By Ryan Demotte

Last week Google acknowledged in an SEC filing that the Federal Trade Commission has launched a formal antitrust inquiry into the company’s search and advertising business practices, issuing a subpoena and notice of a civil investigative demand to the company. According to news reports, FTC lawyers have been informally gathering information for several months concerning the way Google orders search results and advertising. By taking this step, the FTC can compel Google to turn over a wide range of internal information concerning its business. Rivals argue that Google engages in anticompetitive conduct by using its dominance in the search market to favor its own services and reduce web traffic to competing services. Google already faces a similar investigation by European regulators.

In a response posted on its official blog, Google provided a preview of what may be its core defense to any antitrust allegations – that competition in the search engine market is “only one click away,” and that users are free to use any of a variety of alternatives to Google. 

Using Google is a choice – and there are lots of other choices available to you for getting information: other general-interest search engines, specialized search engines, direct navigation to websites, mobile applications, social networks, and more.   

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The Supreme Court today concluded that video games qualify for the same First Amendment protections afforded to books, plays, and films. The Court’s 7-2 opinion in Brown v. Entertainment Merchants Assoc. upheld the 9th Circuit decision overturning a California statute which applied to video games containing the “killing, maiming, dismembering, or sexually assaulting an image of a human being” and punished violators with fines up to $1,000. 

Although this decision is the first time the Supreme Court addressed whether video games deserve the protection of the First Amendment, it concerns a 2005 state law that is already somewhat dated due to its focus on retail sales of disc-based games. Much of the recent growth in video game industry has shifted to games that operate online or over mobile wireless networks where access restrictions based on age or parental consent are more difficult to enforce.

Writing for the majority, Justice Scalia determined that the California law failed both prongs of the applicable “strict scrutiny” standard of review: 1) California did not demonstrate a compelling governmental interest in limiting minors’ access to violent games and 2) the state did not choose narrowly tailored means to implement the ban. On the first element, Justice Scalia found the purported connection between video games and increased violence in children unpersuasive, writing “[a]ny demonstrated effects are both small and indistinguishable from effects produced by other media. Since California has declined to restrict those other media, e.g., Saturday morning cartoons, its video-game regulation is wildly under-inclusive, raising serious doubts about whether the State is pursuing the interest it invokes or is instead disfavoring a particular speaker or viewpoint.” On the second element, the opinion noted that the video game industry already offers a voluntary rating system which can guide concerned parents. The Court distinguished its findings from the facts of Ginsberg v. New York, which involved the sale of “obscene” content to children, by remarking that the violence contained in the video games fell outside the Court’s traditional definition of obscenity.

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Last week’s “Poles and Holes” webcast, carried live on Broadband US TV, sparked a lively debate among panelists representing the telecom sector on the one hand, and utility and local governmental interests on the other. The program featured FCC Wireline Competition Bureau Chief Sharon Gillett who talked with co-hosts Marty Stern of K&L Gates and Jim Baller of The Baller Herbst Law Group about the scope and application of the FCC’s new pole attachment rules, including the rules’ controversial new telecom rate formula and the first-time requirement that incumbent telephone companies get the benefit of regulated pole attachment rates.

The panel discussion highlighted the strong disagreement between telecom industry interests and utilities over the Commission’s new telecom rate formula, new deadlines on completing attachments, and whether revised rules were needed at all. On rights-of-way access and facilities siting matters involving local governments, there was also significant disagreement over the extent to which particular local governments have been a hindrance to deployment. One industry panelist suggested, particularly as to wireless deployments, that “it’s a real fight” in too many cases. Joanne Hovis, President-elect of NATOA, bristled at that notion, stressing the interest of governments in working cooperatively and collaboratively with providers to facilitate broadband deployment, and argued that the industry is trying to “short-circuit localism” and asking the FCC for relief. Hovis, instead, offered that industry should “come to us and we will work with you. If you have a problem with one of our members, we will work with them as well.”

The webcast may be viewed here (registration required).

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The FCC Working Group on the Information Needs of Communities delivered a comprehensive report yesterday addressing recent fundamental changes in the media landscape. The “Information Needs of Communities” report, produced by a group of journalists, scholars, media entrepreneurs, and government officials, reached a number of conclusions indicating that while technological advancements have improved public access to information, major deficiencies exist in contemporary news coverage. Specifically, the report found:

• An explosion in Internet-based reporting on “hyperlocal” news directed by citizen journalists. The report expects further public reliance on Internet news sources as these non-traditional outlets proliferate. The Working Group pushed for rapid universal broadband deployment to expand access to these new media sources in rural and underserved communities. 

