Bernards said that illegal downloading costs the movie industry an estimated $5.4 billion a year.

The industry has filed hundreds of lawsuits against users of peer-to-peer file sharing networks, joining the music recording industry in the crackdown on such networks, said Fred von Lohmann, senior staff attorney for the Electronic Frontier Foundation, a San Francisco-based organization dedicated to protecting civil liberties on the Internet.

Most cases have been settled out of court, he said, and the ones that aren't are moving slowly through the system, where judges have been baffled with how to treat many of the lawsuits.

"Frankly, most of the reaction I have seen from the federal courts has been bewilderment. They aren't used to having hundreds of people who can't afford attorneys coming in not knowing why they are there in the first place," von Lohmann said. Lawrence's case fits the norm in many of the file-sharing suits, where companies go after the parent or grandparent paying for Internet service, although it is often a child doing the downloading.

In some instances, parents have argued they didn't do the downloading and won, only to have the industry sue the child.

"That is not a very pleasant outcome, but if you truly can't afford it, it's probably easier for your child to file for bankruptcy than for you to file for bankruptcy," von Lohmann said.

While the recording industry focuses on people who have downloaded hundreds of songs, it's not uncommon for movie studios to target people with just a few movie downloads, von Lohmann said.

"I think the attitude most of the time is, 'the odds are this wasn't your first one,' and that means sometimes they do hit someone who has downloaded very few movies," von Lohmann said.

Von Lohmann and Bernards said it is unlikely that the studios would seek the maximum penalties of up to $150,000 per movie, but that is of small consolation, said Lawrence, who hasn't even seen the movies cited in the lawsuit.

"To be honest with you, I don't even watch movies very often."
http://www.jsonline.com/news/racine/nov05/367482.asp





Peer-to-Peer Goes Legit
Niall McKay

The old-school peer-to-peer network iMesh has left the murky world of illegal file swapping behind with the launch of a new service that enables users to share up to 2 million tracks from the four major record labels.

The New York-based company is charging its 5 million users an a la carte fee of 99 cents to purchase a track, or $6.95 per month to gain unlimited access to the catalog.

On Monday, iMesh appeared to be off to a good start. It was the No. 4 most popular download on Download.com, and more than 150,000 users have downloaded it since last Tuesday. IMesh 6.0 provides users with three months free access to content. It is not available for the Mac platform.

IMesh was part of the first generation of peer-to-peer file-sharing networks along with Napster, Grokster and Kazaa. Together, these networks jump-started digital music in 1999 by enabling home users to download free (but illegal) tracks to their desktop computers. While other peer-to-peer companies fought and lost a landmark 2004 copyright-infringement lawsuit against the music industry, iMesh settled with a $4.1 million payment and continued to trade.

Now the company has built Microsoft Digital Rights Management technology into its software, allowing users to see a complete list of tracks available on the Gnutella network. However, they can only download tracks that they are willing to pay for, or that are not copyright protected.

"We are the first true P2P company to legalize our service," said Talmon Marco, president and co-founder of iMesh. "Unlike iTunes or Rhapsody or Napster, we will also provide access to another 15 million so-called 'gray market' soundtracks free of charge."

Shabtai is referring to the 15 million or so soundtracks available on the Gnutella network whose copyright owners have either deliberately or unwittingly left them unclaimed, which allows users to legally download them. Such services are beginning to provide independent artists with alternative distribution for their work.

Still, analysts said iMesh will have its work cut out for it. Not only is it competing with more-established services like Apple Computer's iTunes, RealNetworks' Rhapsody and Napster (which is no longer a peer-to-peer service), it will also face challenges from other legal peer-to-peer music-sharing services like MashBoxx, which will be launched later this year by former Grokster President Wayne Rosso.

"From a business perspective their main challenge is to convert their installed base, which is used to downloading music for free, over to paid subscribers," said Gartner analyst Mike McGuire. He estimated digital music is one of the fastest-growing sectors on the internet, with sales projected to swell to about $1.4 billon by 2009 from just $335 million in 2004.

IMesh said in coming months it will add online community software to its services, enabling members to share (if they wish) their age, gender and lists of favorite artists.

Users will also be able to share video content. However, iMesh has inked an agreement with the Motion Picture Association of America not to distribute any video exceeding 15 minutes in length, thus guaranteeing it will not inadvertently distribute feature-length movies over the internet.
http://www.wired.com/news/digiwood/0,1412,69457,00.html





Friendster and Grouper Partnership Fuels Personal Media File Sharing
Press Release

Friendster and Grouper Networks today announced a partnership that will allow Friendster users to share unlimited personal media files with each other using Grouper's personal sharing network.

