David Michail - Digital Media Counsel

HP and Pretexting...Corporate Cleanup or Political Exploitation?

2006-10-09T13:34:00.000-07:00

For those that have listened to my segment on KenRadio, I am sure that there is some skepticism about my own political philosophies and loyalties. Let me be clear, I am neither for or against either political party, as I agree and disagree with both on different policies. My objective in the segment, while uncharacteristic of my traditionally conservative approach, is to declare a different and well-grounded assessment about the situation for kenradio listeners.

As indicated in my spot, it is my speculation that all of the focus on Hewlitt Packard and pre-texting by both politicians and the media seems grossly disproportionate to the gravity of the offenses. In essence, we are talking about an invasion of privacy, and not for commercial exploitation or gain (as in traditional notions of identity theft), but rather, to fulfill some overall corporate objective...namely, stopping damaging board leaks to the media.

In comparison to the intentional and willful fraudulent conduct of mistated earnings by Enron or Worldcom, and other corporate corruption that implicate significant economic advantage to the few at the expense of the public, in those instances I see a rational policy design that makes sense for judicial response. What we have here involves a handful of people whose privacy rights were invaded. Hardly the corporate blow-up of Worldcom, Adelphia or Enron.

When we look at Pretexting laws, they mainly pertain to identity theft in the traditional sense, particularly under the Gramm Leach Bliley Act and the Identity Theft and Assumption Deterrence Act. Also, California's own pretexting law which will go into effect January 1, 2007, makes the first offense a misdimeanor with a $2500 fine. Obviousy, the laws were designed to thwart a specific kind of behavior, and deter a specific outcome related to stealing other people's money. So why would Bill Locklear and the Congressional committee make such a big deal out of what is arguably a low-level criminal action, or at best (at least for the aggreived parties) a private action as a civil claim? After all, when you see a business violate its web site privacy policies, you see civil actions, not criminal ones (although the FTC may institute civil actions as well).

The convenience of the November elections does not help. In most cases, I would speculate that these polticians are seeking to leverage this no-nonsense approach to corporate "crime" as a way to create steam for their political agendas. Eliott Spitzer is an expert at it, but at least from his standpoint, he has legitimate fights with different corporate actors (although Sandy Weil may not think so from his recent public criticism of Spitzer). We are talking about ethics, so I think it is important to discuss why is this happening now, when HP admitted to pretexting back in July? Coincidence?...how very fortunate for our political representatives.

Of course, the test of time will determine whether or not my assessment is correct. If, after the elections, the HP scandal downgraded in media attention for something even more melodramatic, and if the AG's office settles with defendants by a public reprimand and a fine, then regrettably, I suppose that my assessment would not seem so cynical. I would, however, find such outcome as unfortunate because it does not bode well for the ethics of our political representatives or the stndards of American culture that supports such melodrama.

I hope I am wrong. Under the backdrop of the situation, however, I only question the motives. That is not to say that Patricia Dunn and others involved should not be held accountible, I would just argue that the system works and that the law provides an appropriate civil remedy which is probably much more beneficial to the aggreived than this three ring circus we are witnessing.

I invite your comments, criticisms and reponses.

VOIP v. Land Lines: Security and Data Issues

2006-09-25T09:30:00.000-07:00

In my recent commentary on Ken Radio, I discussed some issues regarding VOIP technology in response to a listener's concerns about data packet loss and security. The listener represented a telecommunications call center who was faced with the growing pressure from the market to provide VOIP services as an alternative to traditional land line telecommunications, explaining the potential issues and breakdowns in a VOIP offering.

In response, I started conducting research on the weaknesses of VOIP in terms of data packet loss and security vulnerabilities, particularly from a business perspective. While I personally use Skype for non-critical, non-confidential global communications, I have discovered some reported vulnerabilities in the new technology which will need to be worked out.

