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Volume 3, Issue 150:  Monday, January 8, 2001

  • "Productivity Gains Extend Beyond Technology Area"
    Wall Street Journal (01/08/01) P. A3; Liesman, Steve

    The productivity gains that have driven economic growth in recent years are likely to continue in the future as companies continue to implement technology, according to a new White House study. In the past five years technology has played a key role in lifting the productivity growth rate about 1.6 percentage points higher than in the period between 1973 and 1995. However, economists have argued over how productivity has benefited from technology, and whether companies outside the tech industry have seen the same improvements as tech manufacturers. The new study, written by Martin Baily and Robert Lawrence of President Clinton's Council of Economic Advisers, says the productivity gains have benefited companies outside of the tech industry. Furthermore, the report predicts that these gains will continue. Companies that rely heavily on technology have seen the largest productivity gains, the study says. The White House study's findings are similar to a separate report recently released by Robert Litan of the Brookings Institution and former Federal Reserve vice chairman Alice Rivlin, which predicts that the Internet could save companies between $100 billion and $230 billion over the next five years. The health care industry, for example, could save as much as $20 billion on insurance processing costs by using the Internet, according to the report from Litan and Rivlin.

  • "Net Incubators Aren't Generating Much Heat These Days"
    Investor's Business Daily (01/08/01) P. A6; Graham, Jed

    As many tech startups saw their stock values plunge last year, the incubators who helped launch those startups watched their investments vanish. Now many incubators are replacing their traditional model--providing startups with investment capital in exchange for equity--with a model that resembles an application service provider. Moreover, few incubators will accept equity from startups and will instead require cash. The new incubators, which now call themselves "enterprise factories" or "full-service office communities," are being much more picky about which young companies to assist. For example, IncuVest is offering investment only to those companies with the potential for a $1 billion market capitalization and that provide a 3-to-1 improvement over their competitors' products or services. To further improve its prospects for success, IncuVest has reached an agreement with British Telecommunications, hoping to tap that firm's 13,000 patents. In contrast, TechSpace is renting business services to startups--a model that has already reached profitability, the company reports. The company's investment arm retains the right to take a stake in companies that use TechSpace's services, giving the incubator an opportunity to see if an idea will work before sinking money into it.

  • "U.S. Business-Method Patents Spark Controversy in Europe"
    New York Law Journal Online (01/05/01); Loomis, Tamara

    European law prohibits software patents and business-method patents, causing companies in Europe to worry that they are falling behind the more patent-friendly United States. The European Patent Organization's (EPO's) Administrative Council is trying to reverse the law that forbids software patents, but the issue is proving controversial. Supporters of EPO argue that patents are necessary because they offer companies a financial reason to innovate, while opponents such as the EuroLinux Alliance say patents allow companies to control ideas that should be open to everyone. However, Paul Stevens, a partner at London's Olswang, says the ban on software patents is purely theoretical, noting that EPO has awarded 20,000 software patents based on a provision that allows patents for computer programs with a "technical effect." The controversy has shifted mostly to business-method patents, says Stevens, who predicts that EPO will eventually grant business-method patents. Already EPO grants many business-method patents that are "dressed up as software patents" because it is hard to differentiate between the two at times, Stevens says. Still, the restrictions on patents in Europe allow U.S. firms to easily take ideas from European companies, which cannot borrow ideas in return because U.S. companies are able to patent their software and business methods. This problem is intensifying because the Internet allows U.S. companies to immediately discover and implement ideas that originate in Europe, says Richard Thomas, a partner at Salan in London.

  • "Coalition Makes Concession on Anti-Piracy Technology"
    SiliconValley.com (01/04/01); Chmielewski, Dawn C.

    Hardware makers in the 4C consortium on Thursday agreed to include an opt-out feature that allows consumers to shut off the group's CPRM anti-piracy technology on computer hard drives. The consortium, which includes IBM, Intel, Toshiba, and Matsushita, created CPRM to address the piracy concerns of the film and music industries. CPRM is designed for removable storage that can be traded from one device to another. The technology, which could debut in portable devices this spring, ties a music or video file to the memory card to prevent users from making copies. However, Internet groups such as the Electronic Frontier Foundation expressed concern that CPRM would make its way into computer hard drives. Andre Hedrick of T.13, the national standards body that determines hard drive protocols, says he asked 4C to provide an opt-out feature after IBM discussed the use of CPRM in home computers last October. "You shall be back in control of your computer-you can make the decision about whether you want Hollywood stuff coming to your computer or not," Hedrick says. The Electronic Frontier Foundation was less enthusiastic about the opt-out feature, with co-founder John Gilmore saying, "This technology doesn't belong in disk drives at all."

