Blog Archives
Amazon's tax woes stem from definition of terms
By Kenneth Corbin | June 29, 2009As the largest retailer on the Web digs in for another fight over collecting sales taxes, we see again just how important the definition of a few common words like "physical presence" can be.
Amazon has terminated its affiliate marketing programs in North Carolina and Rhode Island due to pending laws in those states that could require the online retailer to collect sales taxes, even though it has no employees or operations in either.
Both states are on the verge of following [New York's lead](/government/article.php/3740056/Amazon+Tax+Lands+in+New+York.htm) and altering their tax code to equate members of Amazon's Associates program -- site owners who advertise Amazon products with links and receive a commission for referral sales -- as employees of the company.
Amazon has rewritten its associates operating agreement to bar residents of North Carolina and Rhode Island from participating in the program.
As the trailblazing state that came up with a novel interpretation of a Supreme Court precedent to impose a collection requirement, [New York was met with a lawsuit from Amazon](/government/article.php/3744476/Amazon+Sues+New+York+Over+Internet+Tax.htm). The judge dismissed sided with New York, and Amazon kept its affiliate program in that state, collecting sales taxes under protest. (Amazon is continuing its legal fight against the New York law.)
Overstock took a different approach, and dropped its affiliate program in New York altogether.
Amazon's move in North Carolina and Rhode Island seems to suggest a growing awareness that the taxation of online affiliate marketing is heading toward a domino effect, as cash-strapped states grow emboldened by the precedent of the New York case and look to close the loophole that has led to significant revenue shortfalls.
This story is often presented as states inventing a new tax. [It is not](http://blog.internetnews.com/kcorbin/2009/04/online-taxes-arent-new-taxes.html).
Dell held in contempt in New Orleans camera case
By Kenneth Corbin | June 26, 2009An Orleans Parish judge has held Dell in contempt of court for failing to provide company e-mails relating to an ill-fated deal to provide the city with crime cameras, the New Orleans Times Picayune reports.
Dell is one of multiple defendants in a case brought by New Orleans' initial crime camera suppliers, Southern Electronic and Active Solutions, who are claiming that a handful of tech companies and some less-than-scrupulous city officials (including the mayor) conspired to steal their camera technology.
Dell had been threatened with contempt in May, when the judge ordered Michael Dell, CEO of the computer giant to testify in person, and balked that the company was dragging its feet when asked to provide internal documents.
Dell's attorney had argued that the CEO had not met with Mayor Ray Nagin, and that he had no knowledge of any deal with the city. Documents have since emerged to show that the meeting took place in 2004, and that Dell was briefed on the camera deal, the Picayune reported.
The judge got angry when Dell's attorneys produced what she considered an incomplete body of evidence, after having been ordered to search Michael Dell's personal files and those of his deputy, Troy West.
Here's the money quote from Judge Rose Ledet, dismissing Dell attorney Phil Wittmann's protestation that searching the files by terms like "cameras" and "public safety" would :
"Dell is in the business of computers, Mr. Wittmann. How can they not find the documents, how can they not search the e-mails? You're making a mockery of the system here. Read my lips, Dell is in contempt."
Ouch. Dell was ordered to pay $25,000 to the plaintiffs to cover court costs.
Advocacy group blasts 'TV Everywhere'
By Kenneth Corbin | June 25, 2009The Web has lit up with buzz about the desperation that hatched yesterday's announcement from Time Warner and Comcast of 'TV Everywhere,' an online portal where subscribers of Comcast cable will be able to freely view premium content from the likes of TBS and TNT.
Mainly it's about control. It's no secret that the heads of big media companies like Time Warner's Jeff Bewkes have been racking their brains trying to develop models for bringing their content online without giving it away.
So now we have 'TV Everywhere,' an authentication system that will bring more premium content to the Web, but only for Comcast subscribers who can prove they're already paying the freight.
Nationwide technical trials are set to begin next month, but Public Knowledge, a prominent Washington digital-rights group, is already crying foul.
"Limiting access to programming is straight out of the cable playbook, going back to the days when Congress had to act in 1992 to allow the satellite programming distributors to have access to cable programming," Public Knowledge President Gigi Sohn said in a statement responding to the Time Warner-Comcast deal. "This new version raises substantial anti-competitive issues by restricting the availability of programming to the favored distribution methods."
DoJ scores largest ever CAN-SPAM prosecution
By Kenneth Corbin | June 22, 2009Five prolific spammers today pleaded guilty to violating the CAN-SPAM Act in a federal court in Detroit in a case that took down a massive stock fraud operation, marking the Justice Department's largest-ever prosecution under the 2003 statute.
