July 2011

The Federal Communications Commission says it doesn't have to provide Sen. Chuck Grassley, R-Iowa, with information on LightSquared's contentious bid to build a nationwide wireless network.

In the latest letter from FCC, released this week, Chairman Julius Genachowksi argues that the agency only has to comply with information requests from the leaders of congressional committees that have oversight authority for the FCC.

"I regret that some misunderstandings seem to have arisen as a result of several staff-level conversations, and thus welcome the opportunity to clarify the points that the FCC staff sought to convey and to make clear that, far from seeking to stifle congressional oversight, the agency is simply following long-standing practice consistent with Congress's own guidance..." the letter states.

But Grassley says it isn't a matter of misunderstanding so much as the FCC trying to hide something.

"The issue is whether the FCC will operate voluntarily as an open, transparent institution or whether it will withhold documents from congressional review unless legally forced to comply," Grassley said in a statement. "Refusing a legitimate request in the public interest should require more justification than 'we don't have to.'"

Grassley has gone back and forth with the FCC over concerns that LightSquared's planned network will interfere with global positioning systems. The senator has raised questions about how the plan was initially approved by the FCC.

In his last letter to the agency, sent July 5, Grassley questioned whether the FCC should be more concerned about federal probes into LightSquared investor Phillip Falcone.

Genachowski countered that the investigations are informal and that unless misconduct is "so egregious as to shock the conscious and evoke almost universal disapprobation," the agency will wait until the cases are actually concluded.

Sen. Dick Durbin, D-Ill., said he plans to introduce a bill on Friday requiring online retailers to collect state sales taxes, closing what brick-and-mortar retailers have long said is a "loophole" that gives companies such as Amazon and eBay an unfair advantage.

His bill would revisit a 1992 Supreme Court ruling that states cannot force Internet retailers to collect sales taxes from customers unless the company has a physical presence in the state. The bill would let states collect sales taxes based on where the customers live, rather than where the retailer is located.

Similar bills have been introduced in previous years. States like the plan because they would collect extra cash in a tough year for balancing budgets.

"The Main Street Fairness Act doesn't ask anyone to pay a single penny more in taxes. Instead, it would help governors and mayors collect taxes that are already owed," Durbin said earlier this year when he announced his plan.

"Between 2009 and 2012, states across the country, including Illinois, are expected to lose as much as $37 billion in uncollected state and local taxes on internet and catalogue sales. From 2005 to 2010 the state of Illinois estimated it lost $153 million each year."

Major retailers were pleased to see their issue move forward.

"This is a solid first step toward closing this loophole and getting government out of the business of picking winners and losers. We'll be working in the weeks and months ahead to build support for a bipartisan solution," said Jason Brewer, vice president of communications and advocacy at the Retail Industry Leaders Association, which includes Wal-Mart and Target.

Many government agencies need to update their privacy and records management to keep up with new social media, according to a Government Accountability Office Report released Thursday.

"Federal agencies increasingly use recently developed Internet technologies that allow individuals or groups to create, organize, comment on, and share online content," the report noted. "However, these services may also pose risks to the adequate protection of both personal and government information."

The GAO surveyed 23 major agencies, including the departments of Homeland Security, Defense, and Commerce. About half had developed new records management and privacy policies. A third had conducted assessments of privacy and cybersecurity.

According to the report, some agencies asserted that existing policies already cover social media. That, the GAO says, is a mistake.

"Social media technologies present unique challenges and risks, and without establishing guidance and assessing risks specific to social media, agencies cannot be assured that they are adequately meeting their responsibilities to manage and preserve federal records, protect the privacy of personal information, and secure federal systems and information against threats," the report concludes.

Among the agencies that had not done anything to evaluate or update their polices were NASA, the Social Security Administration, Small Business Administration, and the U.S. Agency for International Development, according to the report.

All other departments surveyed had taken at least some steps.

The GAO report recommends that agencies update policies to explicitly describe how personal information collected through social media may be used, as well as conduct surveys of potential privacy and cybersecurity risks.

Top Republicans on the House Energy and Commerce Committee said Thursday they are investigating whether the Federal Communications Commission improperly coordinated with the White House and public interest groups in the development of the network neutrality rules adopted in December.

In a letter to FCC Chairman Julius Genachowski, the lawmakers cited instances where they say commission officials may have improperly met with the White House or outside groups to discuss the network neutrality rules. The FCC's rules bar broadband providers from discriminating against Internet content, services or applications. President Obama endorsed the rules after they were adopted.

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"Agency decisions should be based on law and policy," Energy and Commerce Chairman Fred Upton, R-Mich., Communications and Technology Subcommittee Chairman Greg Walden, R-Ore., and Oversight and Investigations Subcommittee Chairman Cliff Stearns, R-Fla., wrote.

"These allegations suggest the FCC's network neutrality proceeding was designed to fulfill a presidential campaign slogan, when it should have been based on an analysis of statutory authority, an economic analysis of the Internet service market, and an examination of the record," they added.

"If true, it seems the FCC failed to develop an independent conclusion derived from a balanced fact-based record, which is incompatible with proper rule-making."

Among the examples the lawmakers cited included meetings they say Genachowski and a top FCC official had at the White House during which the net neutrality rules were debated, and meetings between Commissioner Michael Copps' staff and the public interest group Free Press, which favored stronger net neutrality rules than were ultimately adopted.

The lawmakers have asked the FCC for information -- by Aug. 12 -- on a wide range of communications related to the commission's network neutrality proceeding between June 25, 2009 and Dec. 21, 2010.

The information includes all the communications between the FCC and the White House, as well as any third parties who discussed the issue with commission officials. In addition, the lawmakers are seeking information about whether FCC officials discussed any conditions or commitments related to the open Internet rules as part of its examination of the Comcast-NBC Universal merger.

A spokesman for Genachowski said, the agency woudl cooperate.

Public interest groups said committee probe unfairly targets net neutrality supporters and not opponents.

"This is a poorly researched, blatantly partisan fishing expedition," Free Press President and CEO Craig Aaron said in a statement. "It cites the thoroughly debunked and ridiculous notion pushed by the group Judicial Watch that routine, publicly documented ex parte contacts between Free Press and Commissioner Copps' office were somehow nefarious. If that's what these congressmen call coordination, then Congress should be far more concerned with the agency's coordination with powerful companies like AT&T, which shaped the final net neutrality rules that Free Press roundly criticized."

British police said Wednesday they nabbed a frontman for the hacker group LulzSec. But did they get the right guy?

The share price of Sprint Nextel Corp., the third- largest U.S. mobile-phone carrier, crashed Thursday it reported disappointing results, Bloomberg reports.

Amazon announces a licensing agreement with NBCUniversal to allow U.S. Amazon Prime customers to stream movies from Universal Pictures' library of content.

And your kids care about this even if you don't: Nintendo has slashed the price of its 3DS handheld after hardly anyone bought it.

More of today's e-Reads here.

The Senate Judiciary Antitrust Subcommittee has scheduled its widely anticipated hearing on Google's business practices, featuring Executive Chairman Eric Schmidt, for Sept. 21.

After initially resisting the subcommittee's request to send Schmidt or CEO Larry Page to appear, Google gave in earlier this month and agreed to allow Schmidt, who stepped down as CEO in April, to testify.

The hearing, titled "The Power of Google: Serving Consumers or Threatening Competition?," will explore concerns that Google is using its dominance in Internet search and online advertising to benefit its own products and services over its competitors. Google revealed last month that the Federal Trade Commission has opened an antitrust probe of the company into these same issues.

The firm has defended its business practices, saying in a blog post at the time that, "We're committed to giving you choices, ensuring that businesses can grow and create jobs, and, ultimately, fostering an Internet that benefits us all."

The beleaguered wireless startup LightSquared announced Thursday that it had signed a 15-year agreement with Sprint.

While expected, the deal nevertheless is good news for LightSquared, which has faced criticism amid mounting evidence that its plans for a nationwide wireless network will interfere with global positioning systems.

Under the agreement, LightSquared will pay Sprint nearly $14 billion in cash and credits over 11 years. Sprint will host parts of LightSquared's network on its spectrum and system. Sprint has the option of buying access to up to 50 percent of LightSquared's wholesale wireless network, which is based on both land transmitters and a satellite.

"This agreement gives LightSquared a rapid and cost-effective radio access network build," LightSquared Chairman and CEO Sanjiv Ahuja said in the announcement. The company expects to accelerate the process and save $13 billion in network construction and operating costs through the deal.

The announcement does little, however, to overcome the lingering questions. In a recently released report, the Federal Aviation Administration said interference from LightSquared's proposed network would be "far-reaching and potentially devastating to aviation."

Still, investment analyst Jamie Townsend predicted on Thursday that LightSquared would overcome the opposition.

"In our view this announcement is a very positive development for LightSquared and substantially increases the probability that the wholesale venture will succeed," he said in a statement. Townsend also noted that the deal will help Sprint provide next-generation 4G service.

Before LightSquared's network can become operational, it must be approved by the Federal Communications Commission, which is currently reviewing the plan.

The Federal Aviation Administration says even a revised proposal from LightSquared to launch a national wireless broadband network will interfere with global positioning systems critical to aviation.

LightSquared has come under fire from the GPS industry and its users over concerns that the company's proposal to deploy a wireless broadband network using both land-based transmitters and a satellite would interfere with GPS systems. In response, LightSquared said in June that it will hold off for now on using the spectrum closest to that used by GPS receivers and operate at a reduced power level than it is authorized to use.