Grouper(TM), launched by the founders of Spinner (now AOL Radio), enables people to share personally-created media like video and photos to the audience of their choice -- friends, family or the general public. Users have the ability to share unlimited amounts of media because Grouper leverages a distributed computing platform. For example, you can share unlimited personal video, pictures, and stream music with your friends!

Friendster, the leading social networking site, provides users a built-in audience for their media -- millions of photos and thousands of videos are updated, viewed and forwarded on Friendster every day. The Grouper/Friendster partnership will extend this, allowing users to:

-- Share your media: Showcase your personality and get to know friends' interests by sharing your own video and photos.
-- Notify your friends: As soon as you share new video and photos let your friends know with built-in communications tools: email, IM and chat.
-- Make new friends: Attract new friends and find common interests with the Grouper Directory and Friendster Network.

"Peer-to-Peer is one of those disruptive technologies, like social networking, that just changes the game. Yesterday, the game was about sharing 10 or 20 photos. Today, it's about what you can create -- there are no limits," said Taek Kwon, CEO, Friendster. "With this partnership, Friendster has leapfrogged other social networking sites. We've shown that a social network provides a context and relevant audience for personal media that used to be hidden on photo sharing sites or personal computers. Now it's a matter of applying that context and audience to an unlimited amount of media."

"Grouper's personal media network was created to make it easy and fun for people to share the videos and photos they shoot," said Josh Felser, CEO Grouper Networks. "Enabling Friendster users to share unlimited numbers of videos and photos dramatically enhances the social networking dynamic, creating more interesting and interactive ways to connect."
http://sev.prnewswire.com/computer-e...1112005-1.html






Rip and Burn and Download on a Stereo
David Pogue

JUST because a bunch of individual ingredients are delicious doesn't mean they'll taste good when they're all cooked up together. Ask anyone who's ever sampled a 5-year-old chef's rendition of chocolate chip spaghetti with meat sauce and grape jelly.

Similarly, many an electronics company has tried and failed to slap together a decent product from buzzword-compliant components - say, iPods, wireless networks, sound systems and personal computers.

So you might not have high hopes for the Olive Symphony, a $900 hi-fi component (www.olive.us) that merges all of those technologies and more. But instead of creating a multiheaded digital Frankenstereo, the company managed to make all of those technologies and features feel natural together. The resulting box takes a long time to describe, because it does so much. But it takes surprisingly little time to master, and most of its features are usable whether you own a computer or not.

If you're looking for a one-line description, well, think of the Symphony as an iPod for your stereo. Inside is a completely silent, fanless, 80-gigabyte hard drive that stores up to 20,000 songs. (A 160-gigabyte model, the Musica, is available for $1,100. It has a fan, but you'd practically have to climb inside the thing to hear it.) The back panel has both analog and digital outputs to your sound system.

The front panel's scroll wheel and bright, monochrome screen permit quick navigation through gigantic music collections by song title, playlist, album name and so on.

Now, Olive isn't the first company to invent a stereo component with a hard drive. What makes the Symphony, which will be shipped to stores next week, so interesting is all the different ways music gets onto and off of it.

Take the built-in CD player, for example. When you slip a CD into the slot and press the glowing Play button, the music begins. The song and band names appear on the screen in huge letters, visible from across the room, courtesy of the machine's built-in two-million-album database of album and track names.

By pressing one button, you can copy the CD onto the Symphony's hard drive. The process takes about 45 seconds a song; you choose the audio format and quality setting. (You get the quoted 20,000-song capacity only with the MP3 format, which is not exactly the audiophile's dream. Choose WAV, AIFF or FLAC for better quality. These are lossless formats - meaning "adored by classical music nuts"- that fill up the hard drive much faster. The Symphony stores about 2,000 songs in FLAC format.)

And what if you have 1,200 CD's? Are you really expected to sit there, drumming your fingers, feeding the box another disc every nine minutes?

Don't be silly. Olive has made an offer you can't refuse: it will preload all of your CD's onto a new Symphony's hard drive. You just pay for one-way shipping for the discs. (This offer is good until at least Jan. 1, 2006. Even after that, the service will always be available, but it won't always be free.)

The Symphony box can also rescue your old records and tapes. If you're willing to connect your tape deck or record player to the Symphony, it can turn each song into a full-blown digital track that behaves just like the songs you've copied from a CD.

