Sex Trumps Jobs, as in Steve, in Apps Flap

Business Week

Is the iPhone bigger than sex? Not likely, but we may be about to find out.

Last week, Apple Inc., whose iTunes App Store is the sole official source of programs for the iPhone and iPod Touch, removed access to thousands of sexually suggestive apps. Among the casualties: Wobble iBoobs, which allows users to, er, animate specific portions of photographs, and Private Dancer, which promises, “Our girls have some serious moves guaranteed to put you in that special mood.”

In an interview with the New York Times this week, Apple executive Phil Schiller explained, “It came to the point where we were getting customer complaints from women who found the content getting too degrading and objectionable, as well as parents who were upset with what their kids were able to see.”

A noble sentiment, to be sure. But at the same time Apple was saying buh-bye to some racy apps, it left untouched others from the likes of Playboy Enterprises Inc. and Time Warner Inc., which offers an app built around Sports Illustrated’s swimsuit issue -- you can upgrade it to get “Soccer Stars’ Wives & Girlfriends in Bodypaint” -- and another called the SI Swimsuit Challenge Game.

When asked about the apparent contradiction, Schiller, who’s head of worldwide product marketing, said of SI: “The difference is this is a well-known company with previously published material available broadly in a well-accepted format.”

In other words: Double standard? There’s an app for that.

Whiff of Hypocrisy

One doesn’t have to take a position pro or con on the merits of sexy apps to get a whiff of hypocrisy here. Apple, after all, is about to launch its much-touted iPad media device, and Chief Executive Officer Steve Jobs needs big publishers like Time Warner to produce compelling content for his new baby. This would be a particularly inconvenient time to pick a fight with them.

All this wouldn’t matter so much if it weren’t for the near-iron-clad control Jobs and Apple exercise over software for the iPhone and iPod touch.

It’s possible -- in fact, fairly easy -- to “jailbreak” the devices, which allows users to download apps from sources other than Apple’s iTunes App Store. (Jailbroken iPhones and iPods are also a major factor in the growing problem of app piracy.) For the vast majority of users, though, the App Store is the only source of software.

Developers must submit their applications to Apple, which has the sole power to decide whether they gain access to users of the 75 million or so iPhone OS devices out there. It’s a power Apple has on occasion shown itself willing to use selectively for corporate purposes.

No App for You

For instance, at the behest of its U.S. telecommunications partner AT&T Inc., Apple last year refused to allow EchoStar Corp. to release an app letting users of its SlingBox device access video content from their home televisions over the AT&T 3G data network. Apple accepted the app only after Sling Media agreed to disable the 3G aspect and make it usable only over a Wi-Fi connection. (Earlier this month, AT&T and Sling Media settled their differences, and the app has finally been cleared for 3G use.)

If another company -- say, Microsoft Corp. -- had similarly flexed its muscle, the cries of “antitrust violation” would have been deafening. Apple gets away with it because … now why does Apple get away with it again?

When it comes to sex and the iPhone, though, Jobs just might have met his match. Technology and porn go together like, well, let’s just say it’s no accident that the annual Adult Entertainment Expo trade show runs in Las Vegas at the same time as, and virtually alongside, the Consumer Electronics Show.

Sex-Driven Innovation

In fact, it’s hard to think of a video-related consumer technology whose rise wasn’t accompanied by, indeed fueled by, sexual content. Cable television, the video cassette recorder -- you name it. The New York musical “Avenue Q” includes a ditty entitled, “The Internet Is for Porn.”

There’s no reason to think smartphones will be any different. So maybe, rather than trying to ban such content, it would be better to regulate it. Segregate adult apps in their own section of the App Store, strengthen parental controls, perhaps require a user to re-enter the account’s credit-card information before downloading anything naughty.

Whatever the approach, at least apply it evenly.

Cheap Calling with Magic Jack

The Wall Street Journal

Magic Jack is a new device and service that allows you to make cheap phone calls through your computer. Overall, the product works as advertised, Walt Mossberg found.

Microsoft in Patent Deal with Amazon

The Wall Street Journal

Microsoft Corp. said it reached a patent licensing agreement with Amazon.com Inc. that gives the online retailer rights to use open-source software in its Kindle electronic book reader and servers based on the Linux operating system.

Under their agreement, Microsoft said Seattle-based Amazon will pay it an undisclosed sum. Microsoft, Redmond, Wash., said in a statement that the deal was a patent cross-license agreement under which it will also gain rights to Amazon patents that it didn't identify.

The statement from Microsoft said Kindle uses both open-source and proprietary software components made by Amazon.

Open-source programs allow users to view and modify their "source code," or underlying instructions. Linux and other programs that are created with the technique have been among the most effective competitors against Microsoft products.

The licensing deal was viewed with suspicion by open-source advocates, who believe Microsoft has sought to stir legal uncertainty about the technology for competitive reasons. Microsoft has for years said its broad portfolio of intellectual property includes patents that are violated by elements of Linux and other forms of open source software.

Companies that incorporate open-source software in everything from mobile devices to corporate applications could, in theory, face legal challenges from Microsoft, though Microsoft must tread carefully because so many of its customers and business partners use open source technologies.

"If the strategy isn't to create uncertainty around Linux, it's hard to say what it is," said Jim Zemlin, executive director of the Linux Foundation, a non-profit Linux organization.

A Microsoft spokeswoman declined comment. In the company statement, Horacio Gutierrez, corporate vice president and deputy general counsel at Microsoft, said the agreement with Amazon "demonstrates our mutual respect for intellectual property as well as our ability to reach pragmatic solutions" patent issues regardless of whether they involve proprietary or open source software. An Amazon spokesman declined comment.

Microsoft noted that it has reached similar deals with many companies since launching a patent licensing program in 2003, including Apple Inc., Hewlett Packard Co., and Novell Inc.

But Microsoft also took a more aggressive stance with a lawsuit it filed early last year against TomTom NV, in which it alleged that the Dutch maker of GPS navigation devices violated a collection of Microsoft patents in TomTom's Linux-based devices. TomTom countersued Microsoft for alleged patent violations, and the two companies later settled their disputes for undisclosed terms.

Pennsylvania School Official in Webcam Spy Case

AP

PHILADELPHIA (AP) - A suburban Philadelphia school district accused of secretly switching on laptop computer webcams inside students' homes says it never used webcam images to monitor or discipline students and believes one of its administrators has been "unfairly portrayed and unjustly attacked."

The Lower Merion School District, in response to a suit filed by a student, has acknowledged that webcams were remotely activated 42 times in the past 14 months, but only to find missing, lost or stolen laptops - which the district noted would include "a loaner computer that, against regulations, might be taken off campus."

"Despite some reports to the contrary, be assured that the security-tracking software has been completely disabled," Superintendent Christopher W. McGinley said in a statement on the district's Web site late Friday. Officials vowed a comprehensive review that McGinley said should result in stronger privacy policies.

Harriton High School student Blake Robbins and his parents, Michael and Holly Robbins, filed a federal civil rights lawsuit Tuesday against the district, its board of directors and McGinley. They accused the school of turning on the webcam in his computer while it was inside their Penn Valley home, which they allege violated wiretap laws and his right to privacy.

The suit, which seeks class-action status, alleges that Harriton vice principal Lindy Matsko on Nov. 11 cited a laptop photo in telling Blake that the school thought he was engaging in improper behavior. He and his family have told reporters that an official mistook a piece of candy for a pill and thought he was selling drugs.

Neither the family nor their attorney, Mark Haltzman, returned calls this week seeking comment. A listed number for Matsko could not be found.

"We believe that the administrator at Harriton has been unfairly portrayed and unjustly attacked in connection with her attempts to be supportive of a student and his family," the statement on the Lower Merion School District site said. "The district never did and never would use such tactics as a basis for disciplinary action."

A district spokesman declined further comment on the statement Saturday.

Lower Merion, an affluent district in Philadelphia's suburbs, issues Apple laptops to all 2,300 students at its two high schools. Only two employees in the technology department, not administrators, were authorized to activate the cameras, which captured still images but not sound, officials said.

"While certain rules for laptop use were spelled out ... there was no explicit notification that the laptop contained the security software," McGinley said. "This notice should have been given, and we regret that was not done."