1. Data Loss

As mentioned in the show, packet loss can occur for a variety of reasons including link failure, buffer overflow in routers attributed to high traffic congestion, ethernet issues and occasionally mis-routed data packets. The result can mean degradation of voice quality or complete data loss in bursts of 1-3 seconds in length….the result….loss of information or ineffective communication. In automated call centers, this loss of information could be crucial as a "Yes" may be heard as a "no" or with a packet loss on a communicated response, the information may be critical to the consumer or the call initiator. Further, as recorded phone calls can be used as a record in the case of litigation, data packet loss can impede the reliability of such recordings.

2. Security Issues

Some potential security risks associated with VOIP include toll fraud in data networks, unauthorized IP phones or devices accessing data servers, identity spoofing, rogue devices and system hacking. Although cellular phones are certainly subject to cloning, and traditional phone lines can be hacked, these technologies may or may not have less vulnerability than VOIP.

Having spoken with another company that uses VOIP as a core offering in their call center technology, VOIP can be set up to be more secure. They use private non-routable IP connections, coupled with data and voice traffic separation can mitigate attacks. Additionally, they implement responsible security management systems including daily configuration and status checks to discover security threats.

While I know that there are different points of view on this issue, the debate is interesting as VOIP is attractive from a price point perspective, but when will the technology and data networks be set up to a point of equal or better security than traditional land lines? I welcome your comments.

Murder-ibilia : Online Auctions and Intellectual Property For Sale

2006-09-05T16:35:00.000-07:00

I am a bit late with this post, certainly after my spot on Ken Radio, but I thought this would be a fun topic to discuss. As indicated in my KenRadio piece, the California district court ordered the federal marshall to auction off Ted Kazinski's (AKA the "Unibomber") personal items last month, including weapons of "mass" destruction such as axes and hatchets, as well as those fashion statement articles of clothing such as the infamous Unibomber sun glasses and hooded sweatshirt. What is most intriguing is the 40,000 handwritten page Unibomber manifesto which definitely has me curious as to its contents.

My proposition in the radio program is why stop with personal items, why not sell the intellectual property rights owned by this individual? In civil matters, one can attach the intellectual property rights of another to recover damages. This holds true for patents, trademarks and copywrite materials. Privacy and publicity rights are considered intellectual property, and if there are opportunities for commercial exploitation of these rights, there can be room for capitalizing on them.

What I find interesting is that while there are exceptions for persons in the public domain such as politicians, these are more likely protected by free speech defenses under the 1st amendment, as opposed to blanket commercial exploitation. Nonetheless, serial killers definitely have a sort of Hollywood morbid-like appeal that have been depicted in horror thrillers dating back to the original Texas Chain Saw Massacres.

Since the objective of this online auction is designed to raise money for restitution to victims' families, Hollywood could certainly option rights to the life story of Mr. Kazinski. This must sound completely insensitive to some, but honestly, Hollywood will probably make a fictional picture loosely based upon the life of Kazinski anyway. There may as well be an incentive for the court to recoup as much capital from Mr. Kazinzki as possible to compensate the families.

Perhaps the families woould be adverse to my proposal? I don't know, but the court ordered Mr. Kazinski's gun collection to be sold directly to the victim's families, which I find a bit hypocritical.

I invite your comments.

Sprint/Nextel v. iPCS: A Humbling Lesson

2006-08-18T20:12:00.000-07:00

As covered in my Kenradio report, the recent Chicago and Delaware court decisions pertaining to Sprint/Nextel's violation of the exclusive management licensing deals held by iPCS poses a significant set-back for the mobile carrier.

The most recent case from Cook County, permitted an injunction against Sprint/Nextel from selling their iDEN network services within the exclusive territory managed by iPCS. Essentially, prior to the Sprint/Nextel merger, Sprint had granted iPCS exclusive rights to sell Sprint branded mobile products and services in 80 markets. While iPCS only operates the CDMA platform under the Sprint banner, the competitive iDEN network which came by virtue of the Nextel acquisition within the same territories, did not pass muster with either the Delaware or the Chicago court.