  • "High-Tech Firms Promise to Spare the Trees"
    TheStandard.com (01/04/01); Abramson, Ronna

    Eight high-tech firms have agreed not to use paper products from old-growth forests. The agreement stems from a campaign by Forest Ethics, an organization that has already persuaded major retailers such as Home Depot and Staples not to sell products taken from old-growth forests and other endangered environmental areas. The tech-industry participants include Microsoft, E-Trade, Intel, 3Com, AT&T, IKON, Texas Instruments, and Alta Vista. Although high-tech firms have never been considered a prime source of products that use old-growth wood, the firms believe that the agreement will ensure that they do not use any environmentally sensitive materials and may even lead to lowered costs. Yahoo! was the only firm approached by Forest Ethics that declined to participate.

  • "California Lawmakers Offer Net Sales Tax Proposal"
    San Jose Mercury News Online (01/04/01); Nissenbaum, Dion

    California Bay Area Assembly members Carole Migden (D-San Francisco) and Dion Aroner (D-Berkeley) have brought back to life legislation that would require Internet companies to pay sales taxes. Nearly identical to a bill vetoed by Gov. Gray Davis last year, the bill would only apply to companies with bricks-and-mortar stores in California that also operate online. Migden believes that the new bill would close a loophole exploited by Internet companies that allows those companies to avoid paying sales taxes by establishing online branches with no direct links to their state business. Companies such as Barnes and Noble and Borders Books have stores stretching all over California but pay no sales taxes on books sold to California residents online. Davis spokesman Roger Salazar indicated that the governor remains opposed to Internet taxes. "At this stage of the game, he thinks it needs to mature a little bit more before we think about taxation of the Internet," says Salazar.

  • "Former Congressman to Head TechNet"
    CNet (01/04/01); Bowman, Lisa

    Former Washington state Rep. Rick White has been appointed the new CEO of high-tech lobbying group TechNet. During a four-year stint in Congress, White made a name for himself by forming the Internet Caucus and giving his support to several pieces of tech legislation, including bills to loosen encryption export restrictions, keep the Internet tax-free, and stem the spread of online porn. During 1999, White came up short in an attempt to win a seat on ICANN. White will speak with the press this morning to outline TechNet's agenda.

  • "Forrester Issues Long-Range Forecast for European Mobile Industry"
    InternetNews.com (01/05/01); Lewell, John

    Forrester Research analyst Lars Goddell says Forrester expects only five telecom groups to provide wireless services in Europe by 2008. Goddell says that consolidation will be the impetus for reducing the number of wireless operators in the region. Wireless operators will also have their average revenue per user (ARPU) drop over the next four years, Forrester maintains. Much of the reduction in revenue can be attributed to the high cost of 3G licenses. In addition, Forrester predicts that wireless Web services, such as location data and content, will not produce as much revenue as forecasted by industry observers. Forrester does not expect profits to reach high levels for the five remaining wireless groups until 2013.

  • "Firm Seeks Protocol to Make Cellphones More Finger-Friendly"
    Wall Street Journal (01/08/01) P. B10

    RealNames is developing simpler messaging technologies for entering data on WAP phones. Currently, users may have to punch a Web phone's keypad as many as 30 times to enter a four-word message. RealNames' technology allows mobile device users to access Internet sites by entering a few words rather than typing an entire "www" address. RealNames' database has a collection of over 1.3 million names of regular Web sites. RealNames also has agreements with prominent telecom companies, such as Openwave and VoiceStream Wireless. According to the VoiceStream deal, RealNames will provide its keyword navigation system and other technologies to the carrier. VoiceStream plans to use the technology in its WAP phones, which are set to become available during the first quarter of this year.

  • "Canada Privacy Law Impacts Foreign Firms"
    Newsbytes (01/05/01); Stone, Martin

    The Personal Information Protection and Electronic Documents Act, or C-6, is the new Canadian online privacy law requiring foreign firms operating in Canada to follow rigid privacy guidelines. This act, which will affect American and foreign firms doing business in Canada, is the first Canadian federal legislation to safeguard personal data in the private sector. C-6 creates federal rules regarding the collection of personal data in the private sector, including access to the data and how it is used and disclosed. "Whoever can navigate these [regulatory] measures...will be able to move themselves past their competition and take advantage of the tremendous growth potential that exists in these markets," says Fiderus CEO Al Decker. "Between the EU's 'Safe Harbor' provisions across the Atlantic and these regulations coming out of Ottawa, privacy challenges are growing." Decker says that privacy and security are the two key aspects of building consumer confidence in the online medium.