The district's Web site said 42 activations of the system resulted in the recovery of 18 computers, not 28 as district spokesman Doug Young had said earlier. They reiterated that it was done only to locate lost, stolen or missing laptops.

"The district has not used the tracking feature or webcam for any other purpose or in any other manner whatsoever," the Web site said. The site also noted that there was nothing to prevent students from covering the webcam with tape.

McGinley said the district had hired former federal prosecutor Henry Hockeimer Jr. to review past practices and suggest improvements.

The FBI is looking into whether any federal wiretap or computer-intrusion laws were violated, according to an official who spoke to The Associated Press on condition of anonymity because the official was not authorized to discuss the investigation. Montgomery County District Attorney Risa Vetri Ferman has said she might also investigate.

Andy Derrow, father of a Harriton junior, said he does not believe the district was spying on students. He said he has two other sons who graduated from the school and had substantially benefited from the computer program.

"I don't think there was any ill intent here," he said "I think we all need to take a breath and wait and see what the facts are."

Steve Jobs' Six Sneakiest Statements

Wired

Steve Jobs was reportedly wearing a top hat when he visited New York publishers last week. It's a fitting lid for the Apple CEO, who can be as tricky as a magician.

Jobs has a knack for throwing off Apple watchers with his masterful misdirections.

Ever wonder why analysts and journalists grossly overestimated the price of the Apple tablet prior to its official announcement? Part of the reason is that Jobs had said during a 2008 earnings call that Apple could not make a $500 computer that was not a "piece of junk."

That assertion lent credence to rumors that the tablet would cost $1,000.

Oops. The entry-level iPad announced in January will cost $500, at least at the low end of scale. Presumably, Jobs doesn't consider it a piece of junk.

Nice one, Steve. You got us there.

Actually, you've fooled us not once or twice, but at least six times, by our count. What follows is a list of five more famously misleading quotes that Jobs pulled from his bag of tricks.

No Plans to Make a Tablet

There were plenty of naysayers who, for the longest time, thought the Apple tablet was a pure myth. Jobs did, after all, tell Walt Mossberg during a 2003 All Things Digital conference that Apple was not working on a tablet -- because the keyboardless form factor was a recipe for failure, according to a second-hand account.

"There are no plans to make a tablet," Jobs was quoted saying to Mossberg. "It turns out people want keyboards. ... We look at the tablet, and we think it is going to fail."

That was seven years ago. And a lot can change in seven years.

But there's plenty of evidence Apple has been mulling over tablets for a while. The New York Times' Nick Bilton reported the Apple tablet was in development for at least five years, and that it was actually a precursor to the keyboardless iPhone.

And Apple filed a patent for a touch tablet device in 2004. To rewind even further, Apple was working with Frog Design on tablet prototypes as early as 1983. Those ancient tablets included keyboards, but Jobs has clearly had tablets on his mind for a very long time.

Not Interested in the Cellphone Business

In that same interview with Mossberg, Jobs said he didn't feel Apple would fare well in the cellphone business.

"I get a lot of pressure to do a PDA. What people really seem to want to do with these is get the data out. We believe cellphones are going to carry this information. We didn't think we'd do well in the cellphone business. What we've done instead is we've written what we think is some of the best software in the world to start syncing information between devices. We believe that mode is what cellphones need to get to. We chose to do the iPod instead of a PDA."

Of course, in hindsight that quote served as a clue that Apple wasn't making a traditional cellphone, but rather a brand new device that fused the characteristics of an iPod, a PDA and a cellphone into one. The result was the iPhone.

Still, a tricky statement nonetheless.

People Don't Read Any More

Jobs made a rather provocative statement in 2008 when he told The New York Times that the Kindle would go nowhere:

"It doesn't matter how good or bad the product is, the fact is that people don't read anymore," he said. "Forty percent of the people in the U.S. read one book or less last year. The whole conception is flawed at the top because people don't read any more."

Of course, the CEO backpedaled on his Kindle-dissing during his iPad keynote when he was introducing the iPad's very own e-book reader and store, iBooks.

"Amazon's done a great job at pioneering this functionality with their Kindle, and we're going to stand on their shoulders and go a bit further," he said during his Jan. 27 keynote this year.

No Movies on a Tiny Little Screen

When Mossberg in 2003 asked Jobs whether he planned to put video in an iPod, the CEO said he was turned off by the idea.

"I'm not convinced people want to watch movies on a tiny little screen," Jobs said. "To paraphrase Bill Clinton, 'It's the music, stupid, it's the music!' Music's been around for a long time, will continue to be, it's huge."

Then two years later, in 2005, Apple released the fifth-generation iPod whose tiny, 2.7-inch screen played video. And then in 2007 Apple released the third-generation iPod Nano with video with an even littler 2-inch screen. But hey, people's minds change, and clearly so does Jobs'.

We Don't Need to Add New Stuff

In a September 2009 interview with Jobs, New York Times columnist David Pogue asked the CEO why Apple crammed a camera into the puny iPod Nano and not the new iPod Touch.

Jobs explained the lack of a camera was to keep the price down, so Apple could market the Touch as an inexpensive gaming device.

"So what we were focused on is just reducing the price to $199," Jobs said. "We don't need to add new stuff. We need to get the price down where everyone can afford it."

But later, teardown company iFixit ripped apart the iPod Touch and found a gap that would fit a camera.

And on top of that, AppleInsider received a tip that cameras were planned for the iPod Touch, but ultimately delayed due to technical problems. We've yet to see if Apple does indeed add a camera to the iPod Touch, but we suspect that's likely to happen eventually.

The iPad Could Drive Readers to Distraction

The Wall Street Journal

Losing yourself in a good book? Those days could be numbered.

In this age of frantic multitasking and ubiquitous digital distraction, one form of media has remained a refuge: You could always lose yourself in a good book. But if Apple's planned iPad digital tablet succeeds as well as its iPod ancestors, those days may soon be over.

The trouble is that the iPad, due this spring, isn't just a reader with a few minor bells and whistles, like the Amazon Kindle, Sony Reader and Barnes & Noble nook. It's also a full-fledged Web surfer and email device, a stereo, a game player, and a machine for watching movies and TV shows. Since it will run iPhone apps, it's also potentially a telephone, a calculator, a GPS device, an instant-messaging pad, a Facebook portal, a clock, a calendar, a restaurant guide, a contraption for studying Bulgarian, a collection of nude photos, a compass, a carpenter's level and God only knows what else.

When viewed on an iPad, books we now find utterly absorbing—with fast-moving narratives that keep us up half the night turning pages—may soak up our attention a little less effectively. Just imagine trying to focus on some boring textbook in the face of all that frantic yoo-hooing from the iPad's many other groovy functions.

We already face this problem at the office. For many of us, the main tool of our labors—an Internet-connected computer—is also our primary temptation to dither, subverting our attention with email, chat invitations and the siren song of diverting Web sites. Now, with the iPad ready to invade the home, the problem is likely to follow us to our favorite reading chairs.

Distractibility, sad to say, is the human condition, and probably evolved at a time when—hey, is that a tiger?!—it was a survival adaptation. But if we can't do anything about human nature, we can control the situations in which we find ourselves. Wily Odysseus understood this when he ordered his men to bind him to their ship's mast lest he quite literally go overboard as a result of the Sirens' seductive song.

Modern-day computer users can make like Odysseus with programs such as Freedom, a free download for Macs that lets you bar yourself from the Internet until you reboot—not a huge barrier but perhaps just enough of a hurdle, and one that provides an embarrassing time-out in which to contemplate what you're about to do.

There are also programs to limit access to designated sites or to restrict them during a given period, so you can prevent yourself from wasting half your work day surfing celebrity gossip blogs. For example, Self-Control, a free add-on for the Firefox browser, intervenes when you go on a time-wasting jag to a Web site you've declared taboo. "Wrong place at the wrong time," it says. "Get back to work."

These programs are a little like the parental-control software people use to limit kids' activities on the Internet, except the parent controlling you would be . . . you. It's the kind of self-paternalism we engage in all the time by, for instance, not buying ice cream because we know we lack the willpower to abstain once it's in the house.