Once your music collection is safely ensconced on the Symphony, you can exile the original CD's, tapes and records to the attic. From now on, you can call up any album right on the screen. You can also mix and match tracks into playlists of your own. Better yet, the Symphony's CD player is also a CD recorder, so you can burn your music - including the tunes you've rescued from your old tapes and LP's - onto shiny new CD's.

If your head hasn't yet exploded, there's more: you can also connect an iPod or any MP3 player directly to a U.S.B. jack on the Symphony (which also recharges the player). Amazingly, the iPod's own music collection now appears on the Symphony's screen, ready for playing through your stereo system. (The Symphony does not, however, play copy-protected files, like songs from the iTunes music store.) You can also copy music from the Symphony's hard drive to the iPod, thus getting extra mileage from all the work you (or Olive) did in transferring your CD collection. That is, the Symphony box lets you load and manage an iPod even if you don't own a computer - an industry first.

In fact, the Symphony doesn't even wipe out all of the music that's already on the iPod; it's content to add, not replace. Over all, this Symphony-to-iPod copying business is a pretty slick trick. (With the new video iPod, it's a trick that needs work. In my tests, copying songs from the Symphony had the bizarre side effect of stripping away all the video from the iPod's TV shows, leaving only the audio. The company promises a fix within days.)

Even this, however, is not the end of the Symphony's résumé. It also has a wireless (Wi-Fi) network antenna, so that it can join your home network. Suddenly, there are all kinds of other possibilities.

For example, suppose you keep your music collection in iTunes (the free jukebox software) on your Mac or PC upstairs. That music library shows up on the Symphony box, ready to play on your much nicer sound system downstairs.

In fact, the same stunt works in reverse: the Symphony also shows up as an icon in the iTunes software, so that you can play its music collection on your computer. In this age of copy-protection paranoia, you just wouldn't expect to find this sort of flexibility and simplicity.

Network nerds will be even more impressed to learn that the Symphony is not just a Wi-Fi receiver; it's also a full-blown access point (wireless router) in its own right. That is, if you plug a cable or D.S.L. modem into the back panel, all wireless laptops in the house can share its fast Internet connection. Not yet wireless? Stand back: the Symphony is even a four-port Ethernet router. You can plug four computers directly into it to create a network.

What does all this mean to non-geeks? Simply that the Symphony box and your computers can play each other's music collections across a home network. You can also drag music files directly from your computer to the Symphony's hard drive. You can even use your computer's keyboard to manage song names and playlists; the Symphony's playlist-management software appears in, of all things, your Web browser.

(Olive also supplies a dedicated, more elegant playlist-management program for Mac OS X only.)

Those networking features also mean that the Symphony can be linked to the Internet, making it easy to download to the box new features and updates of CD track names on new albums.

Finally, the Internet connection also permits the Symphony to tune into Internet radio stations. Over 1,000 are listed when you open the package, organized by genre, and you can add your own.

Clearly, this is a machine with vast potential for musical pleasure - and for confusion. In general, the simple, iPoddish, drill-down-to-the-right-menu system keeps all these features easy to find. There's plenty to learn and troubleshoot, however, especially at the outset.

For example, adding this or any machine to a wireless network can be an evening-long headache, especially because you have to tap in your network password using the remote's number pad. Copying songs from a CD seems quick, but a very long period of post-processing is required before they're available for playback on your computer or copying to your iPod. And although the machine itself is sleek, black and beautiful (the more expensive Musica is silver), the remote control is a surprisingly cheesy, plastic, nonilluminated afterthought.

But Olive has big plans for its audio system. For example, in December it intends to offer a companion device called the Sonata ($200), a small, wireless receiver that hooks up to speakers or even to clock radios. You can park Sonatas in up to 20 rooms of the house; each can be playing different music from the Symphony's hard drive.

So, no, you can't mash together a bunch of trendy ingredients and expect to produce a successful dish. But a master chef can create a triumphant whole even from a disparate jumble of different ingredients - just as long as one of them is an Olive.
http://www.nytimes.com/2005/10/27/te...s/27pogue.html





A Virtual Holiday in the Virtual Sun
Mark Wallace

IMAGINE relaxing in a tiny private cove, on a lava beach near the mists of a waterfall. The sun is shining, a tropical bird cries somewhere in the distance and the cares of the working world seem a million miles away.

It's an idyllic vacation spot, but the best thing about it is that it takes less than five minutes to get there from anywhere in the world. In fact, you can reach it without ever leaving your home. That's because it exists not in any physical location but in one of the many virtual worlds that millions of people now travel to every day with the help of nothing more than a decent computer graphics card and a broadband Internet connection.

