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Volume 2, Issue 45: Wednesday, April 19, 2000
- "A Tricky Element in the Antitrust Battle: Microsoft's Server Tactics"
Wall Street Journal (04/19/00) P. B1; Wilke, John R.; Bridis, Ted
U.S. District Judge Thomas Penfield Jackson, who ruled on April 3 that Microsoft's business practices violated the Sherman Antitrust Act, is now focusing on remedies in order to restore competition to areas where Microsoft holds a monopoly. Competitors of Microsoft, who are currently helping the government investigate Microsoft, now allege that the company is using monopoly power in the Internet and network server market, charging that Windows 2000 was designed to only work well with Windows server software. Microsoft maintains that Windows 2000 works with other software, and that competitors are prodding federal and state antitrust concerns. Neither the Justice Department nor the states have made final decisions on remedy plans. However, following the failure of the settlement talks between Microsoft and the government, potential remedies include restrictions on how Microsoft conducts business, divestiture of Microsoft's Internet browser or Office software, and possible loss of copyrights or other forced disclosure of software code. Executives from Microsoft intend to appeal the ruling and have no plans to change their business tactics.
- "Wringing New Potential Out of the Old Economy"
Financial Times (04/19/00) P. 13; Waters, Richard
Traditional companies and Internet startups continue to blend, leaving old-line firms well-positioned to take advantage of the new economy, and particularly business-to-business e-commerce. Still, investors seem to prefer dot-coms, and traditional firms face structural and cultural challenges in the transition to e-commerce. Established manufacturers such as United Technologies argue that they stand to gain the most from e-commerce. United Technologies has started participating in online auctions, which the company estimates will reduce prices from suppliers by 25 percent over three years. By contrast, the company might have received price reductions totaling 15 percent over three years using older methods of awarding contracts. In addition, United Technologies this summer will launch an automated system that pools all of the company's indirect purchases. However, even these online moves might not be enough to sell investors on traditional manufacturers. Doubt remains over whether traditional companies will be able move quickly enough to leverage new e-commerce technologies and business models, and many old-line firms are teaming with dot-coms as a result. Meanwhile, pure Internet companies are also interested in joining with established companies, which have the brand names, resources, and supply-chain knowledge that help e-commerce ventures succeed.
- "Computing's Dark Side: Digital Domination"
Investor's Business Daily (04/19/00) P. A8; DeTar, James
Two prominent high-tech gurus, Sun Microsystems cofounder and chief scientist Bill Joy and Intel director of research David Tennenhouse, are warning that computers could eventually dominate humans and urging scientists to use caution to prevent this from happening. Joy and Tennenhouse both worked at the Defense Advanced Research Projects Agency (DARPA), which supports cutting-edge technology research and funded the creation of the Internet. Joy, who wrote a version of Unix known as Berkeley Unix, authored an article in this month's Wired magazine called "Why the Future Doesn't Need Us." In his article, Joy expresses concern that humans and robots will blend together, with some humans possibly becoming entirely robot. Decisions in the future could become so complicated that only computers will be able to make them, Joy warns. Joy urges people to consider how to coexist with technology, and asks, "if our extinction is a likely, or even possible, outcome of our technological development, shouldn't we proceed with great caution?" A more subdued Tennenhouse issued a similar warning shortly after the publication of Joy's article. Noting that computers are already starting to oppress people, Tennenhouse says, "A lot of work needs to be done to achieve human-centered computing." In addition to a national agenda for semiconductor research, Tennenhouse calls for software that continues the Internet revolution under the control of humans rather than computers.
- "Rift Develops Over Microsoft Punishment"
Los Angeles Times (04/18/00) P. C1; Shiver, Jube Jr.
Some states involved in the Microsoft antitrust trial now wish to submit a remedy proposal separate from the Justice Department, since the stock market drop seems to have softened the department's stance. Although the states still have disputes to resolve among themselves, they have been racing to prepare their solutions for the April 25 deadline. On April 5, Wisconsin Senior assistant Attorney General Kevin J. O'Connor told Judge Thomas Penfield Jackson that the states hoped to join the Justice Department in a single proposal, and Jackson made it clear that he wanted a unified proposal. A separate filing is likely to extend the trial, rendering any solution even more obsolete in the fast-paced tech industry. However, the Justice Department is concerned about the huge stock market drop, and is reviewing moderate solutions that fall short of a breakup. The department is considering remedies such as forcing Microsoft to set standard prices for Windows, giving computer makers more control over customizing Windows, and splitting Internet Explorer from Windows. Although some lawyers say the stock market has no impact on the trial, Jackson expressed concern about the fall in the Nasdaq average following his April 3 ruling against the software giant. The stock drop might influence Jackson to reject severe structural punishments such as dividing the company.