And for those in need of serious help, there is Covenant Eyes, a subscription service that monitors your Web doings and emails a log to your designated "accountability partner," who could be your pastor or spouse or mom—any one of whom would be sufficient deterrent for most of us. If not, Covenant Eyes also offers customizable Internet filtering—and a mobile version.

In the future more of us are likely to need this sort of thing, because technology is moving toward forcing us to use a single device for practically everything we do, making concentration on any one thing that much harder. Then again, the problem may not be so new. In "Buddenbrooks," that great novel of business, Thomas Mann writes of a weary executive: "Harassed by a thousand details, all of them unimportant, he was too weak-willed to arrive at a reasonable and fruitful arrangement of his time."

And rest assured: Thomas Buddenbrooks, in the 1870s, didn't have an iPad.

Dolce & Gabanna Go Live With iPhone

The Wall Street Journal

Fashion designer Stefano Gabbana bought an iPhone eight months ago, and it's been a love affair ever since. Now he and his business partner Domenico Dolce are expected to announce Friday that their fashion company, Dolce & Gabbana, will livestream its Milan fashion shows on iPhones.

"This opportunity with the iPhone is so important for us," said Mr. Gabbana in an interview. "If you are sitting outside during lunch and you want to watch the fashion…it's very democratic, I think." The shows will also be live-streamed on the Web during Milan Fashion Week, which starts Feb. 25, but BlackBerry users are out of luck. "Maybe in the future," said Mr. Gabbana, who used to carry a BlackBerry, but got an iPhone after relentless pestering by his nephew.

It wasn't so long ago that fashion houses found technology as exciting as filing taxes. So while you can download full episodes of "Mad Men," availability of runway shows online is still scattershot, and more often than not posted days after the event. Only a year ago many in the fashion industry were shocked by the notion of opening their highly exclusive events to the rest of the world in real time.

One year and several successful fashion blogs later that reluctance is fading fast. Labels have been using video, blogs and Twitter to deliver images from their shows. Rodarte, Burberry Prorsum, Alexander McQueen and other brands have livestreamed their fashion shows onto the Web recently.

In September, Dolce & Gabbana, known for its provocative advertising and dramatic looks, invited three bloggers into the front rows of its shows for both its primary Dolce & Gabbana and secondary D&G line. The bloggers were launched to fashion-world fame; the one known as BryanBoy, whose real name is Bryan Grey-Yambao, was a fixture at New York Fashion Week shows this week as he blogged, partied and traded interviews with fellow blogger Tavi Gevinson. Both are also featured in this month's Vogue magazine.

Mr. Gabbana, who also tweets (@stefanogabbana), says he sees all this as experimenting, and doesn't really have a specific goal in mind, such as attracting new customers. "We make a lot of money. I'm rich. Man, I know what I am. But we started this job because we love fashion. Now we have the same approach. We have a fascination with the new technology."

Portending what may come next, the Italian fashion mogul is hoping to be one of the first to get Apple's latest device, the iPad.

Taiwan Laptop Maker Warns of China Labor Shortages

AP

TAIPEI, Taiwan (AP) - A leading Taiwanese laptop maker has warned labor shortages in China's booming coastal cities could affect the supply of computers amid an expected surge in world demand.

Ray Chen, president of Compal Electronics Inc., said the labor situation could also lead to shortages of components ranging from memory chips to hard drives to computer cases, the Economic Daily News quoted him as saying Thursday.

He said the labor shortfall could worsen following this week's Lunar New Year holiday because many factory workers visiting their home towns might not return to the major coastal manufacturing zones where Compal and other electronics companies produce personal computers.

A year ago when the global financial crisis was battering China's exporters, millions of migrants were told to stay home because there wouldn't be much work in Guangzhou and other southern cities. Then, as business started picking up during the middle of last year, factories were caught short-handed.

Many businesses now say they expect labor shortages this year to be worse than previous episodes. Migrants are finding jobs closer to home as the poor interior provinces become more prosperous and the supply of young laborers is decreasing as an effect of China's one-child policy. Fewer, meanwhile, are willing to work for sweatshop wages as their parents did.

The Economic Daily newspaper said many factory operators fear their worker numbers will not return to pre-financial meltdown levels despite offering pay raises.

But an official with Taiwan-based Hon Hai Group, the world's largest contract electronics maker, said it would not be affected by the labor shortages. It started building several factories three years ago in China's interior to comply with Beijing's policy of developing the southwest.

With manufacturing being shifted elsewhere, Hon Hai's base in Shenzhen in Guangdong province now deals mainly with research and development and logistics, according to the official, who requested anonymity because of company policy.

Compal and Taiwan-based Quanta Inc. are the world's top two contract laptop makers.

Compal's 2009 sales amounted to $19.8 billion, up nearly 50 percent from 2008, with the launch of Microsoft Windows 7 operating system and cheap laptops known as netbooks propping up sales amid the global economic recovery.

Taiwanese makers account for more than 80 percent of the world's laptops output by setting up assembly lines in China to take advantage of the mainland's cheaper labor.

Several Taiwanese makers, including Quanta Inc. and Inventec Corp., are building factories in Chongqing in southwest China, where labor costs are estimated to be 20-40 percent lower than the coastal cities.

Skype Fights to be Heard on Mobile Phones

NY Times

BARCELONA, Spain — Josh Silverman, the chief executive of Skype, the voice-over-Internet phone service, could tick off the names of mobile phone operators that block his company’s service.

But for Mr. Silverman, a 41-year-old Michigan native, it is quicker to name those that allow it, no strings attached.

“The two operators that have really embraced us are 3 in Europe and Verizon Wireless in the United States,” Mr. Silverman said Wednesday at the Mobile World Congress, the industry’s annual convention, in Barcelona. “But we are making progress, and operators are beginning to change their attitudes.”

In a world where network neutrality has become a rallying cry for advocates of an unfettered Internet, Skype, the pioneer in low-cost and even free online calls, has become a prime example of the limits of wireless freedom.

In the United States, Skype is blocked on mobile networks, and the service is available only on the Apple iPhone over Wi-Fi. AT&T, the exclusive American carrier for the iPhone, has said that it would allow Skype and voice-over-Internet-protocol services to operate on its 3G network, but Skype has not made an application available.

In Europe, Skype is carried by the company 3 in Britain, Ireland, Austria, Denmark, Italy and Sweden. But many other cellular operators still block its calls, prohibit their customers from downloading Skype’s software or outlaw the use of VoIP service in standard sales contracts.

Some carriers are imposing fees to undermine Skype’s attraction. In Germany, customers of T-Mobile can place calls using Skype, but only if they pay an extra 10 euros, or $13.60, a month. German customers of the Vodafone Group can use the service for an extra 5 euros a month.

However, the barriers to Skype and similar Internet calling services, like Google Voice, are coming under increasing scrutiny as the Internet goes mobile. By 2013, the number of Internet-ready mobile phones will surpass the number of computers in the world for the first time, according to Gartner, a research firm.

“Such practices illustrate how operators’ business models based on control and discrimination of data flows really harm competition as well as the fundamental freedom of communication allowed by Internet,” said Jérémie Zimmermann, the director of La Quadrature du Net, a group in Paris that opposes efforts to control public access to the Internet.

Most operators and network equipment makers still perceive Skype and other Internet phone call providers to be potential freeloaders, stealing their customers while they invest billions of dollars to build out and upgrade mobile networks.

“VoIP is a great technology, but it is not a game-changer,” said Ben Verwaayen, chief executive of Alcatel-Lucent, a network equipment maker. “If everything is free, then operators will not be able to survive. The battle is not about technology but the business model.”

In the United States, last July the Federal Communications Commission asked Apple to explain why it had not approved Google Voice, an application that lets callers circumvent mobile network calling charges, for the iPhone. Apple told the F.C.C. that it was studying Google’s application.

Carriers in the United States could have more difficulty blocking VoIP services as they introduce 4G data networks, faster than 3G. The F.C.C. imposed no-discrimination rules on buyers of 700-megahertz spectrum, which is being converted from analog television use to cellular data.

In Europe, the new commissioner for digital issues, Neelie Kroes, has indicated she might put pressure on wireless operators to allow VoIP services on their networks. In a hearing on Jan. 14 before a European Parliament committee, Ms. Kroes said blocking VoIP violated network neutrality.

