 June 2000
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Compiled and Edited from Newsbytes News Service by Charles Anthony
Wireless Competition By Sherman Fridman Newsbytes - It's time to look at new ways of increasing competition in a rapidly consolidating mobile market, according to a new report released today by Ovum, an independent research and consulting company. According to the report titled, "Virtual Mobile Services: Strategies for Fixed and Mobile Operators, the battle to secure 3G (third generation) licenses for wireless telephones comes amid a scarce radio spectrum and is concentrated in the hands of a few powerful companies. Ovum argues in its report that competition can be sustained by encouraging the creation of more mobile virtual network operators (MVNOs). This, Ovum contends, will increase customer choice and enable new entrants to compete. However, the company says that this will only happen if regulators act in support of this new business model. John Matthews, Ovum's principal consultant and author of the report, told Newsbytes that Ovum uses a very strict definition of a MVNO: an operator that provides its own SIM card in an GSM environment, or a mobile network with its own unique ID in a non-GSM environment. According to this definition, Matthews said, there are no second, much less third, generation MVNOs. However, there are mobile telephone companies that provide enhanced services, and these companies are often included within a more broad definition of MVNOs. The Ovum report would be applicable to these companies as well, Matthews said. Matthews says that at present, competition is not delivering lower prices to wireless telephone subscribers. He says this is because spectrum ownership is extremely lucrative and the largest mobile operators are exploiting it to turn in extremely high profit margins. Matthews feels that further competition is needed to bring about a lowering of prices, but before this can happen, new entrants will have to be brought into the market. This is where regulators can have an impact by easing entry into the market for these new companies. While the Ovum report acknowledges that current experiments with virtual network operation have been successful, it points out that because there is no regulatory requirement for existing spectrum owners to allow others access to their networks, these other companies depend on individual agreements between partners. And not all of the existing operators, Ovum warns, will be keen to allow new entrants access to spectrum for which these new entrants have not paid. According to the report, there are considerable barriers for potential MVNOs to overcome. If there is an environment without regulatory support, physical operators on "home turf" may view challengers as a considerable threat, and may even be willing to mount a legal challenge against them. And, even when a spectrum owner grants airtime to a new MVNO, it may be at a price that makes profitability impossible. Another hurdle cited by Ovum is the high marketing and customer acquisition costs inherent in the mobile market, with vigorous competition from well-established players. In spite of the hurdles, Matthews says that existing mobile operators should see the MVNO as an opportunity presenting an alternative way of expanding into new markets. "The operator who is a big fish at home is often small fry abroad, making for a neat role reversal," he said in a prepared statement. "In this situation, everyone benefits from more open access." Matthews says that there is no reason why well-known household brands, or even sports teams, shouldn't run MVNOs. He feels that this would present a new channel to market for operators with a smaller market share, as they could use their strategic partner's superior branding and marketing capabilities to increase traffic on their networks. For the long term, Ovum reports that MVNOs will not flourish without some regulatory intervention. Many regulators, the report recognizes, have resisted this approach, as they take a wait-and-see attitude as to whether market forces will achieve the desired results. Ovum's advice to companies with an interest in MVNOs is to formulate a strategy sooner rather than later. Matthews says that no one should wait for the regulators to act. "It's far better to work out a solution in advance rather than having one forced on you later." More information from Ovum is available at http://www.ovum.com House Subcommittee Approves Wireless Tax Reform Bill By Brian Krebs Newsbytes - The House Judiciary subcommittee marked up a bill that would help simplify the collection of taxes on wireless phone calls. The Judiciary's Subcommittee on Commercial and Administrative Law passed H.R. 4391, a bill that would allow taxation of cellular phone calls only in a users' "primary place of use," the billing address that users have provided. Currently, when wireless subscribers make calls outside their calling area, those calls are subject to taxes based on the jurisdiction they happen to be calling from. -[PULL QUOTE] - The result is often that consumers are taxed several times for the same phone