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Date: Friday, September 22, 2000, 3:16 PM -0400
From: Faulkner Information Services <mailserver@faulknerinfo.com>
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Subject: Faulkner's Cyberscape Digest 09/22/00 



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CyberScape Digest

CyberScape Digest is a weekly roundup of top internet stories. This issue
covers events from Monday 09/18/00 through Friday 09/22/00. 

  

A Whole Lot of Merging Going On
Internet-related and other high-tech companies began huddling together for
warmth to face the chilly autumn and winter ahead. Preparing for what it
believes will be dramatically increased demand for high-speed Internet
access services over cable modem and DSL networks, telecom equipment maker
ADC agreed to pay stock valued at $2.25 billion to purchase Broadband
Access Systems, a developer of high-speed voice and data delivery systems.
UK-based Aspective paid an undisclosed sum to purchase Oxygen Solutions.
The deal made Aspective the largest ASP in Europe. Sun put up stock valued
at $2 billion to purchase Cobalt Networks, a maker of server appliances
used by Web service providers. The purchase gives Sun access to Cobalt's
technology and will help the computing giant compete more effectively in
the server appliance arena. Marketing software maker Broadbase agreed to
buy ServiceSoft for $645 million in stock. ServiceSoft's products enable
customer service over the Internet. Speaking of software usable over the
Internet, CyberSource completed its purchase of PaylinX for stock valued at
$97 million, and began selling the PaylinX Enterprise Server payment
software as the CyberSource Commerce Transaction Server. Search company
Lycos' European division put up stock valued at 674 million euros (US$573
million) to acquire Spray Network, a Nordic portal. The company sees this
as the first in a series of acquisitions aimed at patching up the holes in
its reach in Europe. Microsoft also leaped into the fray, purchasing
Pacific Microsonics for its HDCD digital audio technology--and for an
undisclosed sum. Microsoft plans to use the technology in future PC
offerings and for a range of consumer devices. Finally, the Hollywood Stock
Exchange and Predict It agreed to merge in an all-stock transaction. They
will drop both names and become HSX. The Hollywood Stock Exchange,
previously covered in this publication, is a virtual "stock market" for
movies and celebrities, while Predict It makes interactive prediction
applications that document and reward users based on how accurately they
predict the results of sporting events. The software can be used for other
events, such as financial markets. 

  

America Online Fights for Merger, Instant Messaging, Unmetered Access
The news came fast and furious this week as antitrust regulators from
various governments expressed their concerns about the proposed merger
between America Online and Time Warner. The European Commission began
circulating a draft of a report that seems to indicate the commissioners
will reject the merger. The commission also might veto Time Warner's
purchase of EMI; since such a combination would reduce competition in the
music arena, it could easily have an adverse affect on music publishing and
prices. AOL, Time Warner, and EMI offered concessions to the European
Commission in hopes of avoiding rejection. In the case of the Time
Warner-EMI merger, which the commission is treating as a separate matter,
the companies offered to divest some record labels and music publishing
interests, restructure their distribution business, and stop manufacturing
CDs. The concessions offered for the other deal seemed more vague; while
they included provisions to prevent the merged company from dominating the
distribution of online music, they did not address the possibility of
third-party content receiving less favorable treatment on AOL Time Warner's
service. Meanwhile, in the US, the Federal Trade Commission contacted
BellSouth, Qwest, SBC, and Verizon to find out what effect the merger would
have on competition in the field of broadband delivery over phone lines.
Many observers saw the move as the first step in a possible new probe of
the deal. The Federal Communications Commission, on the other hand, seems
more comfortable with the merger--provided AOL and Time Warner tow the
line. Specifically, it is rumored that the FCC wants to legally obligate
the companies to keep their promise to let rival high-speed ISPs use their
cable network. Of course, open access to broadband is one of several issues
the FCC is looking at. The commission also is examining the issue of open
access to AOL's immensely popular Instant Messenger service. In a filing
with the FCC, AOL  argued that its instant messaging rivals were trying to
use the FCC to gain interoperability with AIM "on their terms," and that
the commission did not have jurisdiction over instant messaging anyway
because it does not regulate the Internet. The filing was in response to
another filing with the FCC made earlier this month by Tribal Voice and
iCast, rival instant messaging companies. At least AOL could look to the UK
for some good news. After struggling for a year and a half to make all the
appropriate arrangements, AOL UK began to offer unlimited Internet access
for 15 pounds (US$21) a month. While other companies in the UK have
marketed unmetered Internet access, most of them lose money on the service.