Unlike the Delaware decision, whom merely required Sprint to restrict its branding and predatory business practices, it nonetheless permitted continued use of the iDEN network within the subject territories subject to livable parameters. The Chicago court went step further, however, and ordered Sprint's divestment of the iDEN network assets.

While I assess that the Chicago court's decision as overreaching and will likely be overturned on appeal, its an interesting question to ascertain whether or not Sprint and Nextel could have foreseen the risk of competing with iPCS when in merger discussions. Also, I can't imagine why they didn't just roll up iPCS as an acquisition target to mitigate the risk of this situation. Finally, what affect will this have on the overall transition for the dual mode platform and the viability of this platform in the future.

For those closely watching this battle, I invite your comments.

Advergames Targeting Children

2006-08-04T10:54:00.000-07:00

My recent spot on a report entitled "ITS CHILD PLAY: ADVERGAMING AND THE ONLINE MARKETING OF FOOD TO CHILDREN" is a recent study released by Kaiser Family Foundation a non-profit organization. The report depicts the use of the ever popular Advergame, a video game incorporating embedded product placement and/or brand identity, as the vehicle for pervasive viral marketing among children. More specifically, the report follows on from the 2004 study entitled "The Role of Media in Childhood Obesity" which attacks the use of media to peddle high-sugar, low nutrition products to children. I will not recite the statistics so much as they are contained in the report and can easily be downloaded by doing a search online.

What is interesting is that the food industry, more specifically the breakfast cereal brands, have since migrated to the internet and have used video games as a means to attract to the 2-11 year old demographic. Not only is the Internet a more pervasive means of communication and branding, but it also allows marketers to track user behavior as well as proprogate viral marketing initiatives. From an advertising perspective, it makes sense to do cross promotional integrated marketing to drive more product purchases and increase revenues. After all, these companies owe it to their shareholders to increase revenues as part of their fiduciary responsibility.

What is interesting is that this industry, lead by the Association of National Advertisers (ANA), have lobbied against government regulation and have elected to self-police the issue since the release of the 2004 report. As an attorney that represents both advertisers and their agencies, I can understand the need to use creative marketing to increase conversion as a legitimate business initiative. While I would concur that adults have the capacity to make determinations of what they wish to do with their bodies and consume whatever foods they like, children have always been treated differently by lawmakers because they are impressionable, are not able to make informed decisions for themselves, and are not conscious of the long term implications of their future concerns. A example of such protectionism would be the Children''s Online Privacy Protection Act.

Nonetheless, I will not raise this as a moral issue, but rather an issue concerning risk allocation and cost. If this component of the food industry does not make substantive behavioral changes in their market practices to children, there will be consequences which are undesirable. Since the Internet, unlike broadcast Television is largely unregulated in this domain, the only options are: (1) Self-policing; (2) Government-Policing, or (3) Consumer Policing. The latter two are by far the least desirable for the food industry.

Lawmakers will start to see the negative long-term affects of obesity in terms of cost to taxpayers and the increasing degenerative consequences to these children in 30-40 years. Heart disease, diabetes, stroke and auto-immune deficiencies all stem from unbalance diet and lack of exercise. I see this crises, however, as an opportunity for the food industry to work with parents and children to promote balanced diet and exercise as a part of a lifestyle choice. There is a place for these products in childerns' diet, just no over-consumption.

In the current climate, I would warn the food industry, particularly the ones marketing high-sugar breakfast cereals using Advergames to not be so cavalier in their approach to this imminent and likely backlash from the market and Washington. One only need look at the tobacco, energy and fianncial services sectors to see where the breakdown may likely occur. Sarbanes Oxley, a largely complicated and controversial law, represents an example of over-reaction to abuses of self-policing when enough damage is instigated on the public. Protecting children is a very powerful campaign platform and should not be taken lightly.

Further, marketers should be aware that this effort may have a counter-effect on their brand and shareholder value. Attorney Generals and class action law firms have been acting as the consumer police over the past few years in various market sectors. So far, the food industry has avoided scrutiny... at least until enough media attention and public awareness draws attention. The Kaiser report will not help.

