Sunday, June 29, 2014

Smartphones, TV and the U.S. Supreme Court

  • In 2007, David Riley was arrested for allegedly selling drugs from his car. While he was in custody, the police found information on his smartphone that linked Riley to gang-related crimes.  Last week, in the case Riley v. California, the U.S. Supreme Court ruled that cellphones and smartphones cannot be searched by police without a warrant during arrests.  Writing in support of the court’s 9-0 decision, Justice Roberts said “A decade ago officers might have occasionally stumbled across a highly personal item such as a diary, but today many of the more than 90% of American adults who own cell phones keep on their person a digital record of nearly every aspect of their lives” and “with all they [smartphones] contain and all they may reveal, they hold for many Americans theprivacies of life. The fact that technology now allows an individual to carry such information in his hand does not make the information any less worthy of the protection for which the Founders fought.” Roberts also noted that “We cannot deny that our decision today will have an impact on the ability of law enforcement to combat crime.”
  • Separately, the Supreme Court ruled against Internet streaming service Aereo in the case American Broadcasting Companies Inc. v. Aereo.  The service, which was launched in February 2012 in New York City and expanded to 11 markets, used small antennas to access local over-the-air TV broadcasts and stream it across the Internet to its subscribers. The plaintiff’s concern was that Aereo did not pay fees to the broadcasters and infringed on their copyright.  Justice Breyer, in his majority opinion for the court. said “Aereo’s behind-the-scenes technological differences do not distinguish Aereo’s system from cable systems”. Barry Dillar of IAC and a major investor in Aereo conceded defeat when he said “we did try, but it’s over now.”
  • Regarding smartphones – While the court’s decision clarifies that the Fourth Amendment of U.S. Constitution, which prohibits unreasonable searches and seizures, includes information stored on smartphones, there will likely 1) be follow-up litigation related to other types digital content such as GPS tracking, 2) additional questions about theNational Security Agency’s surveillance efforts on U.S. citizens.
  • Regarding broadcast TV – While the Aereo’s approach was clever and innovative, it assumed that broadcast TV content is free. Because the court’s ruling was based on a 6-3 decision, there are diverse views on how to interpret the Copyright Act of 1976, which seeks to address the impact of changing technologies on television, motion pictures, audio recording content.  Consumer demand for alternative content distribution will likely continue to drive innovations..

Sunday, June 22, 2014

Amazon and T-Mobile: Agents of Change

  • After years of speculation, last week Amazon CEO Jeff Bezos announced its Fire mobile phone which 1)integrates its media services (including e-books, Prime Instant Video and Prime Music streaming), 2) provides a new 3-D display and 3) uses Firefly image-recognition which can identify items in a 70 million product database as well as scan phone numbers, web addresses and email addresses on printed material.  Note: because the device is a modified version of Android, customers cannot access the Google Play store.
  • Separately, T-Mobile CEO John Legere announced that 1) its wireless carrier customers would no longer incur data usage charges when using music streaming from PandoraSpotifyiTunes RadioiHeartRadioSlacker,Rhapsody and Samsung's Milk Music (other music services may be added later) and 2) a new program called “Test Drive” would allow potential customers to try out its network with a loan of an Apple iPhone 5SNote:  A probable merger of T-Mobile will Sprint is part of Softbank CEO Masayoshi Son’s efforts to expand its U.S. presence.
  • Regarding Amazon – For years, as Bezos and his team introduced new services and entered new markets, the firm’s profitability has been meager.  However, their efforts have reshaped markets and benefited both consumers and investors. While some critics suggest the Fire is too expensive and gimmicky, it is likely that 1) the functionally of the product will evolve, 2) its integration will the firm’s cloud services will increase and 2) lower priced phones will be introduced.
  • Regarding T-Mobile – Since Legere became CEO in September 2012, initiatives that have delivered positive results include 1) eliminating wireless service contracts, 2)  introducing an early upgrade program, 3) removing international data roaming charges, and 4) covering early termination fees of customers when the move from rival carriers. If he becomes CEO of the merged Sprint/T-Mobile entity, competition among U.S. wireless players will likely increase and consumers should benefit as well