“It is imperative that VoIP can be done,” Ms. Kroes said before the Industry, Research and Energy panel. “That is another way of using the same infrastructure. We have to act and force those owners. There must be another argument against it other than: ‘It is against the rules.’”

Getting access to mobile networks is critical for Skype. The seven-year-old company, based in Luxembourg, has more than 500 million registered users, and they now generate 12 percent of all international calls, according to the research firm TeleGeography.

Founded in 2003 by Niklas Zennstrom and Janus Friis, Skype initially impressed technophiles but has so far largely failed to live up to its commercial potential for business VoIP services. EBay paid $3.1 billion for Skype in 2005 but was unable to fit the service into its online auction business.

Last September, eBay sold control of Skype to a group of investors led by Silver Lake Partners, a Silicon Valley private equity firm, in a deal that valued Skype at $2.75 billion. EBay, which retained a 35 percent stake, said Skype made a $48 million profit in the third quarter of 2009 on $185 million in sales, the last results published before the company was sold.

Mr. Silverman, the former chief executive of Shopping.com, also owned by eBay, foresees regulators in the United States, Europe and elsewhere putting pressure on operators to permit VoIP services.

“Truth and justice are on our side,” Mr. Silverman said. “We think it is a ridiculous argument to say these are ones and zeroes we like and these are ones and zeroes we do not like.”

In some quarters, resistance to Skype is waning. Operators like Belgacom in Belgium experiment with the service without fanfare, to see if it attracts and retains customers.

Skype’s deal with Verizon Wireless, the largest United States carrier, may also make the service more available. In exchange for access to its 3G network, Verizon attached many conditions to its agreement with Skype.

Skype users will have to buy voice and data plans from Verizon Wireless and also one of nine smartphones sold by the operator. Also, any Skype calls placed to United States residents who do not have Skype accounts will be deducted from the caller’s package of Verizon voice minutes.

Calls placed outside the United States and domestic calls to Skype users will be free.

“The Skype-Verizon announcement demonstrates that mobile operators are beginning to change their attitude,” said Dario Talmesio, an analyst at Informa Telecoms and Media, a research concern based in London. “However, the majority of mobile operators have yet to make a firm decision. Blocking VoIP is a short-sighted strategy.”

Mr. Silverman said Skype would never pay to win access to mobile networks. “Being a free service is core to our value proposition,” he said. “We see no plans to change that.”

Tech Giants' New Way to Thwart Patent Suits

Business Week

Frustrated by litigation costs, Microsoft, Sony, and Nokia are paying third-party patent acquirers such as RPX to fend off patent lawsuits

Forgive Microsoft CEO Steve Ballmer if he's frustrated by litigation. Aside from high-profile government investigations into the company's alleged monopoly power, Microsoft (MSFT) has been sued at least 49 times in the past six years for patent infringement by small shops that buy up patents from inventors and bankrupt companies, according to researcher PatentFreedom. Lawsuits from "patent trolls," says the software giant, are a costly blight on the technology industry. "[Patent litigation] costs the industry billions of dollars per year," says Horacio Gutierrez, corporate vice-president and deputy general counsel at Microsoft.

On Jan. 28, Microsoft signed up for patent insurance. It's not insurance such as you might get for your car or house, but a startup called RPX provided what's probably the closest thing to it for tech giants. Companies such as Microsoft, Sony (SNE), and Nokia (NOK) pay RPX annual fees to avoid patent-related litigation. The fees depend on each company's revenue and can range from $35,000 to $4.9 million per year. The 14-month-old RPX is one of the first companies to offer the service, It's already signed up 30 members, including IBM (IBM), Cisco (CSCO), Hewlett-Packard (HPQ), and Samsung.

RPX's approach doesn't guarantee that its members won't be sued. The company buys up patents that could be used against its clients, having spent to date $130 million to acquire more than 1,000 patents and patent rights in the mobile, Internet search, telecommunications, networking, and e-commerce areas. In return for yearly fees, member companies get licenses to all the patents RPX acquires. "By working together with entities such as RPX, the industry can collectively reduce the costs of this needless litigation," says Microsoft's Gutierrez.

Microsoft's settlements with Acacia

Patent trolls are extremely controversial in the tech industry. They're typically small firms that acquire patents from individuals or small companies and then try to extract licensing fees from companies selling products that infringe on those patents. The patent-licensing firms are more politely referred to as "nonpracticing entities" because they sell patent licenses to technologies they don't design, manufacture, or distribute. Microsoft is one of the most-pursued tech companies by these small firms, according to PatentFreedom. The patent disputes almost always start with a lawsuit. In 2009, one of every five of the 470 nonpracticing entity cases filed involved software defendants, according to RPX.

In late January, Microsoft settled two patent disputes for an undisclosed amount with subsidiaries of a nonpracticing entity called Acacia Research (ACTG). One lawsuit involved a patent for software compilers and the other involved technology that can be used by interactive Internet maps. RPX conducted a study of the top 60 technology companies in the U.S. and Asia and discovered that 80.6% of all patent cases against them were filed by nonpracticing entities. "Today the preferred path is litigation," says John Amster, CEO of RPX. "It's a highly inefficient, friction-filled way of conducting business," he says.

ShoreTel (SHOR), which sells business phone systems, is one of the companies looking for a more efficient solution. The company signed up as an RPX member because of high—and unpredictable—patent litigation costs. "Our payments in a quarter to a patent troll can take us from being profitable to unprofitable," says Ava Hahn, vice-president and general counsel at ShoreTel. "We look at it as an insurance policy," she says.
"not a wolf in sheep's clothing"

RPX's approach is attracting venture capital backing, too. Its investors include Charles River Ventures, Kleiner Perkins Caufield & Byers, and Index Ventures. "There ought to be a market-based mechanism for inventors to be paid for their inventions without having to build products or to sue," says Izhar Armony, a general partner at Charles River Ventures. That company has invested in four companies in the intellectual property market, including Nathan Myhrvold's Intellectual Ventures. Intellectual Ventures both acquires patents from companies and comes up with its own inventions.

Still, it's unclear how much a firm like RPX can do to prevent litigation. "It's unrealistic to say you could buy up all the patents that may be asserted against you in the future," says Professor Mark Lemley, director of the Stanford Program in Law, Science, and Technology. "There's a very thin line between a patent troll and a company [that] buys up a bunch of patents and says: 'For a fee we won't sue you,'" he says.

For its part, RPX says that it doesn't sue or threaten to sue companies with the patents it has acquired, even if they're not members. That would run counter to its approach and could cost it customers. RPX has even pledged in its charter not to sue anyone. "We can buy rights to protect our members," says Amster. "Companies are getting comfortable that we're not a wolf in sheep's clothing."

Beyond the FCC's Push for 100 Mbps to 100 Million

Business Week

The challenge will be to deliver universal service, telehealth, a smart grid, school broadband, and digital literacy

Julius Genachowski, chairman of the Federal Communications Commission, has outlined his vision for broadband in the U.S.: delivering 100 Mbps connections to 100 million homes.As part of an update on the National Broadband Plan due before Congress in mid-March, Genachowski sketched out a plan that would keep the U.S. competitive with other nations and enable 90% of the population to have and use broadband, up from about 65% today.

The proposed speeds seem pretty exciting, but the devil is in the details. Currently, at least 55 million homes have the infrastructure to get 100 Mbps deployments through fiber to the home or through a cable DOCSIS 3.0 deployment (the ISP may not offer 100 Mbps to the home, but it could be delivered). The time frame for getting 100 Mbps connections to 100 million homes wasn't defined, although Genachowski called this a "2020 vision." While I think a decade is too long to wait for 100 Mbps to a third of the nation, getting that much deployed is by far the plan's easiest aspect.

Speaking at the National Association of Regulatory Utility Commissioners Conference in Washington, Genachowski said:

"Our plan will set goals for the U.S. to have the world's largest market of very high-speed broadband users. A '100 Squared' initiative—100 million households at 100 megabits per second—to unleash American ingenuity and ensure that businesses, large and small, are created here, move here, and stay here.