  

Privacy Issues Take Center Stage
While many privacy advocates would love to stop the FBI from using
Carnivore, its email-collecting machine, one must wonder if the cure might
be nearly as bad as the disease. Security software maker Network ICE
released an open-source program that performs to the same standards as
Carnivore. Called Altivore, Network ICE's software can monitor a suspect's
email and access to certain types of servers, copy all packets to and from
a suspect's IP address, and discover a suspect's Internet address. The FBI
actually seemed favorable to the new program; a spokesman for the bureau
explained that, as long as ISPs can do their own interceptions and are
willing to testify in court, there would be no reason for the FBI to use
Carnivore--which was supposedly created to help ISPs, not something the FBI
wanted to force ISPs to use. In what may be a non-issue for many Internet
users, Interhack revealed that a device known as the CueCat can trace a Web
surfer's online actions and build a detailed data base about that person.
The device is intended to allow users to get more information via the
Internet about products that pique their interest; users swipe the CueCat
across a bar code located in certain ads. DigitalConvergence, the company
that makes the CueCat, said that it is not building dossiers on CueCat
users. Many observers have pointed out that using the CueCat requires a
magazine reader to register the device, and to sit near his or her computer
while reading the magazine, both of which may discourage widespread CueCat
use. In a more favorable direction, Expedia rewrote its privacy policy to
grant consumers greater control over, and more access to, their personal
information. The new policy includes a clause that implies the company will
not sell such information in the case of bankruptcy--a contentious issue
after Disney-supported online toy seller Toysmart.com went out of business
and nearly sold its consumer information, against its own privacy policy.
One could look at Expedia's action as the free market finding one solution
to the privacy problem; SafeMessage offers another. A program offered by
AbsoluteFuture, correspondence transmitted by SafeMessage can be set, once
opened to disappear without leaving a trace on the recipient's hard drive
after a specific period of time. Privacy advocates and CEOs may appreciate
this kind of software, but the FBI and other law enforcement agencies have
expressed concern that it will hamper their ability to monitor criminals
such as terrorists. SafeMessage is by no means the only program in its
category; in fact, such "identity scrubbers" were held up by Senate
Judiciary Committee Chairman Orrin Hatch (R-UT) as an alternative to
increased monitoring of the Internet. Hatch released a 31-page handbook for
consumers, titled "Know the Rules, Use the Tools," to help Web surfers
protect their privacy online.

Microsoft Has Busy Week
Microsoft's biggest news this week concerns a partnership with Cable
&Wireless and Compaq. The three companies are launching an application
service provider company. Dubbed a-Services, the ASP will offer a wide
variety of hosted applications, including Microsoft office and sales force
automation, to businesses with 10 to 1000 employees. Customers will also
receive network connectivity and Compaq thin-client computers when they
sign up. Expansion into Europe, the UK, Australia, and Asia is planned by
the end of next year. Also targeting smaller businesses, Microsoft took the
wraps off of bCentral's Business Web Services. The services provided
include domain registration, business email, site creation and hosting,
e-commerce, and Web-based marketing. Geared towards customers who are not
technically oriented, the service costs just under $25 a month. Start-ups
will be pleased to hear that both Microsoft and IBM took stakes in
Enfrastructure, a company that hopes to rent everything from computers to
laundry services to just-born firms. Its campuses will provide
Internet-connected offices, gyms, cafes, travel agencies, and banking,
laundry, and concierge services. Enfrastructure will take a small stake in
each company that uses its services. Finally, those who upgraded to Windows
Millennium may also need to update their virus and security software,
because certain software that runs on Windows 98 will not run properly on
Windows Me. Programs with known incompatibilities include Symantec's Norton
Internet Security 2000 and Personal Firewall 2000, Network ICE's BlackICE
Defender, and Network Associates McAfee PGP Personal Privacy. Microsoft
admits that two changes to Windows Me from Windows 98 may be causing the
problems: first, Windows Me no longer supports DOS; and second, the OS uses
the Windows 2000 TCP/IP networking stack rather than the one used by
Windows 98. Most security vendors have made upgrades available. 