  • "Banking on Appliances"
    TechWeb (01/04/01); Marlin, Steven

    Banks and other commercial enterprises are touting new consumer products such as Internet appliances, wireless handhelds, and other innovations as the next wave of electronic communications. Information appliance advocates claim the technology will help connect young people, the elderly, and other "disenfranchised" users, while International Data (IDC) predicts the market will expand from 11 million units to 89 million units between 1999 and 2004. Internet appliances offer crystal-clear displays and are a portable alternative to Web TV. Major developments in this market include a new product line from AOL and Gateway and a possible bank giveaway of tablet-size, wireless Web devices from Qubit Technology. However, failed campaigns to promote acceptance of non-PC technology in financial services have fostered skepticism. Web TV trials by Microsoft have been disappointing, while only 1 percent of Republic Bank's customers use its Web TV service for home banking. Regular PCs are still more convenient, controllable, and reliable than Internet appliances, argues TowerGroup analyst Richard Bell. Meanwhile, eMarketer expects total digital subscriber line subscribers to grow from 330,000 at the end of 1999 to 9 million in 2003, while the Yankee Group projects the number of homes with cable modems to swell from 1.85 million to 10 million between the end of 1999 and 2004. M-commerce is also being helped along by the development of third-generation mobile devices that support video streaming. Wearable technology such as an IBM headset with a camera and computing-enabled home appliances form the basis of a personal area network (PAN)--an interconnected system that allows consumers to carry out operations without using a keyboard or card reader. A PAN is especially advantageous to younger people accustomed to the Internet, and its widespread adoption by this age group could lead to greater usage of handhelds and Internet appliances in banking, argues MIT's Andrew Lippman.

  • "Group Pushes for Web Sites Designed for All Internet Users"
    WSJ.com (01/05/01); Bright, Becky

    The federal government recently said its Web sites must be accessible to individuals with disabilities. Judy Brewer, director of the Web Accessibility Initiative (WAI), a branch of the World Wide Web Consortium (W3C), says the new rules would benefit all users, not just those with a disability. Brewer argues that although the Web has provided several new opportunities for accessing information previously unavailable to those with disabilities, it has also made it more difficult to ensure that all individuals, regardless what their specific disability is, can access that information. For example, while a site may support screen-reading software for those with visual impairments, it may not provide captions for those with hearing impairments. In February 2000, WAI released the authoring tool accessibility guidelines (ATAG), a series of guidelines to assist Web designers in making sure their sites can be accessed by as many users as possible. Brewer also points out that Web authors now have access to numerous applications that can check to see if a site meets accessibility standards for individuals with disabilities. Brewer says owners of Web sites have four reasons for making their sites accessible. First, there are many individuals with disabilities--54 million in the United States alone--and to ignore such a large demographic could be costly. Second, making sure that a site is accessible to those with disabilities will likely make it more friendly for all users. Third, some Web site owners, especially those who run sites for federal, state, and local governments, must make their sites accessible because of the law. Finally, she says site owners can make a statement about how much they are concerned about the community by making their sites accessible.
    (Access for paying subscribers only.)

  • "Shrinking Storage"
    Upside (01/01) Vol. 13, No. 1, P. 124; Wall, Kendra

    The arrival of hard disk drive (HDD)-driven consumer electronics may boost profitability for HDD makers, but consolidation threatens to sweep startups away. TrendFocus estimates that 89 percent of all 3.5-in. hard-drive shipments for the first quarter of 2000 were attributed to the 3.5-in. HDD desktop market, compared to 85 percent in 1999. But 1999 was the toughest year yet for the HDD industry: a lack of product differentiation led to drastic price reductions among competitors, while companies continually topping each other in lab demonstrations and shipments did not provide any measurable product superiority. In September, the six main 3.5-in. HDD makers reached an accord that consolidation was essential to their continued survival. Quantum and Maxtor are expected to merge, leaving IBM, Samsung, Seagate, Maxtor, Western Digital, and Fujitsu in the arena. IBM and Maxtor will continue to concentrate on the high end of the 3.5-in. desktop segment, while Fujitsu and Western Digital have shifted to niche markets; but consolidation is still deemed necessary. IBM and Seagate rely on vertical integration and Fujitsu builds most of its components in-house, but other competitors value outsourcing for the freedom it offers. As a result of its merger with Quantum, Maxtor will employ a "dual path manufacturing strategy" to supply consumers with "high volume, low cost" products via Quantum's partnership with Matsushita Kotobuki Electronics while the Maxtor facility provides "flexibility on the high end," maintains Maxtor CEO Mike Cannon. There will be an increase in 2.5-in. HDD production as notebook usage spreads and emerging applications encourage miniaturization, while IBM's exclusive 1-in. Microdrive will be well suited for digital cameras, MP3 players, and other handheld devices. Maxtor will capitalize on Quantum's QuickView technology, which optimizes hard drives for video. Only time will tell if consolidation is successful.