Though most of these worlds take the form of multiplayer online games like World of Warcraft or Star Wars Galaxies, a few are simply open 3-D environments whose members can get away from it all in a place filled with colorful diversions and other cyberexplorers like themselves. Even in game worlds, many players log on not to slay orcs or blow up death stars but to spend time with friends, see the sights and take a small vacation without ever stepping foot outside their door.

More than 10 million people around the world travel to such imaginary destinations regularly. They get there via software that lets them guide their onscreen representatives, known as "avatars," through places built entirely of pixels where they can interact with one another. Their destinations include virtual dance parties and nightclubs, auto races and yachting events, "Star Wars"-style cantinas, whimsical underwater jazz clubs and much more.

In a world called Second Life, especially (where the virtual Hawaii described above can be found), so many people visit that profitable businesses have sprung up that earn their proprietors real money, not just virtual currency - in fact, a handful of people earn six-figure incomes there. There are discos, casinos and other sites that can be rented for private parties or even for the virtual weddings many people hold.

"Coming to Second Life was a nice way to get away from the stresses of real life," said Amy McKenzie, a full-time mother of three in Madison, S.D., whose avatar goes by the name Diamond Hope. "But mostly it's a place I can meet my friends and just have a good time."

One California woman, whose avatar is known as SweetBrown1 Mfume, spends many of her after-work and weekend hours socializing with friends in Second Life. (Like most of the people interviewed for this article, the woman asked to be referred to only by her avatar's name. Each person's identity has been verified.) In cyberspace, she said, she can spend time with them no matter their differences in location or time zone. "We can dance, hug and kiss, all across the U.S.," she said.

Edward Castronova, associate professor of telecommunications at Indiana University, uses a game world in a similar way. He is often away from home at conferences, and from time to time will keep in touch with his wife by meeting up with her in the online game World of Warcraft. To Mr. Castronova, such worlds are more than just games. "These things are really communications devices," he said.

Entering a world like Second Life is relatively simple. Free trial memberships are available at secondlife.com. Software is downloaded over a cable modem or other broadband connection, and on first entering, new members find themselves at a place called Orientation Island.

After a few minutes spent mastering the basic techniques of movement and how to give your avatar a rudimentary makeover, you're released into the wider virtual world to explore the sights and sounds of a place that contains the virtual equivalent of 25 square miles of land and is growing every day.

PRACTICALLY everything in Second Life's world was created by its residents, who come from 80 countries around the (real) world. Linden Lab, the company that runs Second Life's world, provides a set of content-creation tools that its members have used to create everything from nightclubs and movie theaters to coffee shops and bars to airships, automobiles and clothing stores, a few museums and one or two libraries and nature preserves.

The company itself creates practically none of the buildings and other sites in Second Life, but provides only the rolling landscape on which the more ambitious of its members build.

On FairChang Island, for instance, one of the 1,000-plus "regions" of Second Life (each covering 16 virtual acres), a simple mouse-click allows members to purchase virtual sailboats that can be sailed around the waters of the virtual world. Prices start at less than a penny, and the money goes to the "resident" who created the item. Payments are made using a virtual currency called "Linden dollars" that can be bought and sold freely with real money on eBay and other sites.

In contrast to most virtual worlds, Linden Lab doesn't mind having its currency bought and sold, and even grants Second Life members ownership of the intellectual property rights to whatever they create in the world. But to create anything of permanence, members must "own" a plot of virtual land (on which they must then pay monthly fees).

A robust economy has sprung up as a result, with one of the most profitable areas being the virtual real estate business. Large tracts of land can be "purchased" at auction in Second Life, often for more than $100 an acre, then subdivided and sold at a profit.

But that doesn't make for much of a vacation. For a cheaper thrill, free balloon rides are available that take you soaring over those plots of land and the fantastic creations that occupy them. Virtual Nascar races are held several times a week on Silver Island. And there are ad hoc events and other attractions that can be located using the directory function built into the Second Life interface.

Many regions are more outlandish. The island of Montmartre, for instance, is filled with fantastical sculpture, floating bridges and platforms and playful spaces to explore. And as more people enter the world, new creations spring up (and sometimes are torn down) on a regular basis. One recent addition, Sleezywood, features trailer homes, junkyards and more than one virtual velvet Elvis.

"It's very interesting to be inside somebody else's vision of what the world should look like," Philip Rosedale, the founder and chief executive of Linden Lab, said. "Unless you're concerned with taste and smell, Second Life provides an almost perfect canvas for creating escapist environments. It's an incredible tourist destination."

For those interested in a more permanent stay, or who just want a sharper outfit for their avatar before venturing onto the virtual dance floor, there are a number of fashion boutiques scattered around the world.