call. At present, there are more than 36,000 separate tax jurisdictions for wireless calls. - [PULL QUOTE] The subcommittee was also scheduled to mark up a very similar bill, H.R. 3849, Wireless Telecommunications Sourcing and Privacy Act, sponsored by Commerce Committee Subcommittee on Telecommunications, Trade and Consumer Protection member Rep. Chip Pickering, R-Miss. In addition to simplifying the taxation of wireless phone calls, H.R. 3849 includes language to protect consumers against wireless eavesdropping, and requires the a study of regulatory fees collected by the Federal Communications Commission (FCC). But after passing H.R. 4391, it became clear that - due to an altogether different set of jurisdictional issues - the subcommittee had no intention of marking up Pickering's bill. Subcommittee Ranking Democrat Jerrold Nadler, NY, said he would rather not consider the Commerce Committee bill, adding that to do so would only encourage the committee to further encroach upon the Judiciary's solemn ground. "The Commerce Committee doesn't need to act in this area, which has always been our primary area of jurisdiction," Nadler said. "For 40 years the Commerce Committee has been trying to take away our jurisdiction in this area. But not today." House OKs Anti-Access Charge Bill By Robert MacMillan Newsbytes - Per-minute Internet access charges now are one step closer to being considered perfidy, at least in the legal context, as the House of Representatives in a voice vote approved a bill calling for a ban on the currently non-existent practice. The bill, H.R. 1291, Internet Access Charge Prohibition Act, would ban the Federal Communications Commission from imposing per-minute charges on Internet access, but a carve-out inserted during the measure's markup stage in the House Commerce Committee excludes Internet-based voice services from the exemption. The FCC repeatedly has said that it has no interest in charging per-minute access taxes, and issued a terse statement on the bill's passage today, saying that the agency considers the legislation "superfluous." Rep. Robert Goodlatte, R-Va., issued a statement that praised the bill, saying that while the fictional H.B. 602P bill by the equally fictional "Congressman Schnell" helped get the ball rolling on this issue, the FCC still has the power to assess the charges. "Today the House of Representatives pulled the plug on per-minute Internet fees," Goodlatte said. "No one should be inhibited from accessing the wide array of resources available on the World Wide Web." The bill passed under the House's "suspension rules," which help get relatively non-controversial bills through the House on a faster track. Senate action still is required before the bill can go to the White House, and some opposition may mount from Internet voice telephony providers, who object to the possibility that the FCC still may tax their offerings. Yahoo Suit Cites Privacy, Free Speech Violations By Martin Stone Newsbytes - A federal lawsuit filed in California against Web portal Yahoo Inc. [NASDAQ:YHOO] could establish important protections for Internet privacy and anonymity, said a statement by the American Civil Liberties Union (ACLU) and the Electronic Privacy Information Center (EPIC). The lawsuit was brought against Yahoo by a user of the service provider's financial message boards, and challenges the company's practice of disclosing personal user information to third parties without prior notice to the user, the statement said. Privacy and free speech advocates have criticized Yahoo's policy on grounds that Web users have a right to communicate anonymously. The statement alleged that over the past year, Yahoo has been inundated with subpoenas issued by companies seeking to identify individuals anonymously posting information critical of the firms and their executives. The privacy groups stated that without notifying the targeted users, and without assessing the validity of the legal claims in the subpoenas, Yahoo systematically discloses such information as users' names, e-mail addresses and Internet protocol addresses, and asserted that Yahoo is unique among major online companies in its refusal to notify users of subpoenas and provide them with an opportunity to challenge information requests. ACLU said it favors at least two legal protections for anonymous chatters; that any complaint filed against an unknown defendant include specifics of the allegedly objectionable postings; and that judges not allow lawyers to issue subpoenas without requiring that the Internet service provider notify the potential defendant that someone is seeking personal information. According to EPIC General Counsel, David L. Sobel, "Online Anonymity plays a critical role in fostering free expression on the Internet, and has clearly contributed to the popularity of the medium. The US Supreme Court has ruled that anonymity is a constitutional right, but practices such as those of Yahoo may make that right illusory online." The suit filed in US District Court in Los Angeles was brought by "Aquacool_2000," a pseudonymous Yahoo user whose personal information was allegedly disclosed to