"And we should stretch beyond 100 megabits. The U.S. should lead the world in ultra-high-speed broadband test beds as fast or faster than anywhere in the world. In the global race to the top, this will help ensure that America has the infrastructure to host the boldest innovations that can be imagined. Google announced a one-gigabit test bed initiative just a few days ago—and we need others to drive competition to invent the future."
a broad range of needs and goals

In addition to delivering 100 Mbps to almost a third of the population, Genachowski laid out several areas where the FCC would act to provide small businesses and rural areas with broadband. There were also hints as to how the FCC will convince laggards that broadband is a good thing. It sounds as if some of that convincing will come from lower access costs in some areas, combined with an overall shift in delivering services—from medicine to schooling—via broadband networks. The plan outlined by Genachowski includes the following recommendations:

• To improve the E-Rate program for Internet connections in classrooms and libraries.

• To modernize the FCC's rural telemedicine program to connect thousands of additional clinics and eliminate bureaucratic barriers to telehealth.

• To take the steps necessary to deploy broadband for the smart grid.

• To develop public/private partnerships to increase Internet adoption, so children can use the Internet proficiently and safely. Programs like the NCTA's new A+ program are a model.

• To free up a significant amount of spectrum in the years ahead for ample licensed and unlicensed use.

• To use government rights of way and conduits to lower the cost of wired and wireless broadband deployments.

• To build an interoperable public safety network to replace the current system.

Genachowski also said that while other countries with broadband plans have universality goals whose speeds range as high as 1-to-2 megabits per second, the U.S. goal for universal service will be higher. He talked up digital literacy as well, saying every child must be digitally literate by the time he or she leaves high school. He also offered scary statistics that Om Malik and I called on the FCC to address last year:

• Right now, roughly 14 million Americans do not have access to broadband.

• The U.S. broadband adoption rate is about 65%, compared with 88% in Singapore and 95% in South Korea.

• The U.S. adoption rate is even lower than 65% among low-income, minority, rural, tribal, and disabled households.

• Some 26% of rural business sites do not have access to a standard cable modem and 9% lack DSL.

• More than 70% of small businesses have little or no mobile broadband.

So this appears to be a decent sketch, although it's far less revolutionary than it might seem. Filling in the details around lowering costs and delivering actual services are where the plan could have the most impact. Getting a 100 Mbps pipe to a few million more people over the next decade will happen whether or not the FCC puts it in the National Broadband Plan. Delivering faster universal service to rural and low-income areas, real telehealth, a smart grid, broadband to schools and creating a digital literacy programs will be the real challenges.

Motorola Targets 1Q 2011 to Split off Handset Unit

USA Today

Struggling mobile phone maker Motorola said Thursday it plans to split off the business units that make the phones and television set-top boxes into a separate publicly traded company early next year.

Motorola said in late 2008 that it would spin off only its handset unit by the third quarter of 2009, but it put the separation plan on hold as the recession deepened and sales continued to deteriorate.

Now, it has decided to include the home business unit, which makes the set-top boxes, as part of the new company as well. The spinoff is planned for the first quarter of 2011.

Motorola Co-CEO Sanjay Jha, who will serve as the chief executive of the handset and home business, said the new combination "brings together two highly complementary and innovative organizations. Together we will be best positioned to lead in the convergence of mobility, media, and the Internet."

Motorola's cellphone business has been in a tailspin. The Schaumburg, Illinois-based company hasn't produced a hit since the wildly popular Razr phone in 2005. In recent months, Motorola has had its eyes set on smart phones running on Google Inc.'s Android operating system.

The company's other co-CEO, Greg Brown, will head what's left of the company, made up of the enterprise mobility and networks businesses.

Earlier, the company said that if the spinoff of the handset unit did not happen before Oct. 31, 2010, Jha would get $30 million in cash. It's unclear if Jha will be paid that amount.

Nokia, Intel Launch New Mobile Operating System

PC World

Nokia and Intel will merge two of their mobile operating systems into Meego, a Linux-based, open operating system for everything from advanced smartphones to netbooks, connected TVs and tablet computers, the companies said at a joint press conference on Monday.

The new operating system will combine the best features from each operating system, including the Moblin core and the UI (user interface) toolkit from Maemo. Intel developed Moblin, and Nokia developed Maemo. The first version of MeeGo will ship during the second quarter.

The first devices based on the operating system are expected to arrive during the second half of 2010, according to Renée James, senior vice president and general manager at Intel's Software and Services Group.

The operating system will support both Intel's Atom and ARM architectures. The MeeGo source code, along with the build system and developer tools will be released in the coming weeks, according to a FAQ on the MeeGo website.

The MeeGo code will be hosted by the Linux Foundation, and anyone who wants to develop an application for MeeGo will use the Qt framework. The use of Qt will let users develop an application once and then run it on multiple platforms, according to Kai Öistämö, executive vice president for devices at Nokia.

So far, Nokia is the only company that has said it will ship phones with MeeGo. However, more hardware partners and operators will announce support and product plans for MeeGo in the coming weeks, James said.

The arrival of MeeGo will not change Nokia's plans for Symbian. That operating system will still be used on cheaper smartphones, according to Öistämö.

Computer Hacker to Repay $27.5M, Sentenced to Prison for Credit Scam

USA Today

PITTSBURGH — A San Francisco man who had more than 1.8 million stolen bank and credit card numbers on his home computers was sentenced Friday to 13 years in federal prison and ordered to repay $27.5 million to the banks and credit card companies he victimized.

Max Ray Vision, who legally changed his last name from Butler, had pleaded guilty in June to his role in an online clearinghouse where identity thieves shared stolen information.

A self-taught computer whiz who fell in love with the devices as an 8-year-old boy in his father's computer store, Vision told Senior U.S. District Judge Maurice B. Cohill Jr. that he was mesmerized by "the thrill of hacking, being addicted to it."

Bespectacled, soft-spoken and articulate, the 37-year-old Vision told the judge he had changed and realizes what he did was wrong.

"You probably hear that a lot, but it's absolutely true," he said.

Cohill's sentence was based on a joint recommendation by federal prosecutors and Vision's public defender, Michael Novara. Federal sentencing guidelines suggested a sentence of 30 years to life, which Novara called "ludicrous."

Still, Assistant U.S. Attorney Luke Dembosky said serious punishment was merited because of the scale of Vision's crimes. Dembosky agreed to the lesser sentence because Vision has continued to work with the government under terms that remain sealed.

All Dembosky would say is, "It could relate to a whole range of things."

Before his arrest in 2007, Vision had developed software to prevent hacking and had even worked as a volunteer who helped the FBI understand and prevent cyber crimes.

Dembosky agreed that Vision wasn't mean-spirited, but was more "wide-eyed" and "curious" about what he could accomplish behind a keyboard.

"Unfortunately, that curiosity took a dark turn and that's why we're here today," Dembosky said. "The amount of damage a person can cause with a keyboard in this day and age is astronomical."

Visa, MasterCard, American Express and Discover tracked more than $86 million in fraudulent purchases to the account numbers found on Vision's computers. In all, 10,000 financial institutions were victimized, Dembosky said.

Vision was charged in Pittsburgh because he sold more than 100 credit card numbers and related information to a western Pennsylvania resident who cooperated with the investigation of a website called cardersmarket.com. About 4,500 people worldwide could trade or access stolen credit information on the website from 2005 until it was shut down in 2007.

Vision has been in custody since authorities raided his apartment in September 2007.

Although authorities found 1.8 million stolen credit card numbers on his computers, they said they were confident that Vision had obtained 1.1 million directly, Dembosky said. The others might have come from other sources.

Vision's $27.5 million restitution was calculated by multiplying the 1.1 million by the roughly $25 it costs banks and credit card companies to replace each stolen credit card number, Dembosky said.

"No one should think that's the amount of money Max gained as a result of this misadventure," said Novara, who claims Vision likely netted less than $1 million from selling the numbers.

"I think we're all trying to figure out, how did we get here?" Novara said.

Running Windows on a Mac

The Wall Street Journal

Parallel Zips Past Fusion in Running Windows on Macs

One of the advantages of the Apple Macintosh is that it's the only computer consumers can buy that is able to run both Apple's own Mac operating system and Microsoft Windows on the same machine. That means that, if you prefer the Mac environment, but need to run a program only available in Windows, you can do so on the same Mac, and even at the same time.