• A marked decline in “local accountability reporting” from tradition news organizations. The Working Group noted that the recent increase in media outlets failed to result in more stories focused on community issues. The report warns that the dearth of local overage will result in less government accountability, greater corruption, wasted taxpayer dollars, and other community detriments. As a result, the study recommends policymakers craft incentives for media organizations to establish a “state-based C-SPAN” system and allocate more of the federal government’s $1 billion advertising budget for local media outlets.

• Enhanced collaboration between commercial and non-profit media organizations, with synergies growing across media sectors. The report discovered increased diversification in non-profit media offerings, which the Working Group suggested should be supported through favorable tax reforms.

• The FCC should take action to put media disclosure information online for easier public access. The Working Group advocated streamlining programming disclosures and eliminating burdensome disclosure rules. The report also advised the agency to take steps to discourage “pay-for-play” arrangements where TV stations allow advertisers to influence content. The report calls for the online disclosure of these arrangements.

• The media industry would benefit from the repeal of the Fairness Doctrine and the termination of the FCC’s localism proceeding. The report also suggested the FCC re-assess the efficacy of the current satellite TV set-aside for educational programming.

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Administrative delays continue to plague the publication of the FCC’s controversial Net Neutrality Order adopted back in December 2010. According to agency observers, ongoing negotiations with Internet service providers and the need for OMB to approve the rules’ complex information reporting requirements may push the publication date of the regulations into the Fall.

The official publication of the regulations in the Federal Register will enable net neutrality opponents to launch long-awaited legal and legislative challenges against the Order. Even as publication remained pending, Verizon and Metro PCS each appealed the Order in the D.C. Circuit, contending that the FCC exceeded its statutory authority when it imposed the new regulations. The D.C. Circuit dismissed the suits without prejudice last month because the companies filed prior to the Order’s publication, but Verizon indicated that it plans to refile its challenge once the rules are published in the Federal Register. 

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The Senate Judiciary Committee unanimously voted to approve legislation aimed at shutting down “rogue” websites selling counterfeit goods or offering pirated content. The PROTECT IP Act would authorize the Justice Department to seek court orders prohibiting American Internet service providers from offering access to infringing sites. The Act would further allow content owners to prevent online advertising services and credit card companies from dealing with websites “dedicated to infringing activities.” The new bill represents a less sweeping version of the abandoned Combating Online Infringement and Counterfeits Act (“COICA”) bill, which would have permitted the government to seize domain names involved in copyright infringement.

While some media watchdog groups greeted the proposed reforms with guarded optimism, other organizations expressed lingering concerns over the constitutionality of the Act. Critics note that the definition of a website “dedicated to infringing activities” includes sites which they argue play too small a role in the infringing activity. Reports indicate that the threat of broad enforcement may drive leading Internet search providers like Google to challenge the bill if enacted.

Proponents of the bill, such as Sen. Patrick Leahy (D-VT), contend that the scope of the legislation remains narrow and will only target the “worst-of-the-worst” infringing websites. The proposal enjoys strong support from manufacturer associations and the Chamber of Commerce which blame rogue sites for job losses and recent market declines. The National Association for Broadcasters recently joined the fight in favor of the bill, citing the need to combat widespread piracy of movie and television content. Whether such bipartisan support and industry backing will be enough for the PROTECT IP Act to succeed where its predecessor failed remains to be seen.

With expanding broadband as its defining priority, the FCC is taking a number of steps to facilitate the deployment of broadband facilities. We recently wrote on the FCC’s new pole attachment order, intended to expedite and lower the cost of access to utility poles. In a companion Notice of Inquiry, published today in the Federal Register, the Commission will be exploring ways that local governments and other authorities can help improve rights-of-way access and facility siting, both of which are key to mobile broadband deployment. Comments on the NOI are due by July 18 and Replies are due August 30. 

To give the FCC’s action some context, it has been estimated that the wireless industry has deployed some 250,000 cell sites in the U.S. in the last 25 years. With 4G deployments, which require sites deeper into the network, one analyst estimated that the country will need 2.4 million sites by 2020 to support the expected level of mobile broadband traffic. For those who remember the battles a few years back between the telecom industry and local governments, as well as agencies managing federal lands, a real question exists as to how that all gets done.

Enter the FCC and the facilities deployment NOI, which has identified and seeks comment on various points of contention between industry and government affecting broadband buildout, in an effort to identify a comprehensive solution. These include timeliness and ease of the permitting process; reasonableness of rights-of-way and other charges; outdated ordinances and statutes, including the treatment of small antenna systems on existing facilities (known as Distributed Antenna Systems or DAS); differing regulation between rights-of-way access, including traditional pole attachments versus wireless facilities siting; and opportunities for FCC intervention and best practices.

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