- "Canadian Arrest Made in February Web Attacks"
Canadian police say that they have arrested "a person" believed to be responsible for the February "denial-of-service" attacks that disabled major Web sites such as Yahoo! and eBay and caused many consumers to question the security of e-commerce in general. The Royal Canadian Mounted Police's Computer Investigation and Support Unit, the FBI, and the U.S. Justice Department all worked together to track down the suspect over the last two months. Although law enforcement has remained mum about the identity of the suspect, a recent ABC News report said that the suspect in custody was a 15-year-old boy who used the online alias of Mafiaboy. The Canadian police plan to reveal more information about the case at a news conference today.
- "Juniper Networks Says Chip Can Help Thwart Hackers"
Wall Street Journal (04/18/00) P. B4
Juniper Networks announced that its Internet-switching gear will be equipped with a new chip to uncover and prevent hacker attacks on the Internet. Juniper said the chip will enable Internet traffic to be monitored and filtered without hampering network speed. Juniper said the chip, which is currently provided on all of its Internet-switching equipment, could aid in the prevention of "denial of service" attacks. Juniper said its chip will allow for monitoring and filtering at 20 million data packets per second, 100 times faster than rival equipment, which uses software for traffic monitoring.
- "Europe's First E-Commerce Site for Media Companies Debuts"
InternetNews.com (04/17/00); Pappinen, Lauri
The recently launched KameraOne online marketplace will provide a forum for the trade of digitized video content, including news, sports, and entertainment from the Associated Press, Planet Rock Files, VideoFashion, and short film producer Honkworm. "KameraOne will have a great impact on how content on the Internet will look in the future," said Dan Willstrand, CEO of parent company Kamera Interactive. "Broadband networks will be the most important distribution channels for video content and KameraOne will help our clients to take and keep a leading market position." KameraOne was developed by Kamera Interactive and marchFIRST, which was formally known as USWeb.
- "Worldly Web Suffixes Open New Domains"
Investor's Business Daily (04/18/00) P. A8; Howell, Donna
As businesses and individuals scramble to register any Internet address that ends in dot-com, dot-net, and dot-org, some companies are hoping to strike it rich by reserving the rights to lesser known Internet suffixes. Cash-strapped or tiny countries have found their country domain names can be very lucrative assets. The South Pacific nation Tuvalu could earn as much as $50 million in royalties over the next decade for the rights to its domain, which just happens to be dot-tv. DotTV, a unit of the investment firm and technology incubator Idealab, bought the rights to the name and registered 100 names for $100 each in the first day alone. Since then, the company has decided to put the remaining names up for auction, and DotTV CEO Lou Kerner expects to see bids in excess of $1 million within a year. The Republic of Moldavia had similar success selling its domain name, dot-md, and a number of other countries have potentially lucrative Internet country codes as well. Some doubt whether the alternative suffixes will catch on, but with some savvy marketing, they could be extremely profitable.
- "New Study Finds Hope for Internet Retailers"
Wall Street Journal (04/18/00) P. A2; Quick, Rebecca
Although Internet retail stocks have plummeted and recent hype portends the downfall of online retailers, 38 percent of Web retailers are now earning profits, says a new study from Boston Consulting Group (BCG). The study, conducted jointly with online retail trade group shop.org, also shows that 72 percent of catalog companies that have moved online are now making money. BCG says a shakeout is already occurring, but adds that remaining Web retailers will be stronger once weak competitors are gone. Of the online retailers that have been in business for a year or longer, 79 percent of catalog firms, 50 percent of brick-and-mortar companies, and 36 percent of Internet-only firms are now bringing in profits. The online success of catalog companies stems from their familiarity with delivering products directly to buyers. Brick-and-mortar firms also have an advantage because their established brands lower marketing costs. Although online-only firms spent about $82 to get each new customer last year, traditional companies only spent about $12 per customer. Overall, BCG predicts that online shopping will increase 85 percent this year to $61.1 billion, representing considerable growth, although not as impressive as the 120 percent growth in 1999.