In an assessment conducted earlier this month but only recently released, the FAA appears to have concluded that even this revised proposal would still interfere with GPS systems used in aviation.

"The effects of LightSquared deployment would be far-reaching and potentially devastating to aviation. Proposed LightSquared operations would severely impact the efficiency and modernization of the safest, most efficient aerospace system in the world," according to the July 12 report from the FAA's Navigation Services.

The Save Our GPS coalition, which is made up of companies and groups representing GPS users and companies that offer GPS services, seized on the report as more evidence of its claims that LightSquared's proposed network would severely hamper the use of GPS.

"The FAA report is an extraordinary indictment of LightSquared's plans. Just consider the fact that FAA analysis and tests find that if LightSquared is allowed to deploy as it wants to that 'GPS is expected to be unavailable for planned aviation use over the whole of the continental U.S.,'" Jim Kirkland, vice president for GPS services provider Trimble, which is a member of the coalition, said in a statement.

LightSquared responded that it did not believe the FAA report fully examined its latest proposal.

The FCC letter "doesn't accurately reflect LightSquared's most recent proposal which is focused solely on using the spectrum furthest away from GPS. Simply put, the vast majority of the interference issues raised by this report are no longer an issue. We look forward to discussing this with the FAA," LightSquared Executive Vice President for Regulatory Affairs Jeff Carlisle, said in a statement.

An FAA spokeswoman did not respond to a request for comment on LightSquared's claim that the report didn't take into account the changes made to LightSquared's proposal.

The FAA report, however, does refer to the revised proposal from LightSquared.

"This operational, economic, and public safety impact assessment is based upon LightSquared's June 30, 2011 proposal and June 23, 2011 LightSquared testimony to the House Transportation and Infrastructure Committee, including use of the lower 10 Megahertz channel starting in 20l2 and any use of the upper 10 MHz channel starting in 2014. This assessment assumes the planned power is one-tenth the current authorized power," the report said.

The report also makes an apparent reference to the spectrum LightSquared said it would use in its revised proposal. "The FAA cannot conclude that operations using just the lower portion of the spectrum are compatible with civil aircraft receivers without definition of LightSquared's end-state deployment and further study. However, based upon existing data, LightSquared's operations at the lower channel would preclude the following critical capabilities that rely upon high-precision GPS receivers: airfield and flight procedure surveys, flight test tracking, space weather monitoring, and GPS timing for computing resources and many mission critical systems."

Eleven Republicans from the Senate Commerce Committee are demanding that the Federal Communications Commission conduct a cost-benefit analysis of net neutrality rules designed to prevent anticompetitive behavior online.

In a letter sent Wednesday to FCC Chairman Julius Genachowski, the Republicans request that the agency review the rules under a new Executive Order to reduce regulation.

On July 11, President Obama issued the order, which formally asked independent agencies to join executive agencies in reducing regulations that place unnecessary burdens on businesses.

"We believe that had these Executive Orders been implemented before net neutrality orders were approved by a vote of 3-2 by the FCC on December 21, 2010, the Commission would have made a more informed decision," the letter says. "Therefore, we respectfully request that before net neutrality rules go into effect, you honor the intent of the President's Executive Order by applying a retrospective review towards the net neutrality order and pursuing a cost benefit analysis."

The FCC's much-maligned net neutrality regulations were enacted in December but have yet to take effect. Republicans criticize the rules as unnecessary and overly burdensome for Internet companies, while supporters argue the protections are needed to prevent companies from restricting access online.

The letter was signed by Commerce Ranking Member Kay Bailey Hutchinson, R-Texas; and Sens. Dean Heller, R-Nev.; Jim DeMint, R-S.C.; Kelly Ayotte, R-N.H.; Roy Blunt, R-M.O.; Patrick Toomey, R-Penn., Marco Rubio, R-Fla.; Roger Wicker, R-Miss.; John Thune, R-S.D.; Johnny Isakson, R-Ga.; and John Boozman, R-Ark.

A new coalition launched Tuesday with the goal of persuading lawmakers to set up a regulatory regime that would allow Americans to legally place bets on online poker games.

The FairPlayUSA coalition has attracted some high-profile advisers including former Homeland Security and ex-Pennsylvania Gov. Tom Ridge, R-Pa., to push Congress to fully legalize online poker and to clarify the nation's online gambling laws to more clearly define what is legal and what is not.

Congress enacted legislation in 2006 to crack down on internet gambling by barring U.S. payment processors such as credit card companies and PayPal from handling payments for online bets. However, critics argue that the law has done little to stop Americans from continuing to gamble online and say this denies the U.S. government of potential tax revenues. They also say it exposes U.S. participants to fraud and abuse since most Internet gaming sites are based offshore.

Rep. Joe Barton, R-Texas, has introduced an online poker bill that would authorize online betting on poker and direct the Commerce Department to set up a licensing and consumer-protection regime. The bill would authorize online poker only in states that allow it.

"Licensing and regulating online poker is the most effective and responsible way to ensure the safety of America's children and consumers," Internet safety expert Parry Aftab said in a statement. "Given the growing ... popularity of online poker, we cannot afford to miss this opportunity to protect America's children and consumers. We must take action now."

Aftab, Ridge and professional poker player Greg Raymer make up the coalition's initial advisers but coalition Executive Director Marisa McNee told Tech Daily Dose that the group hopes to add more. Caesars and MGM, which own several casinos, have provided initial funding for the coalition, she added.

McNee said the group has not taken a position on the Barton bill yet and is not lobbying Congress for any particular piece of legislation. The group only favors legalizing online poker and not other forms of online gaming.

McNee said the group is aiming to educate the public and lawmakers about its 10 principles, which include providing law enforcement with tools to crack down on illegal online gambling and "removing U.S. banks as the enforcers" of the 2006 Internet gambling law and also to establish a "strict" regulatory framework for licensing and enforcement of online poker.

"This is about educating the public and policymakers with a set of principles," McNee said.

A top Obama aide who's now ambassador to South Africa made a nice pile of cash after the FCC approved a deal involving LightSquared, the Center for Public Integrity reports.

Lots of the comments on the AT&T merger look scripted.

See more of today's e-Reads here.

The head of the U.S. Computer Emergency Readiness Team has abruptly resigned after a spate of attacks on government networks, according to an agency e-mail obtained by Tech Daily Dose.

US-CERT Director Randy Vickers resigned Friday. Current deputy director Lee Rock will serve as interim director until the Department of Homeland Security names a successor, according to an internal agency e-mail sent by Bobbie Stempfley, acting assistant secretary for cybersecurity and communications, to US-CERT staff. The e-mail did not explain why Vickers left.

InformationWeek first reported Vickers's resignation.

The U.S. Computer Emergency Readiness Team, a division of DHS, is tasked with protecting the government from cyber attacks, and collaborating with state and local governments and the private industry. Hackers have recently targeted government websites at the Senate, Federal Bureau of Investigation, and the CIA, as well as the Gmail accounts of top government officials.

DHS officials have not publicly commented or announced Vickers's departure.

UPDATE 8:17 p.m.: AT&T filed an engineering and economic analysis with the FCC showing the impact of the merger in 15 markets, including Washington D.C., on network capacity. The filing says the "proposed transaction will relieve significant capacity constraints faced by both companies and lead to improved service quality and expanded output of wireless service, among other public benefits."

But AT&T has redacted much of the filing.

Vonya McCann, the top Washington executive at Sprint, reacted in a statement by downplaying the credibility of the report: AT&T's "latest model, clearly constructed with predetermined results in mind, does nothing to change the negative consequences of the takeover for consumers in the form of higher prices, reduced innovation and decreased investment," she said.

Original post: AT&T is expected to submit a filing to the Federal Communications Commission on Monday with a technical explanation on how combining its network with T-Mobile's will create new capacity, a key argument it has made in advocating for the merger.

AT&T argues that merging the two companies' cell networks will create new capacity for smart phones and tablets just as networks are under increasing strain.

The FCC stopped its "shot clock" on reviewing the merger--the informal timer that's meant to ensure a speedy review process--when it requested this data. Opponents of the merger quickly crowed that this meant the deal had hit a roadblock.

"It is clear that AT&T's submission of a new justification for taking over T-Mobile is exactly like the coach of a losing team calling time out so he can work the referees. While the Federal Communications Commission stops its merger review process to examine the new plan, AT&T will use the time to spend more millions of dollars lobbying federal, state and local officials and recruiting non-governmental groups to support what is clearly a failing action," Public Knowledge President Gigi Sohn said in a statement.

AT&T says that it does not think that pausing the shot clock will delay the merger review, which is expected to move into next year. The company framed the new filing as additional data requested by the FCC rather than a new line of argument.

"AT&T has developed additional economic evidence that further confirms the tremendous efficiencies and consumer benefits resulting from this transaction. Because this information, which we will submit next week, is detailed, we are not surprised that the FCC will take the time it needs to thoroughly understand our submission. We do not expect this will adversely impact the timeframe for approval of our transaction," an AT&T spokesman said last week.

When the FCC requested the information last week, it said the company had "developed new models upon which" it is basing its merger arguments.

"Indeed, AT&T is now expressly relying on these models to bolster its arguments concerning the size of the efficiencies made possible by the merger as weighed against the potential anti-competitive effects," the FCC said.

AT&T also submitted filings to the FCC on Friday, again at the agency's request. One filing aimed to beat back arguments that the merger will kill innovation in the handset market. The other one reinforced AT&T's view view that competition in the wireless market should be reviewed on a local basis--where various companies offer service--rather than a national basis, where just four companies compete, including T-Mobile
.
The merger is under simultaneous reviews at the FCC and the Justice Department.