Alan Ralsky and his son-in-law Scott Bradley could both receive sentences of more than six years in prison and a $1 million fine for the CAN-SPAM violations and additional charges of wire fraud, money laundering and conspiracy to commit wire fraud and mail fraud.
"Alan Ralsky was at one time the world's most notorious illegal spammer," U.S. Attorney Terrence Berg said in a statement. "Today Ralsky, his son-in-law Scott Bradley and three of their co-conspirators stand convicted for their roles in running an international spamming operation that sent billions of illegal e-mail advertisements to pump up Chinese 'penny' stocks and then reap profits by causing trades in these same stocks while others bought at the inflated prices."
The DoJ also secured guilty pleas from John Bown, William Neil and James Fite for their role in the operation. The three co-conspirators face jail terms ranging from two years to more than five years.
All five are scheduled to be sentenced Oct. 29.
Ralsky, 64, was charged with masterminding a systematic campaign to pepper unsuspecting consumers with messages containing "materially false and misleading information or omissions" promoting junk stocks for "U.S. companies owned and controlled by individuals in Hong Kong and China."
Cases against three other individuals accused of being involved with the scheme are still pending.
Qorvis v. AT&T, Verizon: This is going to get ugly
By Kenneth Corbin | June 22, 2009You've got to tip your hat to [Qorvis](http://qorvis.com/) -- they really know how to pick a fight. The Washington-based PR and advertising firm, which spearheaded the tech industry's campaign last year to open access to TV white spaces over the objection of the broadcasters, is now taking on another lobbying goliath: the incumbent telecom providers.
This one's about pricing for special access services, the fees AT&T, Verizon and others charge smaller carriers for use of their network infrastructure. [Launched this morning](/government/article.php/3826316/Critics+Call+On+FCC+to+Curb+ATT+Verizon+Pricing.htm), the No Choke Points coalition includes carriers like Sprint and T-Mobile, as well as a host of other businesses and advocacy groups, led by the crusading Qorvis.
Very simply, the [No Choke Points coalition](http://nochokepoints.org/) is asking the FCC re-regulate special access pricing.
But you don't think the telcos are going to take this lying down, do you? AT&T held its own media event today to rebut the claims of the new organization. U.S. Telecom, the trade association representing AT&T, Verizon and others, fired back with a statement describing how competition in special access is increasing as prices drop.
Hogwash, cried No Choke Points. The group responded with a myth v. fact sheet aimed at "unraveling [the] U.S. Telecom spin."
The way they tell it, they've submitted all the data the FCC needs to rule against these predatory pricing schemes, and it's the big telcos that are obfuscating. Prices are rising and competition is non-existent.
An excerpt:
> MYTH: If NoChokepoints wins, consumers lose because network investment will be discouraged
>
> Fact: You guessed it -- wrong.
>
> - AT&T and Verizon have become consumer advocates. Really? You can't be serious.
>
> - And in fact, AT&T's and Verizon's own data filed with the FCC show that they invested more when they were more heavily regulated (1997-2001) than they did after the FCC started deregulating them in 2002 (these are their figures for "plant additions" filed in the FCC's ARMIS database).
>
> - AT&T and Verizon should stick with what they do best -- overcharging consumers and Coalition members like Public Knowledge, and the New America Foundation, MAP and US PIRG -- or, separately, the Small Business Administration should attest to the devastating impact of this market abuse on U.S. consumers.
Indeed.
Meanwhile, AT&T submitted an ex parte filing to the FCC today, urging the commission to leave special access pricing alone, and accusing penny-pinching Sprint of trying to free ride on the labor and investment of the big boys so it doesn't have to build out its own network.
AT&T points to the broadband providers that are expanding their own infrastructure, weaning themselves off of the special access services of the incumbents and introducing competition in the market. Firms like FiberTower, Level3 and the reconstituted Clearwire (a firm in which Sprint holds a dominant interest), have all been investing heavily in cell towers and fiber for high-speed data services.
AT&T says that it's doing its part, claiming that it will invest more in capital expenditures in 2009 than any other publicly traded company.
But Sprint, AT&T maintains, is moving in the opposite direction, slashing capital expenditure while leaning on regulators to make it more cheaper to tap into the infrastructure being built on someone else's dime.