"In real life, I love to shop," said a member who uses the avatar named Rynah Quinn, and who often shops at the Midnight City Mall. "Here I get the same satisfaction, but it's more fun because you can pick the colors and it will always fit."

Others enjoy the many activities on offer. One popular spot is the Neo Realms Fishing Camp in Second Life's Alston region. Created by a team of five residents, Neo Realms lets virtual anglers buy a fishing rod for less than a quarter and then while away the hours casting from the small pier or from lily pads that float nearby. Fishing tournaments with cash prizes are held each week. There is even a Web site (http://fish.neorealms.com) where competitors can check their tournament standings.

The imposing Moonshine Casino in the Mullett region and the Edge nightclub in the Da Boom region are also among the most popular spots in Second Life, and are often crowded with avatars both day and night. In fact, there's a thriving dating scene in Second Life, and avatars are regularly "married" in ceremonies large and small.

LIKE most virtual worlds, Second Life also sees its share of cybersex, in which two people will use a private chat channel within the world to type suggestively to each other, a practice that dates from the early days of chat rooms.

But Second Life adds a visual element to cybersex that chat rooms lack. Poses and animations can be had that allow avatars to engage in all kinds of sexual positions and activities. In addition, there is a virtual sex industry that includes virtual lap dances, virtual escort services and virtual prostitution.

To guide members in what they can expect, Second Life is divided into "mature" regions, where anything goes, and "PG" regions, where sexual content and swearing are not allowed. (The world has a minimum age requirement of 18, but for younger cybernauts, Second Life offers a separate "teen grid" as well.)

A smaller club called the Shelter, in the Isabel region, is designed expressly for those new to Second Life and for those looking for a night out free of sexual overtones.

"Being somewhat of a haven is our primary mission," said Steve Meyer, a Detroit systems engineer who owns the club. Nothing at the club costs money, and instead of disco, hip-hop and "escorts," the Shelter features pop tunes from the 1980's and 90's to dance to, lotteries, game shows and items like virtual clothing and vehicles, all available free to get people started in the world. And if dancing isn't your thing, there's a pool on the patio to relax in.

Although many people keep in touch with their real-world loved ones in virtual worlds, some find relationships that develop in the opposite direction. Ms. McKenzie not long ago met a man in Second Life, lthen met him in real life and is now married to him. The couple were married in South Dakota, and plan to have another ceremony online.

Although worlds like Second Life can be useful for staying in touch or even for forming new relationships, for most people they are simply a casual getaway.

"I like meeting new people, but this is strictly a game for me," a member whose avatar is named Gina Fatale said of Second Life. "Plus, in Second Life I look better."
http://www.nytimes.com/2005/10/28/tr...28virtual.html





Google Throws Bodies at OpenOffice
Stephen Shankland

Google plans to hire programmers to improve OpenOffice.org, a demonstration of its affinity for open source initiatives and one the company believes also shows sound practical sense.

OpenOffice has its roots in Sun Microsystems' StarOffice suite of programs. Five years ago, Sun turned its proprietary software into an open-source project. Only recently, however, has the competitor to Microsoft's Office attracted serious attention.

Now Google believes it can help OpenOffice--perhaps working to pare down the software's memory requirements or its mammoth 80MB download size, said Chris DiBona, manager for open-source programs at the search company.

"We want to hire a couple of folks to help make OpenOffice better," DiBona said.

Google has shown an affinity for open-source software, which are programs developed in the open and available for free. Many of the company's programmers came of age in the open-source era, so advancing the open-source agenda comes naturally, DiBona said. But the company also has business reasons to justify its open-source embrace.

"We use a fair amount of open-source software at Google. We want to make sure that's a healthy community. And we want to make sure open source preserves competitiveness within the industry," he said.

Earlier in October, Google and Sun announced a partnership to boost several software projects, but released few details. Asked about OpenOffice collaboration, Google CEO Eric Schmidt said at the time only that the search engine power would "work to make the distribution of (OpenOffice) more broad." But OpenOffice, like the other software projects the partners intend to work on, competes directly with Microsoft software--a point that has not gone unnoticed.

As one of the most-watched companies in the industry, Google's involvement has helped Sun draw attention to OpenOffice.org. And there are other reasons the software is taken more seriously as an alternative to Microsoft Office. For one thing, OpenOffice.org 2.0 was just released with a modernized interface and some new features. For another, OpenOffice.org supports OpenDocument, a standardized file format that many endorse as a way to break the lock-in of Microsoft's proprietary formats.