  • "Software"
    Business Week (01/08/01) No. 3714, P. 96

    E-business software companies will be the big winners in the software industry this year if the nation's economy does not get bogged down by a recession. Although sales of e-commerce software rose from $1.7 billion in 1999 to $3.9 billion last year, according to AMR Research, sales are projected to reach $6.4 billion this year. In particular, e-commerce transactions software, supply-chain management software, and customer-relationship management software are projected to grow at an annual rate of 50 percent or more. E-business systems are growing increasingly popular with companies because the technology helps them save money. For example, companies maintain that supply-chain management software saves them anywhere from 10 percent to 20 percent in inventory costs. Supply-chain management programs are expected to reach $7.8 billion in sales this year. Another reason companies are welcoming e-business software is that the tools help them develop new online relationships such as business-to-business exchanges. AMR projects that customer-relationship management software, programs that help companies monitor customer satisfaction, will soar 44 percent to $9.8 billion this year. E-business programs represent just 13 percent of the overall software market, which is expected to grow just 18 percent this year. Mainframe business, big enterprise systems, and retail PC software are likely to be problematic for the software industry.

  • "Computing's New Spin"
    Technology Review (02/01) Vol. 104, No. 1, P. 39; Talbot, David

    The emerging field of spintronics--the exploitation of the charge and spins of electrons to control magnetic fields--could one day lead to the development of "instant-on" computers and ultra-small electronic devices. At least 10 corporate laboratories are engaged in developing workable magnetic RAM (MRAM) prototypes, including those at IBM, Hewlett-Packard, Motorola, and Integrated Magnetoelectronics. Such chips could be infinitely more energy-efficient, denser, and faster than conventional memory, and offer instant-on capability. MRAM could eliminate the need for hard drives because they possess no moving parts, theorizes MIT physicist Jagadeesh Moodera. Spintronics involves manipulating electrons "on the atomic scale...something people didn't think was possible even 10 years ago," boasts Stuart Parkin of IBM's Almaden Research Center. Spintronics research spearheaded by Parkin has already led to improved read-head performance through giant magnetoresistance, but Parkin and others are now involved in producing MRAM via magnetic tunnel junctions. The basic principle of magnetic tunnel junctions is the quantum effect of electrons tunneling between magnetic layers to read and write data bits. The long-term goal is building a computer completely out of spintronics, says Stuart Wolf of the Defense Advanced Research Projects Agency. That development is at least 20 years away, but experts predict that instant-on memory will hit the market in five years.

  • "Life Beyond Cyberspace"

    Many of the tools and technologies destined to enhance the lives and livelihoods of future generations of computer users will move from the laboratory to the San Jose Convention Center for a few days in March. ACM1: Beyond Cyberspace---a specialized futuristic conference created to educate and enlighten the public and the profession---will explore how computing will impact the future direction of such diverse fields as biology, oceanography, astrophysics, life sciences, social sciences, and education. Hundreds of leading high-tech firms, schools, and research labs from around the world will exhibit hands-on technologies that would otherwise be unavailable to the public for years. Some of the speakers slated to be on hand to offer their predictions of the future role and responsibilities of computing include Microsoft's CEO Steve Ballmer, Ray Kurzweil, Vint Cerf, and NSF Director Rita Colwell. The conference will be held March 10-14; the exposition will be open from March 10-13, and Educator's Day is March 10.