  

House Panel Approves Bill to Cut Phone Fees
The House Commerce subcommittee on telecommunications approved a bill to
get rid of reciprocal phone fees, the money that one telephone company pays
another phone company when the second company completes a call on its
network that originated with the first company. Many smaller phone
companies have been making a great deal of money--billions of dollars, by
some estimates--on reciprocal fees for completing calls from regional phone
companies to ISPs. The bill, if passed, will benefit large phone companies
which will no longer be required to pay the fees. Consumers groups argue,
however, that it could hurt competing phone companies, which will lose a
source of income. Such companies would have to raise their prices to ISPs
to make up the difference. ISPs, in turn, will likely raise the prices
their customers pay for Internet access. 

  

Online Piracy Issues Get Addressed
Online copyright protection received a boost from a deal between Nippon
Telegraph &Telephone and Canada-based Advanced Cultural Technologies, part
of the ACT Cinemage Group. The two companies are working together on
software to protect the copyright on practically anything that can be
downloaded, including music and images. ACT expects to test the Content ID
system soon. Meanwhile, the Recording Industry Association of America began
taking an even more proactive role to protect its copyrights. The
association assisted police in its investigation of an Oklahoma State
University student who used several protocols to download a huge volume of
files. The student's computer, which was seized by the police, is believed
to contain more than 1000 Internet music files. While the student has not
yet been arrested, a university police officer commented that such a large
quantity of files could trigger the state to step in with felony charges
for copyright infringement. On a different front, Napster, which is
defending itself against the RIAA in court, might have a friend in
Congress. Senator Orrin Hatch (D-UT) sent a letter to the Ninth US Court of
Appeals, apparently to set the record straight: to wit, not everyone in the
US government agrees with the stand taken by the Department of Justice and
the Copyright Office, which back the RIAA. In his letter, Senator Hatch
pointed out that Congress "is engaged in ongoing deliberations" about
Napster's merits and has not reached a conclusion as a whole. As head of
the Senate Judiciary Committee, the senator can expect his letter to carry
a good bit of weight. In any case, the RIAA may be fighting a losing
battle. In the first six months of this year, it found more than 4500 music
Web sites located in the US that illegally offered copyrighted material for
download over the Internet--more than three times as many Web sites as it
found during all of last year.  

  

Deals and Talks and Joint Ventures and...
AT&T Broadband decided to license Liberate's software for interactive TV
services. The two companies will start a pilot later this year which, if
successful, will lead to commercial deployment. Interestingly, AT&T and
Microsoft had made an agreement last year in which the software giant would
supply the software for more than half of AT&T's interactive TV set-top
boxes. Rumors suggest that AT&T has become impatient with Microsoft's slow
delivery. AT&T has also been talking to British Telecommunications about
merging certain key divisions of both companies to create a global wireless
protocol. Such a merger would give birth to the world's third largest
wireless company. Meanwhile, Homestore.com linked up with five moving
companies to form iMove, a joint venture that will let users purchase
moving services online. The site will eventually include a tool for
requesting bids from all the moving companies involved, without requiring
the movers to visit the consumer's home before quoting a price.
Participating movers include northAmerican, Bekins, United Van Lines,
Mayflower Transit, and Allied. In an effort to move more Internet traffic
in Japan, Mitsubishi and Inktomi joined up to sell services and software to
portals and ISPs. Directory and search engine services, as well as software
to be used by ISPs and data center operators, will be offered. Sweeping in
like a white knight--but selling rather than buying--Lycos sold the UK
rights to its Internet franchise to Primar-e, a struggling British
communications firm, for 2.1 million pounds (US$2.96 million) in new
Primar-e shares. Primar-e said that it will relaunch itself as Glow
Communications and market an Internet access package. Finally, in response
to Handspring's new cell phone module (see story below), Palm signed a deal
with Kyocera in which the cell phone maker will integrate Palm software
into its high-end phones. 