As an advocate for advertisers and shareholder value, I assess that the long-term strategy will be the play that adds real shareholder value and increased good will for the brand. Unfortunately, the game is stacked where it requires cooperation of all advertisers, otherwise the plan won't work. Marketers have positioned themselves in a corner in that if they stop using these methods to market to children, they will lose market share to competitors who fail to play by the same rules. While this is a legitimate concern, the ANA should be the body empowered to police and serve as a neutral as the NAD does with broadcast television.

I invite both sides of the debate to comment as this is an issue for all involved in advertising and media.

SONY/ BERTLESMANN MERGER ANNULLED BY EU COURT

2006-07-17T17:07:00.000-07:00

July 13 marks another date that has the music industry regrouping from their strategic plans of consolidation. On this date, the EU's second highest court, the Court of First Instance ruled that the EU Commission regulators improperly approved the 2004 marriage between Sony and Bertlesmann, in a landmark decision basically berating the regulators for sloppy due diligence and lack of evidence in supporting their assessments of the merger.

The primary question, touted by independents, is whether or not the consolidated entity taken on an industry-wide perspective would encourage price fixing in the music industry? The regulators are likely to appeal, but now they have to prove their findings that the merger is benign to competition by desmonstrative concrete evidence. Experts think the investigation will take at least four months, if not more. Sony faces a difficult burden of proof to provide clear and convincing evidence that having three major players is good for competition.

In light of the decision, talks over the Warner/EMI deal that is probably on hold in light of the EU court's decision. Either way, the standard has been raised for consolidation, which is equally bad for Warner and EMI to agrue that 2 competitors are better than 3.

Since a break-up would probably be unlikely, what we are more likely to see are concessions by Sony if they lose their appeal. This of course would make it very difficult for EMI and Warner to join forces by having to argue that further consolidation to two competing players is good for the marketplace. In either respect, the music industry continues to receive its punches, first from the internet, then from anti-trust regulators. Is the party over for major record labels? Your thoughts are welcome.

THE MIDDLE EAST...THE NEW TECHNOLOGY FRONTIER

2006-07-13T18:44:00.000-07:00

The Middle East is becoming the hub for technology with hordes of cash from oil-rich countries pouring in. This month, the syndicated bid for Egypt's 3rd mobile carrier demonstrates that the stakes are high to capture this critical market segment. I am personally familiar with this license deal because I was asked to help syndicate it by an investment law firm in Egypt. Of course, with a $3 Billion price tag (a six times premium over the price paid by the two incumbents) and competition from oil money in an 8-way bidding war, needless to say that deep pockets would be required to put together a deal like this. This is also the first 3-G license of its kind in the country.

What interesting is the vast potential many countries in the Middle East and Northern Africa pose to be the equivalent of India for the EU. We are seeing technology opportunities in Egypt, Turkey, Isreal, United Arab Emirates and Morroco as they have the right combination of incentives for foreign capital, educated populations and low human capital costs. But in order to be really competitive, however, these countries, particularly Egypt, needs to ensure the inviobility of its legal system for enforcement of business commitments and intellectual property rights.

Currently, like most developing countries, one must consider ineffective court systems and corruption as part of the investment risk. While Egyptian equity markets have seen significant growth over the past four years, foreign investors may be a bit averse to taking risk without some sort of guarantee to their investment.

The most effective way to mitigate exposure is to work through established political alliances and corporate relationships whom have significant influence in the country. While Middle Eastern culture is renown for inaction and embellishment, there are credible players in that market. One just needs to have the networks of powerful alliances to navigate around unsavory characters.

Please engage in this conversation about Egypt and the potential for the middle east to become the disruptive market over the next 20 years. I would love to hear your assessments, interpretations and ideas of potential opportunities throughout the Middle East for technology.