Without a "serious national effort," the American news industry will go down the drain, Federal Communications Commissioner Michael Copps said on Thursday.

In remarks to the National Newspaper Association, Copps said while journalists have the lead role in fixing their industry, there is wide support for reform.

"Glitzy infotainment substitutes for real news and 'if it bleeds, it leads' determines newsworthiness," he said. "Maybe all that bleeding has something to do with why America isn't leading the way we used to. I have had a front-row seat to watch this devastation for 10 years on the FCC."

Copps also decried an ongoing "orgy" of media consolidation, as well as the FCC's "unforgivable lack of action on the diversity front."

As solutions, Copps advocated for a wider range of business models for news outlets; more diversity in newsrooms; and K-12 news media literacy education.

"I have come to realize that, without a serious national effort and some significant changes, our media environment will only get worse," he said. "I believe we can--and I believe we must--find ways to redeem the promise of journalism because good journalism is so vital to redeeming the promise of America."

About half of voters in California voters disapprove of controversial new legislation that would require Internet retailers to collect sales tax on online purchases, a poll by the University of Southern California and the Los Angeles Times finds.

The poll found 46 percent of voters favor the online sales tax as a revenue source to help balance the budget and pay for state services, while 49 percent oppose it. Online retailers such as Amazon have been fighting the tax.

"At this point, Californians are evenly divided on whether online purchases should be taxed. This could be one of the most expensive campaigns in California history, and neither side starts with a clear advantage," Dan Schnur, director of the USC Dornsife/Los Angeles Times Poll, said in a statement.

Overall, 55 percent of young voters opposed taxing online purchases by California residents and 41 percent support it. In contrast, 43 percent of voters over 50 oppose taxing online purchases, and 52 percent support it. The poll has a margin of error of 2.5 percent.
Illinois has passed a similar measure.

Justice Department prosecutors are reviewing years-old allegations that Rupert Murdoch's News Corp.'s advertising arm repeatedly hacked into the computers of a U.S. competitor to steal business, NBC News reports.

NBC quotes Bill Isaacson, the lawyer for Floorgraphics, a New Jersey-based advertising firm, as saying he was contacted this week by two federal prosecutors and an FBI agent seeking information about claims that the firm's computers were hacked by News America Marketing, the advertising division of News Corp., seven years ago.

Floorgraphics filed a civil lawsuit against News America and the trial lasted for nine days in 2009. News America agreed to buy Floorgraphics' assets for $29.5 million as part of an out-of-court settlement.

The renewed interested in the incident appears to be part of a broader Justice Department probe into News Corp. ordered last week by Attorney General Eric Holder after allegations reporters at the News of the World hacked into telephone voice mail accounts.

Federal Trade Commission Chairman Jon Leibowitz said Thursday that wireless operators should require their customers to use a password to access the voicemail on their mobile phones. The problem for Leibowitz, as he was quick to note, is that his agency has no jurisdiction over wireless carriers.

The issue of cell phone security has gained new attention because of the cell phone hacking scandal involving Rupert Murdoch's News Corp. Reporters at some of the company's British publications have been accused of hacking into the cell phone voicemail of celebrities, politicians and even crime victims.

During a Brookings Institution forum on privacy, Christopher Soghoian, a cybersecurity researcher and former FTC technologist, noted that only some of the nation's top wireless carriers require their users to use a pin number to access their voicemail on their cell phones, adding that without such protection it's easy to hack into a user's voice mail. Soghoian demonstrated how to do it during an appearance on CBS News earlier this week.

Soghoian asked Leibowitz if he believed cell phone makers should adhere to the FTC's call for building privacy into products, a concept known as "privacy by design," and require their customers to use a pin to get voicemail on their cell phones.

"Yes. They should engage in privacy by design. I'd like to think most companies are moving in that direction," Leibowitz said, but added, "We have no jurisdiction whatsoever" over wireless carriers.

Leibowitz noted that his agency would like some jurisdiction over telecommunications carriers and that some lawmakers in Congress have floated the idea as it relates to privacy enforcement.

The Federal Communications Commission does have jurisdiction over cell phone and other telecom carriers, but Chairman Julius Genachowski has given no indication that his agency is pressing cell phone makers to make password-protected voicemail standard on all mobile phones.

During a hearing last week on privacy before a House subcommittee, Genachowski was asked about the security of cell phones in light of the hacking scandal. He noted that there are several U.S. laws that would cover any criminal hacking and said some carriers automatically require a password and some don't.

"There is no question that greater protection can be accomplished by using password protection and that this is an area that should be looked at," Genachowski said.

The previous version of this blog post incorrectly stated that U.S. Telecom is asking Congress to regulate Facebook. What follows is a correct version of what Walter McCormick, the president of U.S. Telecom, is asking for.

A trade group for major phone companies including Verizon and AT&T thinks it's unfair that such as Facebook can offer Internet-based telephone services without regulation, yet wireless and landline telephone companies have heavy regulatory burdens.

Walter McCormick, the president of U.S. Telecom, called on lawmakers Thursday to update telecommunications laws to reflect the new state of the industry. While phone companies face countless state and federal regulations, "Facebook is free of any regulation whatsoever," McCormick said at a Minority Media and Telecommunications Council conference.

"We haven't said to Congress how you should update the laws. We haven't said you should broadly regulate the industry," McCormick said in a telephone interview afterwards.

But he has a hint for Congress. "If consumers have choices, there is no need for economic regulation," he said.

"At this point in our conversation with Congress, we are just talking now about the fact that you have expanding competition and you have expanding consumer choice, and yet you continue to regulate one segment of the industry in a way that limits our flexibility to innovate and to meet emerging competition," he added in a telephone interview.

He pointed out that Facebook's user base of 750 million outnumbers that of any single phone company, and that the company now provides voice capabilities through a partnership with Skype. "It's a tale of two networks--ours, built on wireline networks, and theirs built on software," McCormick said,

Congress should update telecom law in a way that equalizes the regulatory burdens on Internet companies and telecom companies, McCormick said. "We need to have laws that don't advantage or disadvantage particular networks," he said.

Most tech and telecom stakeholders acknowledge that it would be useful to update telecom laws, which haven't been overhauled in 15 years, to reflect the rise of the Internet. But the agreement ends there, and analysts see Congress as unlikely to take a crack at major telecom legislation any time soon.

Public Knowledge has one word for AT&T: Congrats!

The advocacy group sent out a rather pointed (read: sarcastic) statement in response to AT&T's earnings report on Thursday, noting that while profits are up, employment is down at the telecom giant.

"We would like to congratulate AT&T on another sterling quarter," said Public Knowledge President Gigi Sohn in a statement. "Their revenue is up, to $31.5 billion. Their wireless business is adding customers, growing revenue and selling phones at record levels. Just about the only part of AT&T that's not growing is the number of employees."

According to numbers attached to AT&T's quarterly earnings, and cited by Public Knowledge, there are 13,586 fewer employees than a year ago.

"These numbers show the company has the resources to build out to rural areas if it wants to, and doesn't need to engage in regulatory blackmail by saying that without spending $39 billion for T-Mobile then rural areas won't get service," Sohn said. "The numbers also show that those who think the takeover of T-Mobile will somehow create jobs should take a closer look at the reality of the situation."

An AT&T spokesperson did not respond to requests for comment. The company argues that the deal will help expand broadband service and will not result in significant layoffs.

Several labor groups have come out in support of the proposed merger because AT&T's workforce is unionized. One of those groups, the Communications Workers of America, claims that combining T-Mobile and AT&T will create as many as 96,000 jobs.

The FCC suspended its review of the merger on Wednesday.

With success comes congressional attention. That may be the message online coupon provider Groupon is getting from two lawmakers.

Groupon recently announced plans to go public and is seeking $750 million from investors. But the company is also getting some unwanted attention from the chairmen of the House Bipartisan Privacy Caucus over reports that it plans to collect and share more information about its users.

Reps. Joe Barton, R-Texas, and Ed Markey, D-Mass., wrote Groupon Tuesday voicing concern over the firm's privacy changes and demanded answers by Aug. 10 from the Chicago-based company to a slew of questions related to its privacy policies.

"We want to make sure that 'the Groupon Promise' is kept and that going after a good online deal doesn't lead to your information being sold to the highest bidder," Barton said in a joint news release. Barton and Markey are both senior members of the House Energy and Commerce Committee.

In their letter to Groupon CEO Andrew Mason, Barton and Markey asked Groupon to detail the type of information it collects and from what sources; whether it tracks its users' locations and if so will it allow them to opt out of such tracking; what mechanisms it uses to determine its users' ages; and whether its partners must abide by Groupon's privacy policies.

Barton and Markey have been aggressive in calling out major Internet firms such as Facebook and Google when the lawmakers believe they have violated their users' privacy.

Reuters thinks Apple may be catching up to Exxon Mobil in value

But will fake Apple stores in China devalue the brand?

Hackers LulzSec and Anonymous thumb their noses at the FBI.

More e-Reads here.

Robert McDowell, a Republican FCC commissioner, says he is concerned the agency may fall behind on its effort to overhaul a major fund supporting phone service in rural and low-income households.

McDowell said the FCC was originally supposed to vote in August on a proposal overhaul fund, but the date keeps getting pushed back.

"I start to get anxious about this date slipping away," he said at a conference hosted by the Minority Media and Telecommunications Council on Thursday.