DiBona didn't mention a wider competitive perspective in giving Google's rationale for investing time and money on nonproprietary software. "We were looking for ways to work with Sun and ways to help users. This is a good place to spend some resources," he said.

Google's heavy use of open-source software for its operations has kept its developers in touch with cutting-edge technology, but the do-it-yourself approach has also meant that its employees have technology maintenance responsibilities that most companies leave to others.

Some believe Google eventually will have to settle with a more conventional approach: buying technology instead of building it in- house. Among them is Brian Stevens, chief technology officer of Linux seller Red Hat. He said many customers began with their own versions of Linux before turning to Red Hat for support.

"With most customers, we have a relationship that started that way. Every financial services company, the Department of Energy-- almost everyone got Linux in a nonstandard way on their own," Stevens said. But Google probably won't keep its in-house Linux version, he predicted. "That's not where their competence is. They've got a lot of other problems than building Linux distributions."

A peek under the hood
Google is notoriously reluctant to describe the particulars of its search-computing data center, which served the demands of 380 million people in August. But DiBona did discuss some details.

The company uses the Linux operating system for its mainstay search

CONTINUED: What Google won't open-source... service, he said. Its Linux core begins not with software from a company such as Red Hat, or Novell's Suse Linux, but rather from the version that project leader Linus Torvalds posts periodically to the kernel.org Web site.

Among the open-source technologies used by Google are the Python programming language and the MySQL database, he said. In addition, Google's Blogger site uses Apache Web server software and the Tomcat package for running Java programs on the server.

The GCC compiler software, used to create nearly every open-source program in existence, also is widely used at Google.

Sun's Java also figures prominently, even though it's not open-source at its center. "We make great use of Java at the company," DiBona said, including for Gmail. The company claims the Web-based e-mail service has millions of subscribers.

Sun hasn't released the fundamental part of Java--the virtual machine component--as open-source software. However, the Apache Software Foundation is working on an open-source Java effort called Project Harmony, an initiative that now has IBM developer support.

"I think they'll succeed wildly," DiBona said of Harmony. "They're so good at this. They say, 'We're going to write this software,' and it gets done."

Despite Google's liking for open-source software, plenty of programming at the company is proprietary.

"We're never going to open-source PageRank," DiBona said, referring to the algorithm the company uses to choose which search results to present. "It's the thing that makes Google Google."

Open-source output
Google isn't only an open-source software consumer. It's an open-source producer as well: For example, employees submit software to the Apache Axis Web services project, DiBona said.

The Mountain View, Calif.-based company also employs some open-source notables:

• Sean Egan, leader of the GAIM project for instant messaging software;

• Alex Martelli, a leading Python developer;

• Greg Stein, the Apache Software Foundation chairman and a manager of the Subversion source code management software.

• And Ben Goodger, the lead programmer of the Firefox Web browser project, as well as a few other Firefox programmers.

Google also has published several open-source projects, including tools for debugging software, improving its performance, monitoring MySQL databases and using the AJAX software for richer Web page interfaces.

But so far, there is a significant limit to the group-programming facet of Google's projects: The company doesn't yet accept outside contributions.

Some developers have offered the company contributions meant to improve Google's open-source software--for example, to add 64-bit support to 32-bit software. That cooperation is awkward right now for reasons relating to intellectual-property control, DiBona said.

"We've been slow in being able to accept outside patches," he said. But the company is working on a contributor license that lays out patent and copyright terms for outside contributors. "It's something that pays to be very, very careful about."

The company has helped outside open-source projects, though. Through a $2 million program called the Google Summer of Code, the company sponsored 400 college-age students to work on open-source projects last summer. Each got $4,500 if they met their goals, which 84 percent did. Another $500 went to each of the several open-source projects that helped organize the effort, DiBona said.

Open-source software is good for young programmers, DiBona said, noting that it gives them real-world problems to solve and teaches them self-management skills.

"We think open-source is pretty important," DiBona said. "Without it, the industry would not be as good as it is now to newcomers."
http://news.com.com/Google+throws+bo...3-5920762.html





A New Way To Use The Web

Peer-to-peer software offers faster connection and shared bandwidth
Katya Zapletnyuk

Matthew Gertner may not look like an idealist, though he certainly sounds like one when discussing his new software that he claims will revolutionize how people use the World Wide Web.

The software, scheduled to be released in a few weeks, will help transform Internet technology from its current client-to-server model to a peer-to-peer model, according to Gertner, chief technology officer of AllPeers, the Prague - and Oxford, England - based company that created the new software.