AnswerThink Consulting Group, Inc., a publicly held company, the joint statement said. Further information on the legal action can be found at http://www.epic.org/ Phone.com Files Lawsuit Against Geoworks By Steve Gold Newsbytes - Phone.com [NASDAQ:PHCM], arguably the father of all things WAP (wireless application protocol) and microbrowser, has filed a lawsuit against Geoworks [NASDAQ:GWRX], alleging Geoworks' patents on mobile Internet technology are invalid. The lawsuit has been refuted by Geoworks, which maintains its patents - issued by the US patents office earlier this year - are valid and enforceable. In a blistering press statement, Phone.com said it alleges, and seeks a court order declaring, that it does not infringe on US Patent No. 5,327,529 (the 529 patent) - assigned to Geoworks. In addition, the firm said, its lawsuit seeks a court order declaring the 529 patent as also invalid and unenforceable. "As a leader in the wireless Internet industry, Phone.com took this action in response to Geoworks' aggressive attempt to require industry participants to obtain licenses under the Geoworks patent," Phone.com said in a press statement issued overnight. In its complaint, Phone.com asserts that its technology does not infringe the Geoworks '529 patent, and that the patent is also invalid and unenforceable. Phone.com CFO Alan Black said that the firm believes that this lawsuit will produce an unequivocal declaration that Geoworks' patent has no relation to - and is not infringed by - Phone.com's technology, as well as the declaration that the patent is invalid and unenforceable. In response, Geoworks this morning issued a press statement saying that, although the lawsuit was not sent to its offices, Phone.com has widely distributed a legal complaint over the Internet and to the "Geoworks views Phone.com's claims as completely without merit, and in particular any alleged imminent threat of a lawsuit, as an attempt to interfere with Geoworks' established licensing program," the press statement said. In the statement, Geoworks President Dave Grannan called Phone.com's action "unprofessional," adding that Geoworks has never accused any company, including Phone.com, of infringing its patent. "We created a very straightforward licensing program and announced it to the WAP Forum in accordance with the forum's rules, which Phone.com helped establish. Now it would seem that Phone.com has decided these rules no longer apply and is pursuing a lawsuit against us, which we believe violates the spirit of the WAP Forum charter," he said. Grannan added that Geoworks is already in discussions with a number of leading industry participants who have recognized "both our good intentions and the validity of our intellectual property rights claims." "In fact, just last week we called Phone.com to set up another meeting to discuss licensing," he said, adding that the lawsuit shows that Phone.com's management favors litigation over the widely-accepted business solution of licensing. Geoworks' Web site is at http://www.geoworks.com . The full text of Phone.com's complaint is available online at http://www.phone.com/news/Archive2000/geoworksfiling.html . Dr. Dre Sues Napster By Sherman Fridman Newsbytes - Popular rap music artist, Dr. Dre, also known as Andre Young, has dropped the other shoe on Napster, Inc., the online company that permits the storage and sharing of music via its Web site. Dr. Dre, and his record label, Aftermath Entertainment, filed suit Tuesday against Napster, Inc. in the United States District Court Central District in California (Los Angeles) alleging copyright infringement. Just last week, Dr. Dre sent a letter to Napster, Inc. demanding that they remove all of his music from the company's Web site. In the lawsuit, Dr. Dre alleges that Napster's attorney, by letter dated April 19, 2000, "refused to take appropriate steps to discontinue the ongoing infringements." The suit is similar to the one filed earlier this month against Napster by the heavy metal band known as Metallica. Napster is also in litigation with the Recording Industry Association of America (RIAA), a trade association representing some of the largest music publishers; again, the basis of the complaint is copyright infringement. However, some other performers have sided with the beleaguered San Mateo-based company. The hard rock band known as "Limp Bizkit" is reportedly set to launch a free US concert tour under the sponsorship of Napster which is said to be underwriting the estimated $1.8 million cost of the multiple-city, cross-country tour. The grounds for each of the lawsuits against Napster are, essentially, that since the company allows individuals to share music without the permission of, or compensation to, the copyright owners of the music, they are violating United States copyright law. Napster, in its defense, states that it is simply trying to promote unknown artists and does not promote copyright infringement. In addition, Napster says that its activities fall within the "Safe Harbor" provisions of the Digital Millennium Copyright Act (DMCA). The safe harbor provisions specifically protect companies such