  

Akamai, Digital Island Begin Battling Patent War
Both Akamai and Digital Island filed for broad patents protecting the
concept of content distribution. Earlier this month, Akamai sued Digital
Island for patent infringement, claiming that Sandpiper Networks (owned by
Digital Island) infringed Akamai's idea of content distribution--that is,
using a mathematical algorithm to distribute content to servers colocated
in other networks. Digital Island fired back that it had filed a similar
patent sooner, and that patent should have been approved before Akamai's
patent. The company requested that Akamai's patent be reviewed, and
reassigned if appropriate. Meanwhile, Digital Island is also suing Akamai
for patent infringement on a technology called "fingerprinting," which
helps content distributors recognize users accessing the same content under
different user names and passwords. Akamai's lawsuit is particularly
worrying, since it leads one to wonder which of its rival content
distributors it might sue for royalties next if it wins its case. 

  

China Cracks its Door Open to Competition
While China has not given up on closing the door on "undesirable"
information from the Internet, its cabinet did approve certain rules which
may allow its citizens to peek through. For the first time, private
companies will be able to legally operate Internet and other value-added
telecommunications services. The two pieces of legislation are still
subject to change and revision, however, and the rules as they stand will
force those wishing to run such an enterprise to meet licensing and other
requirements. Worse, the Ministry of Information Industry will handle the
licensing, and it has a history of hostility towards the Internet and
competition. Nevertheless, the approval was seen as a sign that China is
continuing to move slowly in the direction of private capital and a freer
market.  

  

Yahoo! Shuffles One Deal, Makes Others
Search engine Yahoo! replaced Amazon as its featured bookseller with
Barnesandnoble.com after its agreement with Amazon expired. As part of the
deal, Yahoo will include a link to Barnesandnoble on every search result
page, and the bookseller will become a featured merchant on Yahoo's
shopping site. Furthermore, the two will jointly promote a free, co-branded
Internet service, which will go live next month. The search site also
launched a joint venture with Boots, a UK-based health and beauty merchant.
The venture, an Internet photo service, will offer developing, printing,
and other photo services to Yahoo users in the UK and Ireland. Also in the
UK, Yahoo's European division signed a deal with Gameplay.com letting the
online computer games seller market its wares within the Yahoo shopping
site throughout Britain, France, Germany, and Spain. 

  

New Products and Services from Businesses...and Government
Taking advantage of the amount of traffic its Web site draws, Dell revealed
plans to set up the Dell Marketplace, an online exchange where users will
be able to purchase products from Dell and other vendors such as Pitney
Bowes and 3M. Dell plans to start with computer-related products, then to
expand to general office products and other related areas. Unlike Dell's
other ventures into selling items from other manufacturers, Dell itself
will only collect a transaction fee for each purchase, and the manufacturer
will complete the transaction. Upstart Linux company Red Hat unveiled Red
Hat Network, a subscription service which will give users access to
open-source software innovations, upgrades, and security features. PDA
underdog Handspring created a cellular phone module for its Visor device.
The add-on, which will be sold exclusively through Handspring's Web site,
will cost nearly $300 but will not be available until the end of the year.
The United Parcel Service continued to do what it does best--ship
packages--only better. The company unveiled a Web-based returns service to
make it easier for its customers to deal with the return of items purchased
online. UPS Returns will provide the user with an on-screen label which can
be printed out directly from a PC, and a list of UPS drop-off locations,
complete with color maps. Additionally, consumers will be able to simply
hand their packages to UPS drivers, or, in some cases, request a UPS driver
to pick up return packages. Even the US government climbed aboard the
"let's make it easier" bandwagon. The US Supreme Court, which did not even
post a Web page until fairly recently, made its docket available online
free of charge. Users can access information about the 8000 or so cases
that pass through the court each year. The status of a case will generally
be updated the day after the change occurs. Not to be outdone, President
Clinton unveiled FirstGov, a government information portal that allows
citizens to find data by topic rather than agency. The portal lets users
search some 20,000 government Web sites. 