For instance, while I am writing this column on a Mac laptop in the Mac OS, using the Mac version of Microsoft Word, I am also simultaneously running the latest versions of Internet Explorer and Outlook—which aren't available for the Mac—in Windows, on the same machine. I can switch back and forth among these programs with ease.

Now, the two most popular software products for accomplishing this feat, Parallels and VMWare Fusion, have been updated to run faster, and to support the latest versions of the two operating systems, Apple's Snow Leopard and Microsoft's Windows 7. Each costs $80 and requires a Mac running an Intel processor.

I've been comparing these latest versions, called Parallels Desktop 5 and VMWare Fusion 3, using each to run Windows 7 on the same Mac laptop powered by Snow Leopard. My verdict is that, after falling behind Fusion for awhile, Parallels is now the best choice again. In my tests, it proved to be both faster, and more capable of handling the heavy-duty visual effects in Windows 7.

Both programs work by creating a so-called virtual machine—a software version of a physical computer—on the Mac. Inside these faux PCs, you can install any of dozens of operating systems and the applications that run on them. That includes numerous versions of Windows, including Windows XP and Vista, and, now, Windows 7. In order to do this, you will have to buy separately a new, full (not an upgrade) version of Windows, which costs about $200.

Both programs can run either the full Windows desktop, or individual Windows programs with the desktop hidden. Parallels now comes with a new mode, called Crystal, which integrates the Windows system even more, by placing the Windows Start menu and system tray icons in the Mac's own top menu bar.

These virtual-machine programs shouldn't be confused with Apple's own built-in solution for running Windows on a Mac, called Boot Camp, which also has recently been updated to handle Windows 7. Boot Camp can't run the two operating systems simultaneously; you must reboot the computer to switch between them. That gives Windows sole control of the hardware when it's running, but many people find Boot Camp inconvenient. I didn't test Boot Camp for this review.

Fusion 3, from Silicon Valley company VMWare, is a relatively minor revision. The latest version is mainly designed to add speed, simplify the interface, make it compatible with Snow Leopard and Windows 7, and to improve graphics performance. It achieves most of these goals, but I still found it ran more slowly with Windows 7 than it did with Windows XP. It also was significantly pokier than Parallels 5.

In addition, I found that Fusion had occasional trouble with the transparency effects in Windows 7, such as its ability to turn transparent Windows that are open so you can see your desktops. It also occasionally switched off Windows' new Aero feature, which offers live previews of task-bar icons. It sometimes turned all my Windows desktop icons white momentarily.

The bigger story is the comeback of Parallels, which is made by a Swiss-based firm of the same name. It was the first virtual-machine program for Intel-based Macs, but got eclipsed by Fusion. Now, the fifth version of Parallels is much faster and much better at the sophisticated graphics upon which Windows 7 relies.

In my tests, on a 2008-vintage MacBook Pro with 4 gigabytes of memory, Parallels 5 started up and had Windows 7 ready to roll nearly two minutes faster than Fusion 3. Windows 7 Home Premium launched from a cold start within Parallels about a minute faster than it did inside Fusion. And, when I restarted Windows 7 with several common programs running, it took two minutes and 23 seconds in Parallels 5, versus over four minutes in Fusion 3.

Beyond that, I found Parallels 5 handled the graphical previews and transparent effects in Windows 7 more quickly and smoothly than Fusion did. The Aero previews of running programs in the task bar appeared more quickly.

Also, I found Parallels 5 played high-definition video in Windows more smoothly than Fusion did. It also seemed to slow down the Mac side of computers less.

Parallels isn't perfect. In particular, it displays a black screen for a bit during start-up, something the company says it hopes to fix. And, while it shares the Mac's printer, it confusingly mislabels it.

Neither of these programs is the answer for Mac owners who want to run the latest heavy-duty games or other graphics-intensive programs in Windows 7. For them, I recommend either Boot Camp or separate Windows PCs.

But, if you're looking to run typical, everyday Windows programs on a Mac without rebooting, Parallels 5 is now the best solution.

PC Encryption Chip Hacked

SAN FRANCISCO (AP) - Deep inside millions of computers is a digital Fort Knox, a special chip with the locks to highly guarded secrets, including classified government reports and confidential business plans. Now a former U.S. Army computer-security specialist has devised a way to break those locks.

The attack can force heavily secured computers to spill documents that likely were presumed to be safe. This discovery shows one way that spies and other richly financed attackers can acquire military and trade secrets, and comes as worries about state-sponsored computer espionage intensify, underscored by recent hacking attacks on Google Inc.

The new attack discovered by Christopher Tarnovsky is difficult to pull off, partly because it requires physical access to a computer. But laptops and smart phones get lost and stolen all the time. And the data that the most dangerous computer criminals would seek likely would be worth the expense of an elaborate espionage operation.

Jeff Moss, founder of the Black Hat security conference and a member of the U.S. Department of Homeland Security's advisory council, called Tarnovsky's finding "amazing."

"It's sort of doing the impossible," Moss said. "This is a lock on Pandora's box. And now that he's pried open the lock, it's like, ooh, where does it lead you?"

Tarnovsky figured out a way to break chips that carry a "Trusted Platform Module," or TPM, designation by essentially spying on them like a phone conversation. Such chips are billed as the industry's most secure and are estimated to be in as many as 100 million personal computers and servers, according to market research firm IDC.

When activated, the chips provide an additional layer of security by encrypting, or scrambling, data to prevent outsiders from viewing information on the machines. An extra password or identification such as a fingerprint is needed when the machine is turned on.

Many desktops sold to businesses and consumers have such chips, though users might not turn them on. Users are typically given the choice to turn on a TPM chip when they first use a computer with it. If they ignore the offer, it's easy to forget the feature exists. However, computers needing the most security typically have TPM chips activated.

"You've trusted this chip to hold your secrets, but your secrets aren't that safe," said Tarnovsky, 38, who runs the Flylogic security consultancy in Vista, Calif., and demonstrated his hack last week at the Black Hat security conference in Arlington, Va.

The chip Tarnovsky hacked is a flagship model from Infineon Technologies AG, the top maker of TPM chips. And Tarnovsky says the technique would work on the entire family of Infineon chips based on the same design. That includes non-TPM chips used in satellite TV equipment, Microsoft Corp.'s Xbox 360 game console and smart phones.

That means his attack could be used to pirate satellite TV signals or make Xbox peripherals, such as handheld controllers, without paying Microsoft a licensing fee, Tarnovsky said. Microsoft confirmed its Xbox 360 uses Infineon chips, but would only say that "unauthorized accessories that circumvent security protocols are not certified to meet our safety and compliance standards."

The technique can also be used to tap text messages and e-mail belonging to the user of a lost or stolen phone. Tarnovsky said he can't be sure, however, whether his attack would work on TPM chips made by companies other than Infineon.

Infineon said it knew this type of attack was possible when it was testing its chips. But the company said independent tests determined that the hack would require such a high skill level that there was a limited chance of it affecting many users.

"The risk is manageable, and you are just attacking one computer," said Joerg Borchert, vice president of Infineon's chip card and security division. "Yes, this can be very valuable. It depends on the information that is stored. But that's not our task to manage. This gives a certain strength, and it's better than unprotected computers without encryption."

The Trusted Computing Group, which sets standards on TPM chips, called the attack "exceedingly difficult to replicate in a real-world environment." It added that the group has "never claimed that a physical attack - given enough time, specialized equipment, know-how and money - was impossible. No form of security can ever be held to that standard."

It stood by TPM chips as the most cost-effective way to secure PCs.

It's possible for computer users to scramble data in other ways, beyond what the TPM chip does. Tarnovsky's attack would do nothing to unlock those methods. But many computer owners don't bother, figuring the TPM security already protects them.

Tarnovsky needed six months to figure out his attack, which requires skill in modifying the tiny parts of the chip without destroying it.

Using off-the-shelf chemicals, Tarnovsky soaked chips in acid to dissolve their hard outer shells. Then he applied rust remover to help take off layers of mesh wiring, to expose the chips' cores. From there, he had to find the right communication channels to tap into using a very small needle.