"Recognizing that ubiquitous broadband deployment is a strategic, national imperative for policymakers, Sprint and others have sought to hitch to the broadband wagon their demands for government-mandated reductions in ILEC (incumbent local exchange carrier) special access rates and a return to monopoly era, rate-of-return price regulation of such services," James Cicconi, AT&T's top lobbyist, wrote in the filing. "Far from being the panacea for broadband deployment they claim, these parties' regulatory prescription would only weaken broadband infrastructure providers' incentives and ability to invest in a next-generation broadband America -- if not kill them altogether."
But isn't this bigger than just AT&T versus Sprint? After all, No Choke Points warns us that, "AT&T and Verizon want to trick you into thinking this is some old industry food fight among telephone companies."
And, don't forget: "The truth is that special access IS broadband, but AT&T and Verizon are really hoping you don't notice."
Last November, after several months of posturing in near-daily e-mails delivered to reporters and anyone else who would listen, Qorvis won the white spaces fight, having convinced (under the aegis of the Wireless Innovation Alliance) the FCC that the broadcasters' equally voluminous dispatches warning that the new devices would interfere with everything from TV broadcasts to services in mega-churches were overblown.
Are we headed for a repeat performance?
Flipping the switch to DTV, millions still in the dark
By Kenneth Corbin | June 12, 2009Today's the big day! The nationwide switchover from analog to digital television broadcasts, originally scheduled for Feb. 17, is in full-swing today.
Sadly, despite the prolific education efforts of the Federal Communications Commission and television broadcasters, 2.8 million households aren't ready for the transition, according to the latest figures from Nielsen.
By demographic, Nielsen found that African American, Hispanic and younger households are disproportionately unprepared.
The number of households that Nielsen estimates haven't subscribed to cable or purchased a converter box represents 2.5 percent of the television market.
Still, 2.8 million is well down from the 5.8 million homes Nielsen estimated were unprepared in February, when Congress moved to delay the transition.
In the meantime, Acting FCC Chairman Michael Copps pledged today that the agency will be on high alert to help people who flip on their TVs only to find they have no picture.
The FCC is planning to issue a status report on the transition tomorrow afternoon, which will include data on the volume of problems handled by the 4,000 people staffing the agency's call centers.
By law, every full-power station must switch over to digital by 11:59 EST today, but the transition is happening on a rolling basis throughout the day. Many stations went ahead and converted early. The FCC offers a list of transition times (A.M., P.M., early morning or evening) in column K on an Excel spreadsheet available here.
Craigslist $100m revenue estimate 'very conservative'
By Kenneth Corbin | June 11, 2009Craigslist, the wildly popular classified site, is a closely held company that nurtures an image of community spirit and an aw-shucks ethos of just helpin' people connect with people.
Peel that back, and you've got an extremely profitable company, according to research from the Advanced Interactive Media (AIM) Group.
Earlier this week, AIM's Classified Intelligence Report came out with an estimate pegging Craigslist's 2009 revenue at $100 million, up 23 percent from last year. Today, AIM's Peter Zollman penned a blog post saying the "100 million estimate may be very conservative."
"We believe revenue could easily exceed the nine-figure mark," Zollman said.
Craigslist, which offers most of its listings for free, makes money from fees for recruitment ads, as well as real estate listings from brokers in New York.
Using a simple methodology of counting ads, AIM has been tracking Craigslist's revenue since 2003, when it estimated the site raked in $7 million.
Craigslist only charges fees for job listings in 18 cities, though AIM projects that the addition of new markets and Craigslist's [recently-created adult services section](/webcontent/article.php/3821951/Judge+Halts+Prosecution+of+Craigslist+for+Sex+Ads.htm) could open significant new revenue channels.
Senators look to make R&D credit permanent
By Kenneth Corbin | June 08, 2009The tech industry ought to like this one.
The bipartisan leadership of the Senate Finance Committee today introduced a bill that would make the tax credit companies enjoy for research and development permanent.
This is a long-simmering issue for tech companies, who maintain -- quite reasonably -- that greater tax incentives for research and development would help keep the sorts of companies that thrive on shepherding innovation from the lab to the market competitive with their overseas rivals.
"Technology is one of our nation's leading exports, and firms throughout the U.S. profit from the innovations that are developed here," Orrin Hatch, the ranking Republican on the committee, said in a statement introducing the bill.
Hatch signed onto the bill as a cosponsor with Max Baucus, the Montana Democrat who chairs the committee.
In addition to making the R&D tax credit permanent, the Baucus-Hatch bill would also strengthen the simplified alternative credit, which offers businesses more flexibility in claiming tax breaks for basic research.