The FCC launched an effort this year to divert the $8 billion phone fund toward broadband rather than traditional voice service and to reform the regulatory regime governing payments between telecom carriers.

McDowell said his concern that this effort might fall apart is rooted in "post-traumatic stress syndrome" from previous failed efforts to reform the fund, including a major effort three years ago.

"Let's get on with it," he said, echoing remarks he first made on C-Span last week.

McDowell suggested he doesn't see an industry-led proposal for reform, pending from a group of companies with conflicting interests, as a great beacon of hope for the reform effort.

"You can't make everyone happy, and we shouldn't try to make everyone happy. We should try to do the right thing. That is the role of an independent agency," he said.

Tom Tauke, the top policy executive at Verizon, sounded a more positive note about the industry proposal during remarks at the same event. He said "getting this through the commission" is essential to spreading broadband to more Americans.

The Congressional Budget Office has estimate that a Senate spectrum bill will not produce as much money for deficit reduction as its supporters had predicted.

The CBO, which analyzes the budget implications of congressional legislation, released its "score" of legislation approved in June by the Senate Commerce Committee and found it would produce $6.5 billion for deficit reduction -- far below the $10 billion that the measure's supporters predicted it would provide.

Despite this, Senate Commerce Chairman Jay Rockefeller, D-W.Va., and ranking member Kay Bailey Hutchison, R-Texas, issued a statement late Wednesday touting the bill's benefits.

"The Congressional Budget Office's estimate reconfirms that our bill builds a robust public safety network, pays for itself, and still generates real deficit reduction," they said. "This is just another step along the path to final passage. S.911 has strong bipartisan support, and we look forward to getting it through the Senate."

The Senate legislation is aimed at helping public safety officials build a national broadband network to improve communications during emergencies and also free up more spectrum for wireless broadband. It would allocate a chunk of spectrum known as the D-block to public safety officials for their broadband network instead of auctioning it off to commercial bidders as required by current law. CBO said giving the D-block to public safety would cost $2.5 billion.

The Senate bill also would authorize the Federal Communications Commission to conduct incentive auctions aimed at enticing broadcasters to give up some of their spectrum in exchange for a share in the proceeds from the auction of those airwaves.

The CBO said the auction of this spectrum and other spectrum now used by federal agencies would generate about $24.5 billion over the next decade. The CBO noted that it is still difficult to predict how much spectrum would be available for auction by 2021 because no one knows how many broadcasters will decide to give up their spectrum. Still, the agency estimated that between 150 megahertz and 225 megahertz of spectrum could be available for auction by 2021.

The bill would direct that some of the auction money be used to build the public safety network and other provisions, while the rest would be available for deficit reduction. The CBO estimated that the network would cost $11.5 billion to build.

Republicans on the House Energy and Commerce Committee released a draft spectrum bill last week that would maintain current law and require that the D-block be auctioned to commercial bidders. They say that public safety officials have enough spectrum now to build their broadband network and that giving the D-block away would leave a hole in the budget at the same time Congress is trying to find ways to reduce the deficit.

The issue of how much money could be generated for deficit reduction from spectrum auctions has gained new attention amid reports that lawmakers may include the spectrum legislation in a deal to raise the debt ceiling in exchange for measures aimed at reducing the deficit.

As Britain continues to be embroiled by allegations of hacking and bribery at Rupert Murdoch's News Corp.,, Rep. Bobby Rush, D-Ill., says members of Congress should help ensure that American broadcasters serve the public interest.

"Media ownership in America is a privilege, not a right, and it's based upon trust and responsibility," he told communications staff on Tuesday. "First Amendment freedom of the press is critical to our democracy and must never be compromised by corrupt and illegal practices."

News Corporation, which owns Fox News, The Wall Street Journal, New York Post, and dozens of TV stations in America, is under fire after reporters at one of its London newspapers were accused of hacking the telephone voice mail accounts of thousands of people. The paper, The News of the World, has since been shut down but Murdoch and other top executives continue to face heat from lawmakers on both sides of the Atlantic.

Rush, who sits on the House Energy and Commerce Communications and Technology Subcommittee, said he is confident that the Federal Bureau of Investigation will determine whether any similarly illegal activity happened in the United States. "I am especially interested in knowing whether there was telephone and voicemail hacking in the U.S.," he said. "Were bribes paid to cover up hacking here?"

Although the FBI and other legal authorities will ultimately handle any questions of illegal activity, Rush said members of Congress need to ensure that broadcasters are acting in the best interest of the public.

"The public airwaves belong to the American people... And we are elected to make sure that those who are licensed to serve the public interest really do so and reflect who we are as a nation," he said.

Despite calls for regulators to break up News Corporation's vast international media holdings, Rush said consolidation doesn't automatically lead to corruption. The Federal Communications Commission, which regulates News Corporation's broadcast TV stations, has declined to wade into the controversy and analysts say it's unlikely that the media giant will lose its broadcast licenses.

Top Democrats on the House Energy and Commerce and Judiciary committees are urging federal regulators to take a hard look at AT&T's plan to purchase T-Mobile, saying the deal could discourage investment and restrict innovation.

House Energy and Commerce Communications and Technology Subcommittee Chairman Anna Eshoo, D-Calif., Rep. Ed Markey, D-Mass., and House Judiciary Ranking Member John Conyers, D-Mich., sent a letter Wednesday to the heads of the Federal Communications Commission and Justice Department.

"We believe that AT&T's acquisition of T-Mobile would be a troubling backward step in federal public policy - a retrenchment from nearly two decades of promoting competition and open markets to acceptance of a duopoly in the wireless marketplace," the letter, obtained by Tech Daily Dose, says. "Such industry consolidation could reduce competition and increase consumer costs at a time our country can least afford it."

The Democrats, all of whom have voiced concern over the merger in the past, specifically ask the agencies to analyze the potential effects of the deal on the wireless market, consumer welfare, and American jobs. The letter also urges regulators to determine whether the benefits claimed by AT&T will actually materialize and whether the results could only be achieved by combining AT&T and T-Mobile.

Both the FCC and DOJ are reviewing the merger, and must approve it before it can go through. The process is expected to extend to at least the end of the year.

Rep. Mary Bono Mack, R-Calif., has released a new version of legislation aimed at addressing some of the concerns with a draft measure setting national rules for when companies and organizations must notify federal authorities and consumers after a data breach.

The House Energy and Commerce Subcommittee on Commerce, Manufacturing and Trade is set to mark up the bill Wednesday. Mack, the subcommittee's chairwoman, made several changes to a draft measure she released last month in response to concerns raised at a June 15th hearing by committee Democrats, privacy advocates and the Federal Trade Commission.

While similar versions of the legislation have been offered in recent years, the issue has gained new urgency after a series of high-profile data breaches at such companies as Sony and Citibank resulted affected the personal information of millions of consumers. Sony was criticized in particular for waiting several days before notifying consumers that its PlayStation network had been hacked.

"My legislation is crafted around a guiding principle: Consumers should be promptly informed when their personal information has been jeopardized," Bono Mack said in a statement Tuesday. "The time has come for Congress to take decisive action. We need a uniform national standard for data security and data breach notification, and we need it now."

Bono Mack's bill requires companies that possess personal data about consumers to take adequate steps to safeguard that information and notify federal authorities and consumers following a breach.

Under the draft bill, the committee required companies to notify consumers and the FTC within 48 hours of a breach after doing a risk assessment. Democrats voiced concern that there was no time limit on this risk assessment and that it could be stretched out indefinitely. However, some industry officials said the 48-hour time frame was too short and could lead to an over-notification of consumers.

The latest version still requires that consumers and the FTC be notified within 48 hours but only if they are at risk for identify theft or fraud as a result of the breach. At any rate, notification must come within 45 days of the discovery of a breach.

Other changes made to the draft bill include providing more precise language for identifying individuals who are affected by a breach and in defining what constitutes a data breach, Bono Mack's spokesman Ken Johnson said.

"We've made a good faith effort to address their [Democrats] concerns," he said.

Democrats wanted other changes, too, such as a broader definition of personally identifiable information. The latest version does not appear to have addressed this issue. Energy and Commerce ranking member Henry Waxman, D-Calif., still has strong concerns with the measure, according to a House staffer.

Another House aide said Democrats may offer some amendments at the subcommittee markup but it's unclear what areas they would target.

Apple's board of directors has chatted with executive search firms about a new CEO since Steve Jobs has taken medical leave for day-to-day operations, the Wall Street Journal reports. But Jobs calls it "hogwash."

"Did LightSquared's political connections give it a leg up in Washington?

More e-Reads here.

The United States and India signed an agreement on Tuesday designed to ensure the two countries collaborate on cybersecurity efforts.

The non-binding memorandum of understanding was signed by in New Delhi by Jane Holl Lute, deputy secretary for the U.S. Department of Homeland Security, and R. Chandrashekhar, secretary of India's Department of Information Technology.

Many cybersecurity experts say more international collaboration is needed because existing legal procedures are often too slow to combat cyberthreats.

"Through this arrangement, the respective governments and broader cybersecurity communities in both the United States and India will have the ability to coordinate with their counterparts on a broad range of technical and operational cyber issues," DHS said in a statement.

Under the program, the Indian Computer Emergency Response Team and DHS' United States Computer Emergency Readiness Team will exchange cybersecurity information and expertise.

Secretary of Homeland Security Janet Napolitano agreed to the pact during a trip to India in May. The agreement is designed to fulfill one of the pillars of the U.S.-India Strategic Dialogue, established on July 20, 2009.