as Internet service providers (ISPs) from liability for copyright infringement by their subscribers if the ISPs take down infringing material when notified that a user is using the ISPs' facilities improperly. Napster claims that it will remove anyone from using its Web site if they are found to be violating copyright law. Newsbytes obtained a copy of the complaint filed by attorney Howard King on behalf of the rapper. In it, Dr. Dre, alleges that Napster, Inc., by encouraging and enabling visitors to its Web site to unlawfully exchange copyrighted sound recordings with others without the knowledge or permission of Dr. Dre., has violated the law by committing continuing copyright infringements and unlawful use of a digital audio interface device. The complaint filed on behalf of Dr. Dre and Aftermath Entertainment seeks to have the trial of the case heard by a jury. Also being sought are "maximum statutory damages in the amount of not less than $1000,000 with respect to each copyrighted work infringed.," and for preliminary and permanent injunctions requiring Napster "to deliver up for impoundment or destruction all instrumentalities or devices in their possession, custody or control which were used by defendants (Napster, Inc.) in their unlawful conduct .." Neither Howard King, Dr. Dre's attorney, nor Laurence Pulgram, Napster's attorney, were available for comment. Napster Claimants "Liars," Says Metallica's Attorney By Sherman Fridman Newsbytes - More than 30,000 of the 300,000-plus music fans barred from the Web site of Napster, Inc., the online music sharing software company, want their access restored. Howard King, the attorney for the hard rock group Metallica, whose actions caused these fans to be barred from accessing Napster software, has labeled them liars. Approximately 330,000 music fans were barred from the Napster Web site recently when Metallica claimed that the fans were infringing on Metallica's copyrights by sharing Metallica recordings among themselves and others without permission or paying royalties. Earlier this month, Metallica delivered the names of Napster users to the company with the demand that these names be blocked from access to the Napster Web site. Napster complied on May 9. However, at the time it took the action, Napster gave instructions to the barred users advising them how to make a claim against Metallica if the users believed that they were wrongly identified. In published reports, Napster says that it has received notice from more than 30,000 users of its MusicShare software stating that they were misidentified as people who had illegally traded Metallica's copyrighted music. Napster says that under federal law, if Metallica does not take legal action within ten days against the barred users who said that they had been wrongfully identified, Napster would be compelled to restore the users to its Web site. Napster also says that it has begun to forward the claims of ousted users to Metallica's attorney. Howard King, Metallica's attorney, confirmed that he had received a "boatload of perjurious statements" from Napster. "They're absolutely lying," King asserted. "There's no question that they're lying. Each and every one of them was offering Metallica MP3s for uploads." King said that what Napster has done is to encourage 30,000 people to subject themselves to criminal liability. The basis for King's statement is that each of the claims from blocked Napster users is signed under penalty of perjury, meaning that the signers can be prosecuted criminally for perjury if they were found to have lied. King said that while he did not intend to seek criminal prosecution against 30,000 people, he would be using their claims as evidence in court to establish just what "a joke" Napster's claimed copyright protection policy was. The Recording Industry Association of America (RIAA) and rap artist, Dr. Dre, have also sued Napster on essentially the same grounds, claiming that Napster's software allows users to replicate and trade recorded music with others without paying a license fee. Napster had contended that it did not make any copies itself, and that the company was not responsible for how third parties used Napster software. This contention was rejected, as a matter of law, earlier this month by the judge hearing the RIAA's lawsuit against Napster. Asked about the correctness of Napster's assertion that legally it had to restore the barred names to access of its Web site within ten days if Metallica took no action against the individual claimants, King disagreed. He said that that would be the case if Napster were an Internet service provider (ISP), but that Napster's claim that it was just like an ISP was rejected by the judge in the RIAA lawsuit. Napster was wrongly trying to "bootstrap" itself into the category of an ISP in order to be able to take advantage of certain protection given to ISPs by the Digital Millennium Copyright Act of 1998, King said. Napster's attorney could not be reached for comment. Reported by Newsbytes.com (c) Post-Newsweek Business Information, 2000. All rights reserved. |
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