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    19 days

Google Withdraws from Deal with Yahoo

 

In a move that should surprise no one, Google and Yahoo have “officially” abandoned their proposed Internet advertising partnership.

The proposal was laughable from the start, but the two firms took the public stance that the arrangement could somehow have been “pro-competition.” Antitrust regulators were having none of it. As it became clear that the proposal would not simply slide past regulators Google and Yahoo have likely determined that the façade was no longer worth the trouble and legal fees.

As previously noted, it seems unlikely that either party truly thought this would pass antitrust muster. There were potential latent benefits to each, however, which may have led to the proposal’s birth.

While there was little question the proposal had little chance of success, one might wonder if the Obama victory just hours before the firms’ announcement played a role. There was little hope that an Obama administration would be more willing to allow the deal than the outgoing Bush administration. The election may have been the final proverbial straw on the back of this failed-from-the-start alliance.

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Google Delays Deal with Yahoo

 


The joint advertising deal between Google and Yahoo, previously discussed in CyberLawg, is being delayed as the U.S. Department of Justice Antitrust Division continues its review.

Both Yahoo and Google have correctly taken the “we’re happy to help and comply” public line. Still, there is no question that an antitrust review that needs more time is not good news for the potential bedfellows. The Google CEO’s previous suggestion that Google and Yahoo would move forward before the DOJ even completed its review looks pretty silly at this point.

Another concern: the Executive Branch will have a new leader come January. Regardless of the winner of the presidential election, it is hard to imagine that it will lead to an administration more likely to pass on comprehensive review than the current administration.

Of course, there is some question as to whether Google and Yahoo ever thought this would truly work or if they were both just looking to cool down the speculation that Yahoo would be acquired by Microsoft or another third party. Even in a circumstance where DOJ does block the deal both online ad firms do receive some benefit by maintaining their status quo as the two dominant online advertising firms even while the review is pending.

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FCC to approve XM Sirius Merger



 

The FCC, after being deadlocked along party lines, is expected to clear a merger between satellite radio providers XM and Sirius, so long as the firms meet certain conditions, reportedly the firms' payment of $20 million in fines for violations regarding tower locations and power limits.


The approval of the merger comes as a disappointment to consumer groups and Democratic FCC Commissioners, who had heavily opposed the merger based on monopoly concerns. These interests were of the opinion that the combination of the only two satellite radio providers would be the definition of a monopoly. Others, such as Republican FCC Commissioners and the firms themselves, felt that the varied choices in audio programming, such as HD Radio, analog radio, podcasts and similar alternatives were sufficient to restrict any potential price gouging by the new combined firm. The Department of Justice’s Antitrust Department had previously cleared the merger on similar grounds.

This was the classic “close call.” XM and Sirius have been struggling with profitability from the beginning of their existence and there were legitimate questions as to whether satellite radio would be viable at all. On the other hand, the technology is very new. There are equally legitimate questions as to whether allowing a merger of such new technology is a sound long-term choice.

All is not lost even if the DOJ and FCC’s decisions are proven to be wrong as the years pass The Federal Government has the power to break up monopolies when the need arises. While the “break up” process is substantially more problematic than the “prevention” powers, the option does remain. More likely, market powers will be sufficient to keep the XM-Sirius entity in check, at least in the short term.

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DOJ Antitrust Probes Google Yahoo Deal





 

The deal that allows Google to provide some advertising for Yahoo searches has unsurprisingly attracted a formal antitrust probe from the Department of Justice. The fact that the Bush Administration’s Department of Justice, comfortably hands-off in recent years, has begun a formal investigation is not good news for the deal. As a report notes, attorneys for Yahoo and Google believe that the deal is “pro-competition.” Opponents feel that the deal will prevent Yahoo from wanting to compete with the hand that feeds it a portion of its advertisements.

This is a classic example of the adage “if you can’t beat ‘em, join ‘em.” Yahoo just failed to consummate a deal that was primarily designed to allow the firm to more fully compete with Google. Weeks later, both firms’ arguments that a combined deal is pro-competition is a tricky pill to swallow.

So why even try it? The two firms are unlikely bedfellows because each is able to use the other to its own ends at the present point in time. The Google deal provides Yahoo with an “out” from Icahn, Microsoft, and Yahoo shareholders all clamoring for a deal. The primary beneficiary of an independent Yahoo? Google. The search leader has little interest in anything but the status quo: Google dominance in search marketing. Keeping Yahoo independent helps to maintain that status quo. Adopting the famous quote from Sun Tzu, Google truly believes it is best to “keep its friends close, and its enemies closer,” at least until the Department of Justice has its say.

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FCC & Local Role of Broadcasters

 

A topic that is garnering increased interest in recent years,
particularly in the age of substantial media consolidation, is the “local role”
of broadcasters in servicing their communities. The FCC continues to mandate
that broadcasters meet certain standards of community service, such as providing
programming of interest to local audiences, playing local artists, and
otherwise “being a part of the community.”

 

Broadcasters, who believe that market forces should dictate
their local programming, are generally opposed to mandates, arguing that the
bureaucracy of organizing community boards of meeting certain minimal
requirements is a “feel good” ideal that may or may not lead to any true
benefit to communities. Broadcasters also argue that they already meet local
standards, shown by airtime donated for public service announcements and
similar community efforts.

 

Advocates of “local standards” feel that broadcasters can
easily comply with any FCC mandate, particularly given the broadcasters’
argument that such standards are already being met. Advocates also point out
that broadcasters pay nothing for their broadcasting licenses, suggesting that
reasonable efforts to meet local standard are not a serious burden.