A deal between Chinese Internet search giant Baidu and major record labels will help reduce the trade of pirated music in the world's most populous country, Rep. Adam Schiff, D-Calif., said Tuesday.

On Tuesday, Baidu announced One Stop China, a joint venture with Sony Music, Warner Music, and Universal Music. The two-year licensing deal will allow users in China to download and stream more than 500,000 songs for free.

"The announcement of a licensing deal between some of America's leading music labels and Baidu is a major step forward in the fight against the rampant piracy of the intellectual property," said Schiff, who co-chairs the International Anti Piracy Caucus. "I applaud the deal and hope it is the first of many more steps by Baidu and other Chinese companies to respect international copyright norms."

China isoften accused of being a haven for pirated content, and the deal is expected to reshape the way users find music online, according to The New York Times.

Baidu has been listed as a "rogue site" by the International Anti Piracy Caucus as recently as last year. "Approximately half of unauthorized music downloads in China take place through Baidu links," the caucus says in its 2011 Watchlist,

Schiff said he hopes the agreement will send a message to other international websites accused of providing pirated content.

An AT&T executive expressed concern Tuesday about the legal mess that could ensue
if Congress tries to tap into a major telecom fund to pay down the deficit.

His remarks expand criticisms of the proposal beyond the small rural carriers who have been sounding alarm all week to one of the largest and most influential companies in the telecom industry. House Majority Leader Eric Cantor, R-Va., has proposed diverting $1 billion of the $8 billion Universal Service Fund (USF) to help alleviate the deficit.

"There are definitely legal problems with that which are not well understood," Hank Hultquist, vice president for federal regulatory at AT&T, said during a panel hosted by information service Broadband Census.

Rural carriers who strongly rely on the subsidy fund, which pays for telecom services in rural and low-income households, are up in arms over Cantor's proposal.

Rural phone advocates say the proposal could prompt lawsuits from companies that lose funding, with some describing it as theft for the customers who pay into USF through a contribution line on the telephone bills.

Though little is known about how Cantor's USF proposal would be structured, telecom lawyers said they believe it would likely mirror a plan floated by House Budget Chairman Paul Ryan earlier this year.

Ryan's plan would cap contributions into the fund, containing its already enormous size, while attempting to recover $1 billion in waste, fraud, and abuse that would be diverted to deficit reduction.

It's not just phone companies that are wary of the proposal to raid USF. House Republicans see problems with the plan, as well.

Cisco Systems plans to cut 11,500 jobs to cut annual expenses by $1 billion and revive its business, Reuters reports.

Metro turns to social media.

General Dynamics Corp. gets into the cloud computing business, buying Network Connectivity Solutions Corp.

See More of today's e-Reads here.

The scandal over alleged phone hacking and bribery at one of Britain's largest newspapers grows stranger every day, even as the controversy sparks more questions in the United States.

According to the Guardian, a whistleblower involved in the case was found dead in his home on Monday. Sean Hoare was a former News of the World reporter and first claimed that the editor of the paper was aware of the phone hacking.

His death was not viewed as suspicious, but added a morbid twist to a controversy that has already led to the demise of the News of the World and the resignation of top British police officials and executives in Rupert Murdoch's News Corporation.

On Monday, Rep. Mary Bono Mack, R-Calif., sent a letter to five major telecom trade associations asking what steps are being taken to prevent similar hacking in the United States.

"Understanding that the events in the United Kingdom have not been connected to any activity within the United States, I nonetheless believe it's critically important to ask American industries involved in all parts of the communications stream of commerce - from device manufacturers to fixed wire and wireless providers - whether they are satisfied that sufficient safeguards are in place to prevent similar privacy breaches here in the United States," Mack wrote.

The supercharged controversy is threatening to complicate the Federal Communications Commission's media ownership review, which is expected to be released later this year.

Read more on the potential debate over media rules on our Tech page.

NASA will announce on Friday where its new Mars rover will land. The original two rovers, Spirit and Opportunity, were sent to different sites in 2003. Spirit sputtered out in March, but Opportunity is still rolling. Both far exceeded their original 3-month missions.

The first two rovers were sent up on a Delta II rocket. The next mission will go on an Atlas V, and the maker of the rockets hopes the same Atlas V will carry the next astronauts into space from U.S. soil. Read more on that here.

President Barack Obama is no fan of lobbyists, priding himself on running an administration he says is unswayed by undue influence.

But he seems to have swallowed his distaste long enough to entertain one of Microsoft's top lobbyists Monday at the White House, where the tech giant announced a $15 million investment in immersive learning technologies like game-based instruction.

Microsoft SVP Fred Humphries sat in for CEO Steve Ballmer, who couldn't make the education roundtable that featured other high-powered current and former executives like United Way's Brian Gallagher and former Intel chief Craig Barrett, who were both registered to lobby until several years ago.

"At least Humphries is registered, unlike so many of his counterparts who lobby under the radar," complained one GOP tech lobbyist.

Humphries lobbies on copyright, immigration reform, broadband, taxes, free trade and, appropriately for today's White House meeting, "promoting excellence in technology, education, standards, and science," according to the company's latest lobbying disclosure.

"Microsoft is making a significant investment in education today announcing a new $15 million investment in research and development," said White House spokesman Eric Schultz. "They are committing over the next three years to train 150,000 educators and leaders and provide access to professional learning communities."

Still, the meeting left some on K Street grumbling about what they see as the president's double standard, regularly knocking lobbyists until they can help his administration.

Is Google proving Einstein right? The Washington Post asks what you need to memorize these days.

A unique problem for astronauts -- cosmic radiation setting off your computer.

Not sure what happened to this anchor's brain.

More e-Reads here.

Rep. Jay Inslee (D-Wash.) wrote to the chief executives of AT&T and T-Mobile on Thursday to question whether the proposal to combine their companies would cost jobs.

T-Mobile's U.S. headquarters in Bellevue, Washington are just outside Inslee's district. He said his constituents have contacted him with concerns about the merger. "With Washington's 9.1 percent unemployment rate, we can ill afford to lose the more than 3,300 jobs T-Mobile maintains in Washington," he said in a letter.

Inslee homed in on an AT&T estimate that combining the two companies would save $10 billion through cuts to support and general and administrative expenses. He requested a "detailed explanation" of this number, "including the job loss estimate used to calculate this figure, both in headquarters organization and elsewhere."

Inslee also questioned whether prices will rise for T-Mobile customers who have unlimited data plans, unlike AT&T's subscribers who submit to usage caps.

Inslee's other concerns included whether AT&T really faces a spectrum shortage as it claims, whether the proposed consolidation will limit choice in the device market, and whether the merger will affect prices and choice in the market for wireless backhaul, the crucial landline connections wireless carriers largely purchase from AT&T and Verizon.

Inslee, a member of the Energy and Commerce Committee, is a longtime critic of the telecom industry in part due to his ardent support for net neutrality regulations.

AT&T has acknowledged that the merger could lead to some job losses, but says its plan to invest $8 billion in its wireless network over the next seven years will create jobs.
The investment would bring wireless broadband to 97 percent of Americans, the company says.

"We have a metric that every billion dollars results in 7,000 new jobs, so I think that's bringing new jobs to the economy, bringing new jobs to the country, extending a critical infrastructure to the country, and I think it's good for the overall economy," AT&T executive Ralph de la Vega said in a CNBC interview earlier this year.

The merger has been endorsed by the Communications Workers of America and other major unions, which see the combination as a boon to the labor movement since AT&T supports a unionized workforce.

Tim McKone, AT&T's executive vice president of federal relations, said, "We have received the letter and we look forward to responding to Congressman Inslee and discussing the tremendous benefits this merger will bring to consumers across the United States."

The $39 billion deal is under review at the FCC and the Justice Department. It is expected to face additional congressional hearings this fall.

Telecom companies wrote to the White House and congressional leaders on Thursday urging them to abandon a proposal to pay down the deficit using money in the Universal Service Fund (USF), an $8 billion pool devoted to subsidizing telecom services for low-income and rural households.

U.S. Telecom, an association for broadband companies including Verizon and AT&T, said in a statement that debt limit negotiators are considering a proposal to divert $1 billion from the fund to help pay for deficit reduction.

Congressional aides said the proposal to divert USF funds was part of a document circulated by the GOP conference earlier this week outlining a strategy for addressing the deficit. They said the document, which also recommended using spectrum auction revenue as part of the package, set off a flurry of concern from industry this week.

In a letter to negotiators, the carriers panned the USF proposal as effectively creating a "new tax" by transforming USF contributions into taxation. USF currently consists of contributions from telecom carriers, who recover the money through a charge on consumer telephone bills.

"Diverting these funds to deficit reduction would constitute, in practical and legal effect, not only the imposition of a new tax on consumers' monthly communications bills," Walter McCormick, the president of U.S. Telecom, wrote in the letter. He said it would also undermine the FCC's efforts to transition the fund to pay for broadband rather than voice service in "a dramatic departure from one of the nation's highest priorities."

The House Judiciary Committee backed legislation Thursday that would impose a five-year ban on new taxes and fees targeting only wireless services and not imposed on other goods and services.

The Wireless Tax Fairness Act, approved by voice vote, would only apply to new taxes imposed on wireless services and does not affect to those already in place. Supporters say wireless services are being unfairly taxed by states and localities compared with other services. They note that wireless customers pay an average of 16.3 percent in taxes and fees compared with the 7.4 percent average rate imposed on other goods and services.