The needle allowed him to set up a wiretap and eavesdrop on all the programming instructions as they are sent back and forth between the chip and the computer's memory. Those instructions hold the secrets to the computer's encryption, and he didn't find them encrypted because he was physically inside the chip.

Even once he had done all that, he said he still had to crack the "huge problem" of figuring out how to avoid traps programmed into the chip's software as an extra layer of defense.

"This chip is mean, man - it's like a ticking time bomb if you don't do something right," Tarnovsky said.

Joe Grand, a hardware hacker and president of product- and security-research firm Grand Idea Studio Inc., saw Tarnovsky's presentation and said it represented a huge advancement that chip companies should take seriously, because it shows that presumptions about security ought to be reconsidered.

"His work is the next generation of hardware hacking," Grand said.

Canon Launches New Rebel DSLR, Point-and-Shoots

PC World

On Monday, Canon introduced a few updates to its compact point-and-shoot camera line, as well as one new D-SLR, the EOS Rebel T2i. Though the new cameras span different price ranges, all of the new models will share one feature: they will all support the new SDXC memory card format, capable of storing up to 2 terabytes of data.

The new camera in Canon's entry-level DSLR line is the Canon EOS Rebel T2i. While the T2i looks nearly identical to the $799 (with lens) Canon EOS Rebel T1i, it incorporates many of the features found in the mid-range, $1,699 (body only)Canon EOS 7D DSLR.

Like the 7D, it will offer 18-megapixel captures via an APS-C sized CMOS sensor and will perform the same plethora of HD-video capture options as the more expensive model: 1080p at 30 and 24 frames per second, and 720p at 60 frames per second. The still-image capture speed will be closer to that of the T1i's 3.4 fps, however; the T2i will do 3.7 fps. Another interesting feature is that the HDMI port on the T2i will support HDMI-CEC; when connected to an HDTV that also supports HDMI-CEC, the HDTV's remote will be able to control the T2i; neither the Canon EOS 7D or Canon EOS Rebel T2i support this feature.

The Canon Rebel T2i will be available later this month for $799.99 (list, body only) or with an EF-S 18-55mm f/3.5-5.6 IS zoom lens for $899.99.

Canon also launched a number of more budget-minded point-and-shoots. Of those, the PowerShot SD1300 will be the only camera of the new bunch to not capture HD video. The shooter offers 12.1-megapixel captures, a wide angle 28mm lens, 4X optical zoom, a 2.7-inch LCD and will list for $199.99.

Next up is the PowerShot SD1400 IS, whose specifications are basically identical to the SD1300 but with HD video capture (at 720p30) and a mini-HDMI out for connectivity to HDTVs. The SD1400 specifications are also nearly identical to its predecessor, the PowerShot SD940 whose price has now been reduced from $299.99 to $249.99. Curiously, the new SD1400 IS is also priced at $249.99.

The PowerShot SD3500 IS is an update to Canon's first point-and-shoot with a touchscreen LCD, the Canon PowerShot SD980 IS, which was $329.99 but now lists for $299.99. The new SD3500 also is virtually identical from a specification standpoint as its predecessor, with a 4X optical zoom, a 24-mm wide-angle lens, HD video (at 720p30) and a mini-HDMI out. Aside from support for the SDXC format, the new SD3500 will sport a larger and higher resolution touch screen LCD—it boosts the 3.0-inch 230,000-dot LCD to a 3.5-inch 461,000-dot LCD. The Canon PowerShot SD3500 IS will list for $329.99.

A new super-zoom model was also announced: the $349.99 PowerShot SX210. It's an update to last year's PowerShot SX200, which now lists for $329.99. The new 14.1-megapixel shooter will boost optical zoom from 12x to 14x, and use a larger and higher-resolution 3.5-inch, 461,000-dot screen.

All of the compact cameras will be available later this month.

Publishers Win a Bout in E-Book Price War

NY Times

Could book publishers suddenly be in the position of telling Google what to do?

With the impending arrival of digital books on the Apple iPad and feverish negotiations with Amazon.com over e-book prices, publishers have managed to take some control — at least temporarily — of how much consumers pay for their content.

Now, as publishers enter discussions with the Web giant Google about its plan to sell digital versions of new books direct to consumers, they have a little more leverage than just a few weeks ago — at least when it comes to determining how Google will pay publishers for those e-books and how much consumers will pay for them.

Google has been talking about entering the direct e-book market, through a program it calls Google Editions, for nearly a year. But in early discussions with publishers, Google had proposed giving them a 63 percent cut of the suggested retail price, and allowing consumers to print copies of the digital books and cut and paste segments. After Apple unveiled the iPad last month, publishers indicated that Apple would give them 70 percent of the consumer price, which publishers would set.

According to several publishers who have been talking to Google, the book companies had balked at what they saw as Google’s less generous terms, and basically viewed printing and cut-and-paste as deal breakers.

Now that both Apple and Amazon have agreed to terms more to the book companies’ liking, several publishers said that their conversations with Google have taken on a more flexible tone.

These publishers, who requested anonymity because their discussions with Google are confidential, said Google had relaxed its plans to allow customers to print or cut and paste.

“Google has always been open to working with publishers as part of Google Editions, in terms of supporting an open and competitive e-book market,” said Daniel Clancy, director of Google Books.

How e-books are sold — and for how much — has been a crucial topic of debate among publishers and retailers for the last two years, as digital books have taken off. Led by Amazon.com’s Kindle electronic reading device, the e-book market is growing at a fast clip, fueled partly by cheap digital editions. Amazon and several other retailers now offer new releases and best sellers for $9.99, far less than the typical $26 cover price on hardcovers.

Publishers have been fretting that such pricing has devalued books in the minds of consumers and have been looking for ways to regain control of what readers pay. When Apple unveiled its iPad, it said it had agreements with five of the country’s six largest publishers. Under those agreements, publishers would set e-book prices — within limits — so that new releases of most general fiction and nonfiction would sell for $12.99 to $14.99. Apple will act as an agent of the publishers — a set-up known in the publishing world as the agency model — and take a 30 percent cut of each sale, leaving the rest for publishers to split with authors.

In early negotiations, the 63 percent Google had been offering publishers was based on a wholesale model, but executives briefed on the discussions said that Google was now open to talking about an agency model and was also prepared to discuss paying publishers 70 percent of each sale.

Even Amazon has been forced to back off its $9.99 pricing in an agreement with Macmillan, one of the country’s six largest publishers. In a recent dust-up after Macmillan told Amazon it was moving to the 30 percent agency model with higher consumer pricing, Amazon removed direct access to Macmillan’s physical and electronic books from its site for a week. Amazon later surrendered to the publisher’s terms.

Google’s e-book retail program would be separate from the company’s class-action settlement with authors and publishers over its book-scanning project, under which Google has scanned more than seven million volumes — mostly out of print — from several university libraries. That settlement was recently imperiled by a filing from the Department of Justice that said it still had significant legal problems with the agreement, even after a round of revisions. The settlement is subject to court approval.

Google users can already search up to about 20 percent of the content of many new books that publishers have agreed to enroll in a search program. According to publishers, Google originally said it would automatically enroll any book sold through Google Editions in the search program. An executive from at least one of the six largest publishers said the company did not agree with those terms. Mr. Clancy said that Google would not require books sold through Google Editions to be part of the search program.

Last May Tom Turvey, director of strategic partnerships at Google, told publishers at the annual BookExpo convention in New York that Google’s program for selling new e-book editions would allow consumers to read books on any device with Internet access, including mobile phones, rather than being limited to dedicated reading devices like the Amazon Kindle.

Google, without its own e-reader, wants to be a Switzerland of sorts, competing with Barnes & Noble and other e-book sellers to become the preferred digital bookstore on devices other than the iPad or the Kindle, such as Android smart phones.

In general, publishers are eager for Google to enter the e-book market because they want more competition. “We would love to have a diverse marketplace for e-books,” said Maja Thomas, senior vice president for the digital division of Hachette Book Group, which publishes blockbuster authors like James Patterson and Stephenie Meyer. Since Google would contribute to such diversity, Ms. Thomas said, “we welcome them.”