- "Safe Harbor Vote Delayed"
Wired News (04/17/00); Yackley, Ayla Jean
A European Union vote to ratify the Safe Harbor agreement reached by EU and U.S. officials last month has been pushed back until late May. "We were looking for a political green light, but have to defer to the institutional demands of the EU," said one Department of Commerce official, speaking on condition of anonymity. The official predicted that the agreement would be ratified by EU member states at a May 30 meeting. Junkbusters President Jason Catlett, a proponent of federal privacy laws for U.S. consumers, said that the U.S. stands to become increasingly out of step with the rest of the world on the implementation of privacy laws. Armgard von Reden, IBM's manager of government programs in Europe and a member of the American Chamber of Commerce in Brussels, says the pre-Safe Harbor arrangement between the U.S. and EU was "very cumbersome and...administratively prohibitive." "Without Safe Harbor, this would end up at the WTO," von Reden said. E-commerce in Europe would likely suffer if the EU decides to abandon the Safe Harbor agreement and prevents data from reaching the other side of the Atlantic. E-commerce in Europe will top out at 175 billion euros by 2005, according to Forrester Research. Von Reden predicts that American companies participating in the Safe Harbor program will be able to satisfy Europeans' high privacy standards.
- "Turkey Debates Cyberspace Controls"
Reuters (04/16/00); Unal, Elif
Turkey is debating an anti-terrorism bill that would greatly expand the government's control of the Internet and could force local Internet companies to turn over private information, including email content, to a watchdog group composed entirely of state officials and chaired by the prime minister. The Bill on The National Information Security Organization And Its Duties calls for a penalty of up to five years in jail for those who fail to fulfill the bill's "obligations." Timur Sirt, an Internet analyst for the Yeni Binyil daily, says the proposed law is quite broad and could be used to limit any kind of Internet activity. Other European countries are considering new laws governing the Internet, but those proposals pay far greater attention to individual rights.
- "Critics Doubt Value of Maryland's New Software Legislation"
Baltimore Sun (04/16/00) P. D1; Wheeler, Timothy B.; Guidera, Mark
Critics are questioning the value of new software legislation that Maryland's lawmakers are soon expected to pass. The Uniform Computer Information Transactions Act (UCITA) is a wide-ranging modernization of commercial law controlling software purchased over the Internet and in stores, which was written as model legislation to be incorporated by all 50 states. According to those who favor the legislation, the law will make certain that software creators receive payment for their work. However, Cem Kaner, a lawyer and consultant to the software industry, who has lobbied across the country against the model legislation, says the law may in fact force out small software development firms, specifically those that work on open source programs. In addition, some companies, particularly those firms that rely on computer databases, are concerned that the law may interfere with their ability to shape software according to their requirements or to get compensation for programs that do not work. The only other state that has passed the law, Virginia, does not intend to enact the legislation until 2001, and then only after the law has been studied for modifications by a panel of legal and technical experts.
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- "Study: ASPs to Spend $1 Billion on Technology in 2000"
CNet (04/17/00); Heskett, Ben
Networking and technology firms intend to position themselves in the application service provider (ASP) market as the increasing number of ASPs expand their infrastructures to boost competitiveness. The number of ASPs in the market has grown to 100 by the first quarter of this year, up from 70 last year, according to Cahners In-Stat Group. Those ASPs will spend nearly $1 billion this year on technology from companies such as IBM, Cisco Systems, Sun Microsystems, and Oracle to connect their applications with clients, according to Cahners In-Stat Group.
- "After Taking a Beating, Dot-Coms Now Seek Financial Saviors"
New York Times (04/18/00) P. C1; Kaufman, Leslie
E-commerce companies are seeking deals to help them survive after the recent barrage in the stock market over the past weeks left many of them with little money or interest from investors. The trend is toward consolidation between companies providing similar services, as companies with financial difficulties are bought by more stable competitors. Retailers are convinced that only leading companies in a given area of expertise will receive future funding, even though some Internet retailers have less money in the bank than their value on the stock market. Still, many high-tech venture capitalists whose own portfolios have dropped in value believe they may have more leverage in negotiating with new Internet companies.