"In many places, the taxation of wireless approaches or even exceeds the rates of sin taxes on goods like alcohol and tobacco," Rep. Zoe Lofgren, D-Calif., the bill's sponsor, said in a statement. "This legislation simply freezes existing discriminatory wireless taxes to help foster wireless networks as a platform for innovation and jobs growth."

Some state and local government groups, however, have voiced strong concerns with the measure, saying it would hamper their ability to raise revenues at a time when they are facing massive budget shortfalls.

" This legislation represents an unwarranted federal intrusion, as it carves out one sector of the communications industry for favorable tax treatment," according to a letter sent earlier this week to the committee from the National Association of Counties, U.S. Conference of Mayors and others.

The committee did adopt an amendment aimed at addressing some of these concerns by allowing a state or city to impose a new wireless tax if it is approved by the affected voters.

Meanwhile, in the Senate, Majority Whip Dick Durbin, D-Ill., is aiming to finally introduce his online sales tax bill before the August recess. A spokeswoman said he has been working to attract Democratic and GOP co-sponsors. The legislation is aimed at closing a loophole stemming from a 1992 Supreme Court decision that exempts retailers from having to collect sales taxes from customers in states where those companies do not have a physical presence. The decision initially applied only to catalog retailers but has since been extended to online sales. States say they are losing billions of dollars in revenues from uncollected online sales taxes.

Durbin's proposed bill would allow states that have signed on to a project known as the Streamlined Sales and Use Tax Agreement to require online retailers to collect sales taxes from customers even in states where those companies do not have a physical presence. The streamlined sales tax project was established by several states to try and simplify the differing sales tax regimes used across the country.

Some online retail groups have criticized the streamlined sales tax project, saying they have not gone far enough and that requiring online retailers to collect taxes on remote sales would impose a major burden particularly on small businesses.

Sen. Mike Enzi, R-Wyo., who has sponsored similar versions of Durbin's proposed bill in the past, told Tech Daily Dose earlier this week that he would like to see state and local governments do more to help attract support for the measure. Despite critics' claims, Enzi insisted that "it's not a new tax" but instead would allow states to collect sales taxes they are already owed.

A day after raising concerns about a House GOP draft spectrum bill, top Democrats on the House Energy and Commerce released their own measure Thursday which differs on whether public safety officials should be given a valuable chunk of spectrum.

Both the GOP and Democratic versions of the spectrum bills agree on the need to ensure public safety officials have a national broadband network to improve emergency first responder communications.

But like a bipartisan bill approved last month by the Senate Commerce Committee, the House Democratic draft released by Energy and Commerce ranking member Henry Waxman, D-Calif., and Communications and Technology Subcommittee ranking member Anna Eshoo, D-Calif.would reallocate a chunk of spectrum known as the D-block to public safety officials for their broadband network.

A GOP draft released Wednesday by Energy and Commerce Republicans sticks with current law by requiring that the D-block be auctioned to commercial bidders. Communications and Technology Subcommittee Chairman Greg Walden, R-Ore., has argued that public safety officials have enough spectrum to create their network, noting they have been given nearly 100 megahertz.

He also has voiced concern that giving the D-block away to public safety would leave a hole in the federal budget at a time when lawmakers are trying to find ways to reduce the deficit.

Like the House GOP draft and the Senate bill, the House Democratic measure would authorize the Federal Communications Commission to conduct incentive auctions to free up more spectrum for wireless broadband. The aim is to entice broadcasters and others to give up some of their spectrum for a share of the proceeds.
The Waxman-Eshoo measure also would allow the FCC to conduct only one round of incentive auctions, a provision sought by broadcasters.

The Democratic measure also would use the some of the auction funds to help pay for the creation of the public safety network. And like the Senate bill, it would create a nonprofit corporation to oversee the funding and construction of the public safety network.

"The draft legislation reflects our view on how we can best help our nation meet its current and future needs for wireless broadband spectrum and address the pressing need to provide public safety with advanced communications capabilities," Waxman said in a statement. "There are important differences between our approach and the Republicans', but I hope that we will be able to work together to develop a bipartisan consensus."

AT&T released a statement saying the company is "pleased by the concerted effort being put forth to address a critical infrastructure problem in our country - the need to bring additional spectrum into the marketplace. The legislation put forth by Ranking Members Waxman and Eshoo provides an effective framework to do just that."

The Communications and Subcommittee is holding a hearing Friday on public safety spectrum where both the Democratic and GOP draft bills will likely be debated.

Some lawmakers on the House Energy and Commerce said Thursday that Congress needs to dig more deeply into the phone hacking scandal involving News Corp., saying it raises questions about the security of cell phones.

"I'd like to call on the chairman of the full committee to use his jurisdiction to probe the whole issue of privacy [and phone] hacking ... and this burgeoning scandal of News Corp.," Communications and Technology Subcommittee ranking member Anna Eshoo, D-Calif., said during an unrelated hearing on Internet privacy held by her subcommittee and the Commerce, Manufacturing and Trade Subcommittee.

News Corp. has come under fire in recent weeks after it was revealed that some of its British newspapers, most notably the now-defunct News of the World, had hacked the cell phones of British politicians, members of the Royal Family and others.

Commerce, Manufacturing and Trade Subcommittee Chairwoman Mary Bono Mack, R-Calif., said the incident also raises questions about the security of cell phones.

"We often hear that privacy laws in Europe are much stricter than they are in the U.S. If that's so, it's hard to understand how the phone hacking incidents in Britain could have gotten so far out of hand," she said. "It raises the question of whether American consumers are as vulnerable as politicians and celebrities in London."

When asked whether cell phones have adequate safeguards, Federal Communications Commission Chairman Julius Genachowski said cell phones are equipped with features such as the ability to require a password to access voicemail that do provide adequate security.

Senate Commerce Chairman Jay Rockefeller, D-W.Va., and other lawmakers Wednesday called on the Justice Department and Securities and Exchange Commission to investigate possible allegations that U.S. victims of the Sept. 11, 2001 terrorist attacks and other Americans may have been targeted as part of the phone hacking controversy. Some questioned whether News Corp. may have violated the Foreign Corrupt Practices Act.

The Wall Street Journal reported Thursday that the FBI has opened an investigation of the company.

In addition to several British media outlets, News Corp. owns the Wall Street Journal, New York Post , Fox News, and several broadcast stations in the United States. The FCC is in charge of approving the licenses for those stations.

"Based on what we know so far, we continue to believe it is very unlikely that News Corp.'s actions, particularly if confined to the U.K., will lead to the company losing its U.S. broadcast licenses," the investment firm Stifel Nicolaus said in a research note Thursday. "But this development bears monitoring."

Still, the firm added that if any News Corp. officials were convicted under the Foreign Corrupt Practices act, such a move "would ratchet up the heat and could provide a basis for someone to call on the FCC to hold a hearing."

The Department of Homeland Security plans to spend more than $300 million over the next four years on radiation-detection equipment, despite studies that show it has not been fully tested and may not work, the Washington Post reports.

We have a lot of stuff in this world, and Cisco has a graphic to prove it.

More e-Reads here.

Rep. Anna Eshoo, D-Calif., and other Democrats on the House Energy and Commerce Committee have some concerns with the draft spectrum bill released Wednesday by the panel's top Republicans.

The draft measure "is a starting point but includes provisions that Eshoo and other Democrats will likely be unable to support," according to a House aide, who declined to outline their specific concerns. Eshoo, the top Democrat on the Energy and Commerce Communications and Technology Subcommittee, however, and other Democrats are continuing to talk to GOP members in an effort to produce a bipartisan bill they can support, the aide added.

Despite criticisms, the draft has won some praise. The National Association of Broadcasters applauded the incentive auction language. In a brief interview with Tech Daily Dose as he was walking into the Capitol Wednesday afternoon, NAB President Gordon Smith said the House draft was a "a good bill." His group is pleased that the draft authorizes the FCC to conduct only one round of incentive auctions. Without such a restriction, Smith, a former GOP senator from Oregon, said broadcasters worry Congress would continue to push for multiple rounds of such auctions as a way to generate additional revenues for the Treasury.

Verizon Senior Vice President Peter Davidson also praised the measure. He said the draft meets his firm's three goals of making more spectrum available for mobile services and providing for an open auction of such spectrum, while also making progress toward building a national broadband network for public safety officials.

The White House on Wednesday panned a bill that would lower funding levels across various government agencies including the FCC, where it would shrink the agency's coffers and scrap its net-neutrality regulations in the latest of several GOP attempts to kill controversial rules.

In a policy statement issued by the Office of Management and Budget, the administration said that several portions of a spending bill approved by the House Appropriations Committee last month along party lines are cause for "concerns."
Among the grievances is the funding level for the FCC for fiscal year 2012, which the bill sets at $319 million.

President Obama's 2012 budget requested $354.2 million for the FCC, up from $335.8 million in 2010.

The FCC funding level proposed by House Republicans would "make it increasingly difficult to manage its expanded responsibilities, such as auctioning additional spectrum, overseeing mergers, and reforming the Universal Service Fund," the OMB said.

OMB also argues that the bill would not save taxpayer money because the FCC's budget is funded through regulatory fees.

The statement also criticized a provision of the bill killing net-neutrality rules, passed by the FCC last year over Republican objections in an effort to control how phone and cable companies may treat Internet traffic.

"The FCC has carefully crafted rules to promote competition while balancing the technical needs of Internet providers," the White Houset said.