If Google does enter the e-book market, it would be one of a handful of programs under which the company sells content directly to consumers. Google generates the majority of its revenue from ad sales on its search pages and on the Web sites of publishing partners. It is now charging for content through its YouTube unit, renting digital versions of independent films tied to the Sundance Film Festival.

China Heralds Bust of Major Hacker Ring

The Wall Street Journal

SHANGHAI—China heralded a major bust of computer hackers to underscore its pledge to help enhance global online security, with state media saying officials had shut what they called the country's largest distributor of tools used in malicious Internet attacks.

Three people were arrested on suspicion of making hacking tools available online, the state-run Xinhua news agency said on Monday. Their business, known as Black Hawk Safety Net, operated through the now-shuttered Web site 3800cc.com and generated around $1 million in income from its over 12,000 subscribers, the report said.

The arrests took place in late November as part of a police investigation that spanned three Chinese provinces and resulted in part from Black Hawk's role in domestic cyberattacks, according to Xinhua.

The delay in announcing the case wasn't explained. China in recent weeks has waged an aggressive public-relations campaign on the issue of hacking, apparently at least in part aimed at discrediting allegations from Google Inc. and others last month that China was the source of sophisticated cyberattacks against the Internet search giant and a number of other foreign companies. After U.S. Secretary of State Hillary Clinton also raised concerns about hacking from China, Chinese state media said her comments were hypocritical and said Google had become a pawn in an American "ideology war."

State-media reports described Black Hawk as offering hacking "training," which is a euphemism for selling malicious software. Xinhua said the site helped disseminate a computer virus in 2007 that wreaked havoc on private and government computers in the city of Macheng, in the central province of Hubei.

The Macheng prosecutor's office, in a statement, identified two men formally arrested in the case on Dec. 31 as 29-year-old Li Qiang and 28-year-old Zhang Lei. The statement said they were founders of Black Hawk Safety Net. The men couldn't be reached for comment. A man answering phones at an office of Black Hawk in the Henan province city of Xuchang said its servers had been shut down but that he couldn't elaborate.

Chinese hackers have described the Black Hawk operation, which also included the site 3800hk.com, as important, but just among the many on the Internet. Increasingly, they say, programs designed to break into Internet-connected computers, known as hacking tools, are available on Chinese-language sites that are located outside the country.

China's closure of Black Hawk Safety Net reflects the use of a new clause in its criminal law that makes it illegal to offer others online attack programs. Xinhua said some 1.7 million yuan in assets, or about $249,000, were also seized, including cash, nine servers, five computers and a car.

Numerous reports have fingered Chinese sources as the suspects in various cyberattacks, including ones that targeted the offices of the Tibetan spiritual leader Dalai Lama and the German chancellor's office. Within China, various attacks over the years have involved theft of user accounts and whole Web site source code.

Determining the origin of Internet attacks is difficult, however. While Google alleged that the hacking attempts it faced originated China, for instance, outside experts briefed on the attacks say they were actually traced to servers in Taiwan, which some experts say Chinese hackers could have used as a cover.

Some reports say that China hosts far less malicious software on its servers than is held on U.S. systems and is less of a spy threat than the U.S. Other experts point out China is a less-than-ideal location to launch overseas attacks because the Internet's international links are slowed by limited bandwidth and heavy content filtering.

China has described itself as the largest global victim of Internet hackers. According to a report released by the National Computer Network Emergency Response Coordination Center of China, Xinhua said, the hacker industry in China caused losses of 7.6 billion yuan ($1.11 billion) in 2009.

Microsoft, Partners Pitch in on Super Bowl Security

Information Week

A collaboration platform combines SharePoint, mapping software, and analysis capabilities to let law-enforcement agencies in Miami share information in real time.

Law-enforcement officials will have help keeping Super Bowl attendees in Miami safe using collaboration technology from Microsoft and its partners.

The system, called Project Dolphin, will let officials collect information from different law-enforcement agencies, including the Miami-Dade Police Department, during Sunday's event and share and analyze that information in real time.

Project Dolphin combines tools from Microsoft, ESRI, GuideSTAR Technologies, and Analyst International Corp (AIC). The system comprises Fusion Core Solution, developed by Microsoft and ESRI, which uses Microsoft's SharePoint Server with ESRI's ArcGIS 9.3.1 server and GuideSTAR's investigative and intelligence analysis tool, GS/1.

Different public-safety organizations will be keeping track of security at Super Bowl XLIV, and the data they collect is stored in their own systems. Fusion Core brings that information together into one system, enabling authorized personnel to exchange documents, information, and alerts securely.

Authorities can view information geospatially using ESRI's visualization and mapping technology, while other software enables analysis of the information gathered.

Miami-Dade Police, the eighth largest law-enforcement agency in the U.S., will be using the Project Dolphin software with its own IT system, which is already quite sophisticated, Microsoft said.

DOJ Deems Amended Google Book Search Deal Anticompetitive

eWeek

The Department of Justice Feb. 4 urged a New York District Court not to bless Google's amended Google Book Search deal with authors and publishers, citing copyright and antitrust issues that render the deal anticompetitive. The DOJ said the deal would let Google be the only competitor in the digital marketplace with the rights to distribute many works in multiple formats. The DOJ further agreed to work with Google, authors and publishers on a viable, fair solution. District Court Judge Denny Chin will hold a hearing on the amended settlement agreement Feb. 18.

The Department of Justice said copyright and antitrust concerns continue to make Google's amended settlement agreement for its Google Book Search project anticompetitive, suggesting the court presiding over the case shouldn't bless the deal.

Acknowledging that Google and authors and publishers have made considerable progress in their agreement to digitize books and offer them to readers through Google's  search engine, the DOJ told the U.S. District Court for the Southern District of New York Feb. 4:

"Although the United States believes the parties have approached this effort in good faith and the amended settlement agreement is more circumscribed in its sweep than the original proposed settlement, the amended settlement agreement suffers from the same core problem as the original agreement: it is an attempt to use the class action mechanism to implement forward-looking business arrangements that go far beyond the dispute before the court in this litigation."

Google and the Author's Guild and the Association of American Publishers in October 2008  struck their Google Book Search deal, a plan in which Google would scan millions of orphan books, or those works for whom authors can't be found or are unknown. Google would then let users search for them and pay to use the works, with authors and publishers taking 63 percent of the sales and Google taking the remaining 37 percent. 

The DOJ and Google's search rivals opposed the deal, arguing that it would give Google too much control over orphan works in an increasingly competitive space. Privacy advocates complained that Google wasn't taking the necessary precautions to protect readers' privacy.

Google, authors and publishers in November 2009 revised the settlement, which has been picked over and commented on by opponents and proponents while the District Court reviews the deal.

In a 31-page filing to presiding District Court Judge Denny Chin, the DOJ acknowledged the parties in the deal made "substantial progress" over such concerns as: enabling rivals to access orphan works; imposing limitations on provisions for future licensing; eliminating potential conflicts among class members; providing more protections for orphan works; and addressing the concerns of foreign authors and publishers.

However, the DOJ claimed the deal still affords Google "anticompetitive advantages." Specifically, the DOJ said the deal would let Google be the only competitor in the digital marketplace with the rights to distribute many works in multiple formats. The DOJ further agreed to work with Google, authors and publishers on a viable, fair solution.

Google's response to the DOJ's filing ignored the negative conclusion, playing up the positive. A Google spokesperson told eWEEK:

    "The Department of Justice's filing recognizes the progress made with the revised settlement, and it once again reinforces the value the agreement can provide in unlocking access to millions of books in the U.S.

    We look forward to Judge Chin's review of the statement of interest from the Department and the comments from the many supporters who have filed submissions with the court in the last months. If approved by the court, the settlement will significantly expand online access to works through Google Books, while giving authors and publishers new ways to distribute their works."

Despite Google's positive spin, experts have said they would be surprised if Chin disagreed with the DOJ and approved the amended settlement agreement, which comes almost five years after authors and publishers filed a copyright infringement suit versus Google.

Chin, who has received reams of documentation from opponents and proponents of the deal in the last few weeks, will hold a hearing on the amended settlement agreement Feb. 18.