The Problem With MySpace

2006-06-23T19:45:00.000-07:00

MySpace is having trouble keeping sexual perdators from combing its website. In response, they deny entry for anyone under 14, and are are trying to retsrict access to minor profiles (14-15) to anyone over the age of 18, but the easiest way to circumvent that plan is for predators to lie when they register. With a recent $30MM lawsuit filed on behalf of a 14-year old Texas girl who claims she was sexually assaulted by a 19 year MySpacer claiming to be a highschool football player, MySpace will need to come up with better solutions to avoid further lawsuits.

There is a fundamental balance between privacy and need to protect consumers. Using traditional bodies of law concerning premises liability, the standard for property owners to provide security for patrons in public areas requires reasonable foreseeability of criminal activity, and reaosnable precautionary measures to prevent them.

How far will MySpace have to go to provide security without ruining their credibility with users or costing them significant sums to conduct background checks? Its a social problem that has infiltrated the online community, and affects all peer-to-peer networks.

MySpace shouldn't have to shoulder all of the responsibility. They need to act like a good corporate citizen, but just like having a sexual offender move into your neighborhood, the community needs to be proactive. Perhaps putting sexual offenders on a banned access to Internet is a solution. We already have a sexual offender registry...Since they need to register their legal names to get phone and cable service, the telco and cable providers can easily screen for this. Of course, WiFi and WiMax may also be problems, but at least we can reduce the number of bad actors on the Internet.

I made a point on kenradio that parents need to be responsible to monitor their kids' activities...at least their snooping is not illegal (as would be the case if MySpace did it). Further, kids need to be held more accountible for the types of relationships they build online, and should be taught not to be so naiive about other human beings. We live in a different world that Wally and Beaver...and we all need to be smart about it.

Thsi is a dificult subject for many, especially if you have kids like me, but thought it was worth discussing.

Privacy: The Big Churn

2006-06-12T17:25:00.000-07:00

Recent Attacks on Privacy by the White House has had the ACLU and others up in arms. It has become a hot topic since the NSA retrieved phone records from the major telcos without a search warrant some months back. Now we also see the FCC and FBI pushing ISP's to store all electronic communications from email to search for two years. Currently, they only have the server capacity to store data for a few weeks.

We are living in a world where someone is watching our every move.. at least electronically. But rather than worry about advertisers tracking us down every moment of our day, we have a strange twist where our government doesn't want to be held to the same standards and scrutiny as corporate America.

Suprise? We shouldn't be. The Internet is a tool for communication that is free-form and incites ideas and innovation. Of course, it is also a tool that can be exploited for negative purposes, such as preying on minors and terrorism.

But you have to ask yourself, if we deny everyone certain human liberities in terms of privacy, who are we putting in charge to make the call? Historically, its been too dangerous to give the government too much power...hence the Bill of Rights.

I am trying to stay somewhat neutral on my perspective, but I am sure you can guess where I fall on this. What are your thoughts?

Virtual Assets For Online Gaming

2006-05-28T08:12:00.000-07:00

When market-makers buy and sell virtual assets in on-line games such as Second Life and World of Warcraft, are those people infringing upon the publisher's copyright, or are the merely selling a copy of an asset which is permissible under copyright law? I raised the subject on Kenradio.com last week. I would like to hear what you have to say.

Cablevision Sued For DVR-like service

2006-05-28T08:02:00.000-07:00

Cablevision was recently sued for copyright infringement by the major studios and networks for copyright infringement. It seems that the roll-out of their new $10 a month DVR-like service has made the content owners nervous. Essentially, Cablevision is using their set-top-box VOD technolofy to allow subscribers to store their content on an offsite 80 gig hard drive, and allow them to stream their shows whenever they want and however they want...much like a DVR.

The Studios and Networks are crying foul, saying that this is VOD with some fancy work-around to prevent them from getting their share of the $10 monthly subscription fee. Cablevision is saying that it is exactly like a DVR with an off-site storage component.

Cablevision allows the susbcriber to store the content on a partitioned server, and does not control, store, access or distribute the content...they provide server space. Is it infringement? My assessment is no, but of course its our job to argue both sides. What do you think?