Republicans said the legislation cut 9 percent in funding from federal agencies compared to last year.

OMB also said the eventual funding allocations remain unclear "pending the outcome of ongoing bipartisan, bicameral discussions between the Administration and congressional leadership on the Nation's long-term fiscal picture."

The Gay & Lesbian Alliance Against Defamation said Wednesday it has withdrawn its support for AT&T's proposed merger with T-Mobile USA.

The group came under fire this spring after its former president, Jarrett Barrios, wrote a letter to the Federal Communications Commission supporting the AT&T/T-Mobile merger not long after receiving a donation from AT&T. Barrios denied that the group's support for the merger was linked to the donation but resigned last month.

In a new letter to the FCC, Mike Thompson, the group's acting president, said his organization was rescinding its endorsement of the merger and now has a neutral stance on the deal.

"A rigorous review process considered GLAAD's unique mission and concluded that while AT&T has a strong record of support for the LGBT community, the explanation used to support this particular merger was not sufficiently consistent with GLAAD's work to advocate for positive and culture-changing LGBT stories and images in the media," Thompson said in a statement.

He repeated his group's stance on net neutrality, noting that GLAAD does not approve of AT&T's general opposition to net neutrality rules barring all broadband providers from blocking access to Internet content, applications or services.

"A nondiscriminatory and neutral Internet has allowed new digital media initiatives and the blogosphere itself to flourish online," he told the FCC.

In response to GLAAD's move, an AT&T spokesman said, "As we've previously said, we recognize, and fully respect that these organizations, which do important work, will make up their own minds about whether to support the merger or remain neutral. And, though it should go without saying, the decisions made by these organizations will not in any way impact our desire to work with, partner with, or support those organizations in the future."

Last month, Pride at Work, an offshoot of the AFL-CIO that promotes gay rights in the workplace, announced its support for the merger, citing AT&T's track record in supporting rights for gay workers.

The Obama administration is between a rock and a hard place on the AT&T merger, the Washington Post reports, because it needs to support labor unions.

More of today's e-Reads here.

Senate Commerce Chairman Jay Rockefeller, D-W.Va., has called on U.S. authorities to investigate whether any News Corp. media outlets may have broken U.S. laws in light of the phone-hacking scandal involving one of the company's British tabloids.

News Corp., which owns the Fox News network, Wall Street Journal and other U.S. media outlets, is under investigation by U.K. authorities after it was revealed that the company's News of the World tabloid had hacked the cellphones of British politicians, members of the Royal Family and even crime victims. News Corp. closed the tabloid as a result of the scandal.

In a statement late Tuesday, Rockefeller said the British case "raises serious questions about whether the company has broken U.S. law, and I encourage the appropriate agencies to investigate to ensure that Americans have not had their privacy violated."

He added that he is concerned that the cellphone hacking may have also involved victims of the Sept. 11, 2001 terrorist attacks or other Americans. "If they did, the consequences will be severe," Rockefeller warned.

Following the commission's monthly meeting Tuesday, Federal Communications Commission Chairman Julius Genachowski told reporters that he has no plans at this point to get involved in the phone-hacking scandal, Bloomberg reported. The FCC oversees the licenses for News Corp.-owned broadcast stations.

Delays in the federal government's telecommunications overhaul are costing Level 3 Communicatio9ns and Sprint Nextel a big load of business, the Washington Post reports.

Venture capital funds raised 28 percent more in the second quarter of the year than in the same period of 2010.

Groupon plans to give business partners more data about its users in a move that could invite Washington scrutiny.

Apple is making another effort to control the trademark for "App Store."

Netflix doesn't want Hulu.

Google chairman-cum-author Eric Schmidt is feeling the heat of his book deadline.

A handful of Web startups aim to give customers more control over their health.

Google is helping out in post-tsunami Japan in an effort that could help raise its profile there.

Therapy over the Internet?

Are limited data plans bad for competition?

Twitter is valued at $8 billion in a recent deal raising $400 million.

Tech stock is cheap, argues a top venture capitalist who does not see a bubble forming.

A phone hacking scandal takes down a historic Murdoch tabloid.

Apple promises to fix security gaps in the software for its popular electronic devices.

Hackers steal 1.2 million email addresses from The Washington Post's jobs website.

Google takes Facebook head-on.

But Google's Eric Schmidt would "love to have deeper integration with Twitter and Facebook" when it comes to social networking. And although the nascent social network Google+ isn't ready for businesses yet, it will be soon.

Boston investors who failed to back Mark Zuckerberg before he mattered regret that missed opportunity.

It's still raining on the Cape and chances look dismal for NASA to get an on-time launch of the space shuttle Atlantis -- the very last time a shuttle will go into space. Our full story here and some NASA video of Thursday's lightning here.

Net neutrality moved one step closer to the rule books after the FCC submitted the regulations for a federal review, according to a note Thursday in the Federal Register.

The review by the Office of Management and Budget is the last major hurdle before the rules become enforceable. It will assess whether new reporting requirements for industry comply with federal standards for data collection.

As part of a lengthy set of rules reining in how phone and cable companies treat Web traffic, the FCC mandated last year that Internet service providers must disclose more information about their network management practices.

The FCC estimated in its submission to OMB that complying with the disclosure mandates will take the average phone or cable company 32 hours per year.

That is triple the FCC's previous estimate of 10 hours, which broadband providers said was too low. Internet service companies have a chance to comment on the new estimates as part of the review.

Net neutrality regulations passed the FCC in December over criticisms from some phone and cable companies that the requirements are too burdensome.

House Republicans who have sought to repeal the rules slammed the FCC for underestimating the burden of its rules in its initial calculation.

"One has to wonder whether the FCC will also finally admit it has grossly underestimated the burden on innovation, investment, and jobs," Energy and Commerce Chairman Fred Upton, R-Mich., and Communications subcommittee Chairman Greg Walden, R-Ore. said in a statement on Thursday.

Former Sen. Byron Dorgan, D-N.D., has signed on with LightSquared, the embattled telecom startup that's seeking to build a wholesale, nationwide wireless network.

Dorgan, as well as former Reps. George Nethercutt, R-Wash., and Charlie Stenholm, D-Texas, will join an advisory board for a new LightSquared program called the Empower Rural America Initiative, the company announced Thursday.

LightSquared recently scaled back its plans after tests showed that the company's proposed network would interfere with global positioning systems. In a letter released Thursday, the Defense and Transportation departments asked the Federal Communications Commission to withhold approval for LightSquared's network.

"The departments continue to support the National Broadband Plan, but
cannot do so at the expense of a global, ubiquitous utility such as the
Global Positioning System," reads the statement from the National Coordination Office for Space-based Positioning, Navigation, and Timing. "The departments encourage further assessment of any alternative spectrum and/or signal configuration plans."

Lightsquared says the Empower Rural America Initiative will aim to resolve some of those issues and expand wireless coverage in underserved areas, according to LightSquared.

"Let's work to find solutions that will give farmers the accurate GPS signals and advanced wireless and broadband services available to rural America," Nethercutt said in a statement. "They shouldn't be mutually exclusive goals."

The nation's top broadcasters appear to be trying to get ahead of any possible deal on the debt ceiling that might include a provision providing authority to conduct auctions involving spectrum relinquished by television stations.

Broadcasterswrote House leaders Thursday, urging them to ensure television stations are not harmed if debt ceiling legislation includes a provision to give the Federal Communications Commission authority to conduct incentive auctions.

Such auctions are aimed at enticing broadcasters and others to voluntarily give up their spectrum in exchange for a share in the proceeds.

"Broadcasters are not opposed to granting the FCC voluntary incentive auction authority, so long as the authorizing legislation includes specific safeguards," the top executives with the nation's top four broadcast network affiliate groups wrote.

Supporters of incentive auctions say they could generate as much as $10 billion for deficit reduction. The White House and Congress are currently in talks over GOP demands that raising the debt ceiling be contingent on deficit reduction.

In their letter to House Speaker John Boehner, R-Ohio, and Minority Leader Nancy Pelosi, D-Calif., the broadcasters note that if the incentive auction provision is included as a revenue raiser in the debt ceiling deal, they want four "essential safeguards" included.

These include ensuring that the quality of a station's signal is not harmed if it is forced to relocate; that the incentive auction process does not hamper broadcasters' ability to offer new digital services; that the FCC be permitted to conduct only one round of incentive auctions; and that broadcasters be reimbursed for any costs associated with the process.

Republican Federal Communications Commissioner Robert McDowell will slam his agency on Thursday for overrregulating industry through "a mind-numbing 3,695 pages of rules" that he says have piled up over decades and are often obsolete.

According to his prepared testimony, McDowell will recommend "a full and thorough review of every rule" at the FCC during a House Energy and Commerce hearing on Thursday, echoing calls from Republicans for major reform to the nation's top telecom regulator.

The Oversight subcommittee hearing will draw a panel of federal officials, who will describe how their agencies are fulfilling President Obama's directive this year that they regulate with care, considering the potential burdens of new rules and reviewing existing ones.

McDowell will nominate the FCC's new net-neutrality rules for the chopping block, recommending that the agency nix the controversial Internet traffic regulations before they hit the books and and "cause uncertainty and unintended consequences in the marketplace." Congressional Republicans have made various efforts to do the same after the rules passed last year.

FCC Chairman Julius Genachowski circulated Obama's order to staff after it was issued in January along with an e-mail saying he supports the goals.

Genachowski has stressed the need to reduce barriers to broadband deployment, and has tried to ease some regulatory burdens such as the rates broadband companies pay to attach their technology to utility poles.