  

A Pop Logic Quiz: is NotHarvard not Harvard, or not NotHarvard?
After cheekily suing Harvard University in an attempt to establish its
rights to the NotHarvard name, online educational company NotHarvard.com
changed its name to Powered.com. The new name stands for "Power Education."
Company co-founder and Harvard graduate Mark Gonzales maintains that it
provides a better description of what his business does. The start-up sells
Web-based technology to enable firms to offer free online courses. How has
the name change affected NotHarvard's--excuse me, Powered's--lawsuit with
Harvard? The university quickly started a countersuit when it heard of the
start-up's suit; now that NotHarvard is now Powered, Powered offered to
give Harvard the NotHarvard.com domain name and drop its lawsuit if Harvard
would drop its lawsuit against Powered. The venerable university, well into
its fourth century, was not amused. 

  

Making Their Exits
Department of Justice antitrust division head Joel Klein turned in his
resignation, stating that he will leave at the end of September and take
some time off before beginning his job hunt. Perhaps best known for leading
his division to successfully challenge Microsoft, Klein's departure is
unlikely to affect the course of the software giant's appeal. George Bell,
CEO of Excite@Home, plans to resign his CEO post as soon as a suitable
replacement is found, but will remain chairman of the board until at least
the end of next year. A company spokeswoman said Bell's departure should
not adversely impact day-to-day operations. Several businesses suffered
through much worse losses this week. AltaVista laid off 225 employees, or
25 percent of its work force, as part of a strategic restructuring to take
it back to its roots as a search engine rather than a general portal.
Engage, an online marketing firm, sent pink slips to 175 of its
employees--about 13 percent of its staff. The company made the move to
consolidate its business, achieve profitability sooner, and save $21
million a year. Restaurant guide and online takeout ordering firm Food.com
sliced its staff in half by laying off 100 people. Joan Varrone, Food.com's
chief financial officer, also left the company, and John Laing stepped down
as COO but remained on the board of directors. The layoffs accompany the
closing of Food.com's Seattle location and the consolidation of its
operations in San Francisco. Food.com's CEO can take comfort in still
running a business in a booming economic climate that still sees dot-coms
dropping like rain in Seattle. The 170 employees of Pseudo Programs
suddenly found themselves jobless when the company gave up its
six-year-long attempt to make "Net Television" successful. With no new
investors in sight, the company ran out of cash. Finally, today is the last
day of work for Xenote's 24 employees. The company made a key-chain, dubbed
iTag, that permitted users to find out more information about songs they
heard over the radio and "bookmarked." Like Pseudo, the firm could not
raise the funds needed to keep it going. 

  

Cyberscape Delight: Alternatives to the Australian Olympics
Those who spend more time fixing networks than hurling javelins can take
some pleasure in checking out some of their favorite "sporting events" at
the Web site for the Information Technology Olympics. Supposedly held this
year in Sydney, South Dakota, the IT Olympics offer such events as Project
Management Deadline Target Shooting; Legacy Code Conversion (with several
divisions, such as COBOL to assembler); Mousepad Gymnastics; and many
others. The parody site even includes articles covering the various events,
daily results, and a daily schedule; sadly, clicking on anything on the
site produced annoying but entertaining "systems errors." Still, it's worth
a look for those feeling the games down under have been overhyped. Where
else can you hear about Australia taking the gold in the Truncation
Triathlon for reducing a four month server upgrade to two weeks by ignoring
error messages? For those not so technologically inclined, Silly 2000
offers a breath of fresh air. Silly articles include "Opening ceremony
spectators asked to bring warm, non-flammable clothing;" "Editors demand
something happen;"  "$2 million revamp of Sydney baggage-delivery system
accidentally sent to Budapest;" and many others. 
  


*** Terri Wells, Faulkner Information Services *** 

CyberScape Digest, Copyright 2000, Faulkner Information Services. All
rights reserved. 

Should you have any questions, concerns or problems with your flash, please
contact us at: mailto:flash@faulkner.com 

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