The R&D tax credit was written into law in 1981, and has expired 13 times since as Congress has debated multiyear extensions. Making the R&D tax credit permanent was a plank of the technology platforms of both Barack Obama and John McCain in last year's election.
Lawmaker takes to wiki for healthcare reform
By Kenneth Corbin | June 05, 2009Remember that e-government pipedream of writing legislation on a wiki? MixedInk, a startup dedicated to bringing the collaborative Web 2.0 ethos to the political process, is trying to make it happen.
Previously, [MixedInk](http://mixedink.com/main.php) (profiled here) has enlisted its community to work on the Democratic Party platform and draft an inauguration speech for Barack Obama.
Now that Congress is in full swing, the three pals behind the startup are going to try to take on a bill. And a kingfish at that.
Rep. Anthony Weiner, D-N.Y., has thrown in his lot with MixedInk, offering up as suggestions 10 guiding principles for healthcare reform and asking for the community for additions, edits and comments.
"I have argued we need to have government behind glass walls," Weiner said in a video announcing the project. "People should be able to see in what's going on. But not only that -- they should be able to participate."
The healthcare comment period is open through July 6.
More antitrust scrutiny for IT sector
By Kenneth Corbin | June 03, 2009The Justice Department has opened a probe into agreements reached between tech companies over hiring away top talent from each other, according to the Washington Post.
The article, citing unnamed sources, said the investigation is preliminary, with a specific focus on Google, Yahoo, Apple and Genentech. But it also described it as a broader, "industry-wide" probe exploring potential anticompetitive practices in the tech sector.
It's no secret that competition for top talent in IT is fierce. One need not think back too far to recall the IBM's legal battle with Mark Papermaster, the executive hired away by Apple, which IBM alleged was a breached of a non-compete agreement he had signed.
Then there was the fracas in 2005, when Microsoft sued Google in 2005 for poaching Kai-Fu Lee, one of its star engineers.
But looking ahead, the bottom line here is that this rumored probe is just the latest sign of mounting regulatory scrutiny the tech industry is facing. As the tech industry matures, it could be that the argument that regulation would choke off innovation and hamstring growth is beginning to ring hollow.
There are clear leaders in certain corners of the industry, with no convincing signs of an imminent shakeup. A common refrain along these lines is that Google's simply getting too big.
Stories describing Google as sitting in the crosshairs of the antitrust authorities in Washington have become a common occurrence dating back to the ill-fated advertising partnership with Yahoo last year. They often begin something like, "Despite its close ties with the Obama administration, Google is increasingly the target of antitrust ..."
Indeed. We've already seen antitrust inquiries into its Book Search settlement and the two Google directors who also sit on the board of Apple.
Then again, is anyone going to be surprised to see this administration take a tougher stance on antitrust issues than the previous?
Pot shots at the Google Book Search deal
By Kenneth Corbin | June 02, 2009WASHINGTON -- Google's really getting it from all sides about its Books Search project.
Here at the Computers, Freedom and Privacy conference, Google attorney Alex Macgillivray sat on a panel discussion as the lone defender of the deal, trying his best to assuage concerns about monopolies, privacy and authors' rights.
"There really is this whole spectrum of choices for the rights holders," Macgillivray said.
As it stands today, Google has reached a tentative settlement with a group of authors and publishers that had filed a copyright-infringement lawsuit to block its efforts to digitize the collections of five major research libraries.
Google settled with the plaintiffs, but now other groups and government regulators are raising a fresh set of concerns about the deal, with some claiming that it gives Google an unfair competitive advantage over competitors who might want to initiate their own scanning projects.
"I'm comfortable with the term 'monopoly' here," said James Grimmelman, an attorney with the Institute for Information Law and Policy.
Macgillivray stressed that striking down a deal based on a hypothetical impact for hypothetical competitors is nonsense.
He also pointed out that Google made the investment and took the risk to launch this project, painting it as a full-throated defense of fair use.
Of course, the argument over the Book Search deal tends to conflate several issues -- those involving copyrights and scanning, orphaned works, anti-competitive concerns and, to some, privacy. The concern with the last point is similar to the concerns people have been raising about Google for several years -- namely, that it has an insatiable hunger for ever more data about its users. As to the others, it's really going to be left to the lawyers.
And, for those eager to keep up with the legal documents circulating about the case, SharedBook, a software firm geared toward publishers, has set up a discussion page dedicated to the settlement.