- "A Docket Full of Issues"
Potomac Tech Journal (04/10/00) Vol. 1, No. 11, P. 19; Kaltenheuser, Skip
Burgeoning information technology companies are pushing into new legal waters, but society is following with new laws as well. Tech companies should keep an eye on developing legislation issues, such as privacy. The recent Financial Services Modernization bill brought down the barriers between insurers, banks, and security companies, paving the way for new entities and new ways to use technology to share information about customers. States are allowed to enact consumer protections that preempt federal law, and some are doing so. The Federal Communications Commission is considering regulating online credit operations in ways that could affect data compilation, sharing, and selling in marketing. E-commerce taxation is another big issue, as are unsolicited email and the enforceability of online contracts. Lawyer Ron Dreben believes that the latter issue will be settled during the next couple of years, including the use of digital signatures. He predicts that laws concerning the unauthorized use of data in comparison shopping programs and aggregation sites will be clarified. Copyright laws will have to be reconsidered. Experts say the law, specifically the Economic Espionage Act, will soon get into gear and catch up with companies. Patents, especially for intangible ideas and methods, are changing as well. Business methods are now being patented, and there is a prior user protection specifically for them. However, patent expert Robert Rines thinks that this patent class will eventually be found unconstitutional.
- "Battle Cry: Integrate e-Biz Apps"
InternetWeek (04/17/00) No. 809, P. 1; Wilson, Tim
A new class of middleware known as business-to-business (B2B) integration software is now available to businesses needing to establish communications channels with partners, suppliers, and customers. By availing themselves of the B2B integration packages offered by a variety of vendors, companies avoid the costly task of establishing links with each individual partner or supplier. "Companies want to pick one integration vendor that can connect them to all the exchanges and other partners they want to work with," says AMR Research analyst Kimberly Knickle. "Eventually, no company is going to be able to do business on a B2B level without this type of integration technology." The vendors employ XML technology to enable one business' front-end e-business application, such as an e-marketplace, to share data and documents with another business' back-end legacy system, such as its accounts payable application. End users will view the documents as if they were generated on the local system. The cost of implementing such a system is significant, particularly for a large enterprise, but when the cost is compared "to the cost of doing connections on an on-off basis, there's really no contest," according to B2B integration user Lane Butler, vice president of marketing at RightFreight.com.
- "The Well-Rounded Consumer"
InformationWeek (04/10/00) No. 781, P. 44; Sweat, Jeff
Companies are working to gather and analyze customer information to obtain a 360-degree view of customers over time and across various channels, as e-business increasingly empowers consumers. The Internet allows customers to switch their business to competitors with the click of a mouse, so companies are finding it critical to better understand their customers and improve service. Customers now expect a company to be aware of all of their interactions across different channels, including the Web, email, telephone, and face-to-face contact. To obtain a full picture of its customers, Rittenhouse Financial Services uses Siebel Systems' Siebel 99 customer-relationship management (CRM) suite. Any contact the customer makes with Rittenhouse is recorded in the Siebel software, and the data is then analyzed using predictive modeling software from AtRisk. Rittenhouse uses AtRisk to determine, for example, whether a customer is preparing to leave and to make suggestions representatives can follow to try to keep the customer's business. Still, companies find it difficult to truly know their customers since interactions with one company do not reflect information such as personal characteristics, hobbies, and family. For this reason, some companies are trying to supplement their databases with information from third parties. For example, online flower retailer 1-800-Flowers.com buys data from Experian Information Solutions, which provides demographic and psychological data about lifestyles and character traits. However, companies face many challenges in trying to get all of their customer data in one location, and many businesses are confused by the abundance of CRM products. At this point, only 5 percent of IT organizations are implementing a 360-degree customer system, while the vast majority are simply linking their sales and services divisions to a common database, estimates Sam Galucci of CRM consulting firm eLoyalty.
- "Those Web Patents Aren't Advancing the Ball"
Business Week (04/17/00) No. 3677, P. 62; Mullaney, Timothy J.
The current system for granting patents for simple Internet ideas is barring progress, writes Timothy J. Mullaney. Under the law, the Patent & Trademark Office (PTO) will grant patents if they are useful, novel, and not obvious, and according to PTO Commissioner Q. Todd Dickinson, the easy provision of patents has turned the U.S. into a productivity machine. However, the problem is that during the Industrial Revolution developing and bringing products to market was extremely capital-intensive, whereas today Internet business models are fluid and cheap to create. The PTO has not, however, adjusted its standards for granting patents and the result has been such ridiculous judgments as granting Priceline.com exclusive rights to the "name your own price" system used by car dealers for decades. The PTO and the courts therefore need to raise the standards for business-method patents, with only those that show true innovation receiving protection.