The peer-to-peer model supports the concept that "information wants to be free," which runs counter to the traditional business model pioneered by Microsoft.

Gertner said the software will be available as a free download on the Mozilla Firefox browser — a no-charge browser that enjoys about 100 million users created as part of the Internet's Open Source movement.

Proponents of the peer-to-peer model tout it as economically more advantageous than client-to-server models, where every client must establish a connection with a server and the owner of the server pays the bandwidth charges.

Peer-to-peer models offer faster connections and users don't get blocked because they are sharing the same bandwidth.

"Economically, there is no single payer who must pay for the entire cost — it is shared among all the peers," said Brian Del Vecchio, software developer for Boston-based networking hardware company Datapower.com.

This is the model used to distribute games and large software like the new Open Office software.

Another product of AllPeers is designed to facilitate selling content — a model, Gertner says, that may soon phase out the advertisement-based business model of the Internet.

"We believe that in many cases the advertising model is kind of weak. It is a model that is quite open to fraud and it requires you to change the look of your Web site, which you might not want to do," he said.

Promoting sharing

Web sites are striving to have more of their applications running on the user's machine and not a on central server to speed up connections.

"At a certain point you want to have a real framework for doing this," Gertner said. AllPeers is working to create an extension to the Firefox Web browser that will enable its users to utilize more powerful computer applications by configuring programs so they can run inside the user's Web browser rather than inside a server.

Such a platform, Gertner stressed, will provide a framework that makes it possible to more easily develop applications that can run inside users' browsers and meet directly with each other.

The extension is also designed to help users organize, search and share their personal media files, and automatically converts personal computers into Web servers and Web browsers.

"It is like Google for your media files," Gertner said.

Based on its peer-to-peer model, AllPeers is also developing software, to be launched early next year, designed to make online content sales of articles, photos and videos easier. The software will also provide display and payment options that are user- friendly.

AllPeers, established in 2003, aims to attract five to 10 million users for its product by mid-2006. Gertner said company owners chose Prague as its launch location because of the nation's highly skilled and relatively inexpensive programmers.

"The Czech Republic is a good place to develop software," he said, but company officials were uncomfortable with the state of the country's intellectual property laws.

"We don't feel that the Czech legal system is mature enough to have intellectual property belonging to a Czech company," he said. So AllPeer's British arm took over the property rights issues and serves as a financial vehicle and investor base.

Gertner declined to forecast when AllPeers' business angels will make see investment returns.

"What we think is more important is to build a user base. In this market today it is all about network effect," he said.
http://www.praguepost.com/P03/2005/Art/1103/busi4.php





Early Skype Backers Rev For Revver
By Staff, TheDeal.com

Several investors in Internet telephony provider Skype Technologies have reunited to offer an undisclosed amount of Series A financing to Revver, a peer-to-peer video-sharing service with an online presence.

Skype, also a P2P enabler, became the VC feel-good story of the year when eBay purchased it in September in a deal that could be worth up to $4.1 billion if certain benchmarks are met.

Bessemer Venture Partners and Draper Richards were original investors in Skype. Draper Fisher Jurvetson participated in a second fundraising round for the company. The firms have teamed again to back Revver, which has developed a technology platform that helps the producers of amateur digital videos share the content online and also generate revenue from their efforts.

So what's the connection?

Perhaps the opportunity to generate hefty advertising revenue from P2P networks, whose potential is untapped.

"The explosion of self-published, popular-content downloaded via e-mails from friends and colleagues, instant messages, or discovered on various Web sites or P2P networks, presents a massive market opportunity," Steven Starr, Revver founder and CEO, said in a press release.

"It's the hope of a whole wave of new investments that VCs are making these days," says Andreas Stavropoulos, a managing director with Draper Fisher Jurvetson, trying to deal with navigating, collecting, aggregating and monetizing self-published content.

Self-publishing technologies such as Web logs and wikis are advancing the online marketplace to a more Web-services-oriented environment--an area VCs will continue to scrutinize for the next several years, Stavropoulos says, because managing self-published content is difficult.

As self-publishing, P2P networks and online file-sharing and distribution grow, costs decline proportionally, so feeding an advertising market and creating revenue from shared content is a focus for start-ups today.

Many business plans landing on his desk, Stavropoulos says, address the "Web 2.0 way of doing things" and its impact on traditional Web business models.

Founded in 2004, Beverly Hills, Calif.-based Revver has developed a video-sharing system that allows users to tap into self-published content for free but links video producers with advertising revenue. With its proprietary tagging technology, Revver facilitates and tracks the distribution of videos, in which sponsors pay to advertise.