The subcommittee will also hear testimony from FTC Chairman Jon Leibowitz, among other agency officials.

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The advocacy and public policy group Greenlining Institute objected to the proposed AT&T and T-Mobile merger in California Wednesday, saying it would hurt competition and eliminate jobs.

The California-based group, which has also opposed the merger in filings with the Federal Communications Commission, asked the California Public Utilities Commission to require more information from AT&T.

"The merger would harm competition in the retail value-conscious wireless services market; low-income and other value-conscious consumers would face increased prices and degraded quality of service," Greenlining says in its filing, available here.

"The merger would also harm competition in wholesale markets; the elimination of T-Mobile as the dominant value-conscious provider would give AT&T the incentive and ability to engage in anticompetitive conduct in the backhaul and roaming markets."

The proposed deal would make AT&T the No. 1 wireless provider in the U.S. market.

"In a world where wireless access is a necessity, the potential loss of T-Mobile's low-cost service presents a real threat to millions of low and moderate income Californians," Greenlining Institute General Counsel Samuel Kang said in a statement. "As it now stands, AT&T's purchase of T-Mobile will be bad news for our communities."

The Justice Department announced late Wednesday that Christine Varney, who heads the department's antitrust division, will be leaving her post early next month.

Varney's division is currently reviewing AT&T's proposed merger with T-Mobile USA. The $39 billion transaction would combine the nation's second biggest wireless provider AT&T with No. 4 T-Mobile and reduce the number of national mobile operators from four to three.

In a statement, the department said Varney will be leaving her post Aug. 5 - well before the agency is expected to finish its review of the AT&T-T-Mobile deal. The department did not say why Varney is leaving but several news reports said she plans to join the law firm of Cravath, Swaine & Moore.

"Christine Varney led the Antitrust Division with great distinction through a period when the department confronted a number of proposed mergers and other matters that could have led to higher prices, lower quality products and less innovation in a recovering economy," Attorney General Eric Holder said in a statement. "There is no doubt that her tireless work helped protect consumers and businesses from anticompetitive conduct and preserved competition in America's economy."

Justice, with Varney as head of the antitrust division, has been criticized for approving some controversial tech and telecom mergers including Comcast's merger with NBC Universal and Google's acquisition of travel software maker ITA Software.

Computer and Communications Industry Association President Ed Black praised Varney's efforts to "reinvigorate" antitrust enforcement but said he hopes the Obama administration will pick an antitrust division leader who will vigorously enforce the law to promote competition. Black's group has called on Justice to block the AT&T-T-Mobile deal.

"We hope the Obama administration will appoint a strong antitrust chief who understands the new economy and how competition spurs innovation and economic growth," Black said. "Sound antitrust enforcement is particularly critical to the tech industry."

Sprint also opposes the AT&T-T-Mobile deal. Sprint Senior Vice President for Government Affairs Vonya B. McCann praised Varney's service and said the firm is "confident that the DOJ's dedicated staff, as well as Varney's successor, will continue to carefully and expeditiously evaluate the dangers of the pending AT&T takeover of T-Mobile and determine that the creation of a duopoly, with control of approximately 80 percent of the wireless market, is a clear violation of our nation's antitrust laws."

Sen. Chuck Grassley, R-Iowa, says the Federal Communications Commission is dodging his questions about LightSquared's controversial plan to build a nationwide wireless network.

In a letter to FCC Chairman Julius Genachowski on Tuesday, Grassley wrote the FCC chief never answered questions posed in an April 27 letter to the agency.

"On May 31, 2011, over one month after my initial request, you responded with a letter that did not respond to any of my questions and offered a general defense of the FCC's expedited procedure regarding LightSquared," Grassley wrote. "When my staff followed up with your legislative affairs office to seek an explanation for your failure to be responsive, my staff was told that the FCC chose to intentionally ignore the document requests in my letter."

According to Grassley, the FCC staff said they do not respond to congressional documents requests unless they come from the chairmen of the House Energy and Commerce or the Senate Commerce, Science, and Transportation committees.

In his May 31 response to Grassley, Genachowski defended the FCC's handling of LightSquared's plan. Tests show that LightSquared's network, which relies on both land-based transmitters and a satellite, will interfere with global positioning systems.

The FCC issued a statement saying the agency will work to resolve the issue.

"While we have deep respect for Senator Grassley, we respectfully disagree with the characterization of the exchange between staff in our offices," the statement reads. "As always, we remain responsive and look forward to working together on this and other issues."

Grassley asked the FCC to clarify whether it will answer his questions. He has also raised concerns about Securities and Exchange Commission investigations into the finances of LightSquared's owners.

Consumer Watchdog is claiming victory, at least to some extent, in its push to have the Federal Trade Commission investigate Facebook's virtual money programs.

According to Consumer Watchdog, Facebook changed its terms for game developers to use its virtual money after the advocacy group asked the FTC on June 28 to look into the policies.

But Facebook spokesman Andrew Noyes said the policy update was "long planned" for July 1.

Consumer Watchdog argued that the social network's policy controlled the game prices on other websites, a claim that Facebook disputes.

"Faced with an antitrust complaint, Facebook tweaked one blatantly anticompetitive provision, but they've used their monopoly position to maintain an onerous burden on developers that ultimately will mean higher prices for consumers," said John Simpson, director of Consumer Watchdog's Privacy Project. But without formal FTC action, he said, there is nothing to stop Facebook from changing the policy back.

In a January blog post, Facebook announced that on July 1st the company would require "all social game developers on the Facebook canvas platform to process payments through Facebook Credits."

The post went on to state that "Although we are not requiring developers to use Facebook Credits as their sole in-game currency, we are offering special incentives to those who do."

Simpson told Tech Daily Dose that after years of focusing heavily on Google, Consumer Watchdog is "broadening our concerns about the privacy and anticompetitive practices of other tech companies."

Senate Commerce Chairman Jay Rockefeller, D-W.Va., has a long list of ideas for reducing the deficit and one of them calls for generating tax revenue by legalizing online gambling.

Last week, Rockefeller released 18 proposals that he said could generate $1.29 trillion over 10 years in deficit savings. The list includes a proposal for regulating and taxing online gambling, which he said could result in more than $41 billion in tax revenues over 10 years.

"Establishing online gambling regulations will protect consumers, state's rights and state sovereignty, and eliminate a huge illegal market that today benefits only countries and companies overseas," Rockefeller's office said in a statement.

Rockefeller is considering offering legislation to legalize online gambling, his spokesman said Wednesday. Either way, he said, Rockefeller believes the proposal should be on the table in deficit reduction talks.

While most online gambling websites are based outside of the United States, a 2006 U.S. law has tried to combat online gambling here by barring credit card companies, banks and others from processing payments from online gambling bets.

Rep. Joe Barton, R-Texas, introduced bipartisan legislation last month that would legalize online poker by authorizing online betting on poker and direct the Commerce Department to set up a licensing and consumer-protection regime.

AT&T cleared another hurdle in its marathon bid to acquire T-Mobile USA after gaining approval last week of the deal by Arizona, the first state to give its blessing to the merger.

The Arizona Corporation Commission, the state agency that oversees telecom providers, approved AT&T's acquisition of T-Mobile USA, the nation's fourth biggest wireless provider, without a hearing and with a minimal condition requiring the firm to notify T-Mobile customers by mail of the deal.

Only four other states -- California, Hawaii, Louisiana and West Virginia -- have indicated an interest in examining the acquisition. The Federal Communications Commission and the Justice Department are currently reviewing the merger.

"As indicated previously, there will be no interruption or decrease in the wireless services provided to the T-Mobile customers as a result of the acquisition," the June 27 order from the Arizona commission approving the deal says. "The acquisition will have no impact on the rates, terms and conditions of the AT&T subsidiaries' Arizona tariffs or on their ability to provide service."

Arizona Gov. Jan Brewer came out in support of the merger last month, joining more than two dozen other governors in backing the deal.

"This deal is a springboard for launching American wireless service into the next generation," Brewer, a Republican, wrote in a June 20th letter to the FCC. "Providing more Arizonans the opportunity to utilize high-speed wireless broadband will give our great state a needed edge to continue to succeed on the global stage."

Critics argue that the deal will harm wireless competition and lead to higher prices and less innovation for consumers. They worry it will result in further consolidation in the industry. If the deal is approved, AT&T, the second biggest wireless provider, will leapfrog the nation's top provider Verizon Wireless and leave only three major national wireless providers.

After a string of bad news, LightSquared tried to shore up support for its increasingly controversial national wireless broadband network by announcing Tuesday it has raised millions of dollars in new investment.

The startup said it has raised $265 million in additional investment, bringing in $2.3 billion in capital over the past 12 months. The money came from both current and new investors.

"This latest round of financing signals another endorsement by the financial markets of our business model, and LightSquared's intent to use private capital to build out a new network to meet the growing demand across this entire nation for wireless broadband access," LightSquared CEO Sanjiv Ahuja said in a statement.

A range of tests has determined that LightSquared's planned network, which included both land-based transmitters and a satellite, would interfere with global positioning systems. LightSquared has now scaled back iplans to deploy the network.

Under the newly revised deployment plan, LightSquared says it will hold off on using the spectrum closest to that used by GPS receivers.

But the controversy is far from over, with the GPS industry demanding that LightSquared not use the adjacent spectrum at all. The Federal Communications Commission is now evaluating the interference test results and must approve the plan before LightSquared can move forward.

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