 

Both sides have valid arguments. Broadcasters are correct
that the mandates are a bit broad, particularly when only broadcasters, as
opposed to cable or satellite provider, are subject to the regulations. Public interest
advocates also have valid points, most notably the argument that news and
cultural programming is becoming homogenized. With so many media outlets owned
by large firms that want to cross-promote and otherwise create efficiencies in
programming, there is little question that local coverage has taken a back seat
in recent years.

 

While regulations on broadcasters should be strictly
tailored, the FCC requirements regarding community standards are hardly a crushing burden. Indeed, broadcasters
should probably be thankful that the FCC has chosen this route of regulation as
opposed to taking a stricter stance on media consolidation and license renewals
in media markets.

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Verizon, ATT Win Spectrum

 

The winners of the auctioned spectrum were announced today.
As expected, Verizon Wireless and ATT were the big winners. While billions of
dollars were spent on this spectrum by the firms, there is little question that
the investment was a good one. Rights to this resource will position both ATT
and Verizon as long term wireless powerhouses for years to come.

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Spectrum Sales Nets 19.6 Billion Dollars

 

The FCC’s auction of spectrum being vacated by analog
television netted the agency $19.6 billion that will be used to help with the
transition to over-the-air digital television. This amount represented more
money raised that all previous spectrum auctions combined. The winner of the
auction will not be named for some time, but most followers expect to see
Verizon Wireless or AT&T Wireless eventually announced as the winner. The
“commercial” block sold for the $19.6 billion will be the first nationwide
network that would be open to all devices and software. Lobbying from public
interest groups and firms such as Google led to this “open restriction” on the
spectrum.

 

While the commercial portion was successful, the “D Block,”
designed to be a network developed privately but employed by public services
such as emergency responders, did not receive a bid high enough to meet the
reserve price
. This sends the FCC back to the drawing board to reconsider some
of the restrictions and costs involved in developing that block.

 

It will be interesting to see how the winner of this
spectrum will implement its services on this newer open network. It will be
surprising if there are not some early disputes about how “open” the spectrum
remains. The winner of the spectrum will want to limit encumbrances, and
open-access proponents will want to mandate that regulations are followed.
While hopefully minimal, it is wishful thinking to suspect that these
regulations will not lead to a few minor spats between the interests.

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Spectrum Bidding Heats Up

 

The bidding war for radio spectrum that is being freed up by
the elimination of analog television broadcasting continues to attract
attention by major technology firms. You can see a map of the spectrum range here.

 

Several blocks of spectrum in the 700-MHz range have to date
attracted bids of $18.9 billion, well in excess of the FCC’s goal of $10
billion. Of particular note, the C Block, the largest swath of airwaves up for
auction reached its minimum reserve price of $4.6 billion. This now means that
the airwaves must be used to build an open network, allowing the operation of
numerous devices and applications, compared to the current method of wireless
providers defining the types of phones used and the services provided.

 

While the bidders are anonymous, speculation indicates that
Google and Verizon Wireless are the primary players, though few expect Google
to invest enough to win. Google may have posted the minimum bid for the C block
to ensure the open network, which the firm heavily supported.

 

The money invested in this spectrum is certainly not a lost
investment. Regardless of the final price, winners of this band of spectrum
will easily recoup their investment and then some as higher bandwidth mobile
applications begin to explode.

 

Google is also a likely winner here. While we don’t know if
it placed the minimum bid to ensure open access or not, it is very likely that
there will be an even higher bid submitted by a player other than Google. In
that scenario, Google get what it wants while avoiding actually making any
investment at all. This is a shrewd move that would position it in future
battles with the proposed Microsoft/Yahoo conglomerate.

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Microsoft Bids for Yahoo

 

Talk about a big deal. Microsoft has offered to purchase Yahoo
for $44 billion. If completed, the monstrosity would be an instant Google
competitor, combining the forces of two firms that alone have not been able to
compete with Google.

 

While the deal is a long way from coming to fruition, this
seems to make sense at first glance. Both Yahoo and Microsoft have had their
various struggles over the recent years. Yahoo has had a hard time focusing its
business on a core group of services, and its attempt to be all things to all
people has not been successful.

 

Microsoft’s attempts to enter the search market have been
lackluster at best, and there are more and more challenges to its core software
business coming from maturing open source programs, online applications by
Google and others, and Apple’s rise in popularity. The Vista
operating system is another example of a recent failure that has not earned the
public’s continuing trust.

 

Of course, the potential deal would have to clear antitrust
conflicts, but if Google & DoubleClick was not a problem for the
government, it seems unlikely that these two firms, both primarily in separate industries,
would create much trouble.

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Bill Eyes International IP Help

 

A recent bill introduced in the house, entitled
“Prioritizing Resources and Organization for Intellectual Property Act of
2007,” or PRO IP for short, casts an eye towards improving international
cooperation and enforcement of IP rights.

 

The bill, introduced by John Conyers of Michigan,
proposes that the United States Patent and Trademark Office appoint 10
intellectual property attachés to serve in United States embassies or other
diplomatic missions. Their mission would include assisting “United States persons holding intellectual
property rights, and the licensees of such United States persons, in their
efforts to combat counterfeiting and piracy of their products or works within
the host country, including counterfeit or pirated goods exported from or
transshipped through that country.”

 

International infringement of American works has become a
more salient issue in recent years, as previously discussed in CyberLawg. Appointing
these additional attaches is a low-cost but potentially high reward
arrangement. By educating developing countries about IP protection the United States
has opportunity maintain its citizens’ IP interests while similarly working to
build better overall political relations with developing nations.

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