Revver will use the money for internal growth, research and development, and sales and marketing initiatives.

Revver is the most recent example of P2P networks receiving VC support.

BitTorrent, a San Francisco start-up that manages Web traffic and cooperative file distribution, raised $9 million from Menlo Park, Calif.'s DCM-Doll Capital Management in late September. Meanwhile, Vivox, a Wayland, Mass., VoIP (voice over Internet Protocol) provider raised $6 million from Canaan Partners of Menlo Park and Grand Banks Capital of Newton, Mass., earlier that month.

Skype is the most impressive exit for a self-publishing and P2P network but not the only example. Internet domain provider VeriSign grabbed technologies that fit within purchased aggregate news provider Moreover Technologies in October for $30 million. Moreover, it received venture funding from Atlas Venture, Reuters Venture Capital and Dawntreader Ventures.

VeriSign also acquired Weblogs.com for $2.3 million earlier in the month.

It seems all exits in self-publishing won't be like Skype's sale to eBay, but, Stavropoulos says, "I would like to think Revver has even greater potential."

Board seats will go to Bessemer general partner Rob Stavis and Draper Richards partner Howard Hartenbaum. Both VCs sat on Skype's original board.

Fenwick & West LLP advised Revver.
http://news.com.com/Early+Skype+back...3-5928657.html





U.S. Cell-Phone Tracking Clipped
Ryan Singel

Federal law enforcement attempts to use cell phones as tracking devices were rebuked twice this month by lower court judges, who say the government cannot get real time tracking information on citizens without showing probable cause.

This summer, Department of Justice officials separately asked judges from Texas and Long Island, New York to sign off on orders to cellular phone service providers compelling them to turn over phone records and location information -- in real time -- on two different individuals.

Both judges rejected the location tracking portion of the request in harshly worded opinions, concluding investigators cannot turn cell phones into tracking devices by simply telling a judge the information is likely "relevant" to an investigation.

"When the government seeks to turn a mobile telephone into a means for contemporaneously tracking the movements of its user, the delicately balanced compromise that Congress has forged between effective law enforcement and individual privacy requires a showing of probable cause," wrote Magistrate Judge James Orenstein of New York in the latest decision Monday. (.pdf).

In the Long Island case, the DOJ asked to record the location of the cell towers that handled a call using information in a phone's "control channel," which is separate from the voice channel used in a mobile telephone call, which would give only a rough approximation of a user's locations and movement.

In the Texas case, the government sought to capture information regarding the strength, angle and timing of the caller's signal measured at two or more cell sites -- data that might allow investigators to pinpoint a person's location using triangulation.

Orenstein handed down his 57-page opinion the same day as the Electronic Privacy Information Center released documents acquired in a Freedom of Information Act lawsuit, which showed the FBI had repeatedly violated its own rules about surveillance of American citizens.

The DOJ applied for the real time cell tracking information alongside orders to install so called "pen registers" and "trap and trace devices" which let investigators immediately learn the dialing information of incoming and outgoing calls.

These orders are relatively easy for the government to get since the Supreme Court ruled that there is no expectation of privacy in the phone numbers a person dials, and federal law requires judges to issue the orders so long as law enforcement promises the information will likely be relevant. The government cited another law, the Stored Communications Act, to argue those devices could be also used to capture the location-focused information.

Kevin Bankston, an attorney at the Electronic Frontier Foundation, which filed a friend of the court brief (.pdf) in the New York case, says the Justice Department may have been using cell phones to track people for a long time, since judges typically don't publish opinions on such orders.

"This is a true victory for privacy in the digital age, where nearly any mobile communications device you use might be converted into a tracking device," Bankston said in a statement. "Judges are starting to realize that when it comes to surveillance issues, the DOJ has been pulling the wool over their eyes for far too long."

Bankston noted in an interview that the Justice Department attempted to convince Orenstein he had the authority, under another federal law called the All Writs Act, to order the cell phone tracking by revealing that other judges had used that statute to authorize real time tracking of credit-card purchases, which the government referred to as a "Hotwatch Order."

It is unclear if those orders are limited to tracking fugitives or if they are also being used in ordinary criminal investigations.

Both judges concluded that Congress needed clarify the laws regarding cell phone tracking.

Though House and Senate lawmakers are currently battling over the final form of the reauthorization of the Patriot Act, it is unlikely the bill will clarify the cell phone tracking issue.

The Justice Department is expected to appeal both judges' decisions, but did not return a call for comment by press time.
http://www.wired.com/news/technology...,69390,00.html

















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Now More Than Ever, Don’t Forget To

















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