  • "D.C. Download"
    Industry Standard--grok (01/01) Vol. 3, No. 46, P. 26; Pressman, Aaron

    Federal legislators are expected to tackle three vexing Internet issues in the next session: privacy, taxes, and copyright law. Congress will most likely try to avoid 50 contradictory state laws by combining a slew of privacy-related proposals into a compromise. Analysts expect the Consumer Internet Privacy Enhancement Act, which prohibits the collection of consumer information unless there is an opt-out option, to be revived in the Senate. Real-world retailers want Internet sales taxes to be levied on dot-coms to keep the field level, and analysts expect a battle between those who support the Internet Tax Reform and Reduction Act, which would allow state sales tax on the Internet if rules are simplified, and those who want to extend the Internet's current moratorium on sales tax. Internet merchants that possess public listings want a federal law barring competitors from gathering such information, although portals such as Yahoo! worry that they will have to pay for stock prices, sports scores, and other data that they already put online for free. A fight is expected between those who want to protect public listings with the Collections of Information Anti-Piracy Act and those who support the portals.
    For information regarding ACM's work in the area of public policy, visit http://www.acm.org/usacm.

  • "The New Boston Tea Party"
    Executive Edge (01/01) Vol. 3, No. 1, P. 36; Warren, Chris

    Although some participants in the e-commerce tax debate say parity for brick-and-mortar retailers can be restored in the marketplace by having state and local governments simplify their tax systems, many state governments would rather have the Quill decision overturned. The 1992 Supreme Court decision says it would be too cumbersome for stores that have a physical presence in a state, yet have a national presence, to comply with tax laws everywhere. Some observers believe major retailers would not mind having the Quill decision struck down. For the Wal-Marts and other giants that already have fully staffed tax compliance departments, overturning Quill would amount to a competitive weapon that could keep the smaller players out of e-commerce, warns David McClure of the U.S. Internet Industry Association. With such resources in place, the larger, old economy players would be able to dominate e-commerce. Early this year, the new administration is expected to address e-commerce changes, including the Internet Tax Freedom Act, which expires in October. Experts advise new media companies to prepare for the unknown by building a flexible tax collection element. Marty McClintock, head of the e-business tax practice at Deloitte & Touche, says "we need to design entity structures and plans that provide the necessary fluidity to react to both business model and legislative changes."

  • "The E-Team"
    CFO (12/00) Vol. 16, No. 14, P. 50; Leibs, Scott

    Companies are reorganizing their IT divisions to facilitate e-business development. A recent Transition Partners survey of 53 CEOs found that only half the respondents viewed their IT departments as stable, while the rest saw constant change as the result of e-business driven strategies, competitive pressure, and turnover. Companies are divided on how best to execute e-business development. Some have fully integrated their traditional IT initiatives with their e-business initiatives, while others have established e-business groups independent from the rest of the company. Novartis Pharmaceuticals advocates blending IT work with e-business development. To implement a new Web-based order management system, the company trained existing programmers to work with new Java-based and Microsoft e-commerce software. "Our people responded extremely well, and it was great for everyone's morale," says Novartis CIO Raymond Pawlicki. DaimlerChrysler has taken the opposite approach by establishing a separate e-business unit, called DCX Net. While DCX Net works closely with the core IT operations of the company, DaimlerChrysler maintains that it is important that the venture remain separate from the IT structure to ensure that e-business development moves forward. Harvard Business School professor Clayton Christensen says that e-business can either be disruptive or sustaining to a company. Disruptive technologies force companies to dramatically restructure their organizations while sustaining technologies allow a company to capitalize on its existing structure. Christensen says companies for which e-business is disruptive should develop e-business through a separate unit to help focus the effort, while companies for which e-business is sustaining should integrate online procedures with their existing structure.

  • "Germans Tackle Digital Rights Management and Stumble Onto a Taxing Solution"
    InfoWorld (12/18/00) Vol. 22, No. 51, P. 52; McClure, Stuart; Scambray, Joel

    A German court has decided in favor of the Central Agency for Private Copying Rights (ZPU) and against Hewlett-Packard (HP), requiring HP to pay copyright royalties for each CD recorder that the company sold in Germany from 1998 to the present. Security experts are aware that machine-readable content can never be completely copy-protected, despite the best efforts of the entertainment industries and various content creators and purveyors. However, ZPU appears to have decided to recoup the possible losses that content owners suffer by taxing the act of copying. Other nations have considered doing the same, or have done so. Canada has set a tax on blank recording media, with the money to be distributed to eligible makers of recorded works copied for personal use in Canada. It would not be too far-fetched to envision recording companies evolving into ISPs so that they could make up their losses by charging fees for Internet access. Of course, the recording company-ISPs would then have to deal with content thieves hijacking free Internet access. America Online has had some success in maintaining the monthly costs of a standard network-access account, but it is also about to merge with Time Warner and the entertainment company's artists. The best compromise to the digital rights management issue would be a price model that discourages rampant copying and makes up for losses in sales volume.

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