IP/Internet/New Media Blog

By Galen Gentry

On April 6^th  the District of Columbia Court of Appeal ruled that the Federal Communications Commission has no authority to determine how internet services providers manage traffic to their customers.  The case, Comcast v. FCC , is a blow to proponents of net neutrality.  In 2008 the FCC ruled that Comcast improperly discriminated against certain internet content when it blocked some of its customers from using the popular BitTorrent Inc. technology which allows users to download large files such as videos more easily.

Comcast appealed and the three judge panel unanimously found that the FCC overstepped its bounds in the 2008 ruling.  The court stated the FCC lacks direct authority from Congress to regulate internet traffic.  The ruling brings the issue of net neutrality back to the fore.  Some government and business leaders seek legislation which would prevent internet providers from curbing or charging higher prices for use of selected applications or access to certain websites. 

At issue is whether telecommunications companies should be allowed to manipulate how fast or slow websites pages load on customers computers.  Companies like Google support net neutrality which would prevent internet providers from curbing or charging higher prices for use of selected applications or access to certain websites.  The telecom giants such Verizon and Comcast are against such legislation.  President Obama supported previous efforts to enact net neutrality legislation and FCC chairman Julian Genachowski has made net neutrality a top priority. 

The issue of net neutrality is a partisan one.  It may take a long time for Congress to act.  In the interim the FCC may appeal the ruling or it may seek to reclassify high speed internet service so that it would be regulated like telephone services under existing laws.  The same companies which oppose net neutrality, the giant telecoms, would oppose such a move.  If the FCC makes an effort to reclassify high speed internet service the telecom companies are sure to challenge the action in court. 

 America needs competition among its high-speed internet providers. Open access has proved to be an effective way to do this in other countries. The FCC’s rules on net neutrality were an adequate substitute.  But with the Court’s ruling the United States now has neither.

By Galen Gentry

Yesterday, Mayor Villaraigosa signed a measure to cut business taxes for internet based firms. Last year internet firms were reclassified from multimedia to business and professions. It’s an important distinction because the former pay a city tax rate of $1.01 of gross receipts and the latter pay $5.07 (yes, fellow attorneys you are unfortunately in the $5.07 category). The change was approved without dissent by the city council. The rate change is retroactive. The fact that it is retroactive will cost the city at least $3.4 Million in revenue according to an article today’s Los Angeles Times Business Section by Phil Willon.

The mayor and the city council were clear as to the reasons for the change of heart–they believe internet based companies are easy to move and that the drastic increase in city tax would result in an exodus which would ulitmately cost Los Angeles more revenue in the long run.

By Galen Gentry

The AP reported that Google stopped censoring the Internet for China by shifting its search engine off the mainland today, March 22, 2010. Google is acting on its statement, made Jan. 12th, that it would no longer adhere to China’s requirement that it keep some Internet results out of its citizens’ view. Visitors to Google’s old service for China, Google.cn, are now being redirected to the Chinese-language service based in Hong Kong, where Google does not censor the search results; however, it cannot be accessed inside China, because the mainland government filters restrict the links that can be clicked by mainland audiences.

Google plans to keep its engineering and sales offices in China so it can keep a presence in the country and continue to sell ads for the Chinese-language version of its search engine in the U.S. Google is unlikely to sever all ties with China in the future. It would not make economic sense. China’s explosive growth has created a market that is hard to pass up.

By Galen Gentry
PC Magazine reported that two law firms have filed a class action law suit against Yelp for allegedly extorting advertising payments in exchange for removing or modifying negative reviews appearing on the site. The named Plaintiff is a veterinary hospital in Long Beach, California. The plaintiff claims it asked Yelp to remove a false and defamatory review and in response the company sales representatives repeatedly contacted the hospital and requested that it advertise with Yelp in exchange for hiding or removing the negative review.

What is interesting is that the allegations in the complaint are not new. On February 18, 2009 The East Bay Express, a free weekly publication, based in Oakland, California published an article entitled “Yelp And The Business Of Extortion 2.0”

In the article The East Bay Express stated that interviews with dozens of business owners revealed several people were promised that negative reviews would be moved or removed if the business would advertise by Yelp sales reps. Further in another six instances positive reviews disappeared after owners declined to advertise.

Web 2.0 is all about user generated content. That business model, pioneered by Google, is used more and more as the cornerstone of the marketing efforts of businesses large and small. Yelp is a popular website which posts user generated content in the form of reviews of small businesses such as restaurants, dry cleaners, nightclubs, tire stores, and the like. Yelp attempts to monetize the content by obtaining advertising contracts from businesses which have been reviewed on the site. Yelp’s business model is not unique (Avvo.com has a somewhat similar site for lawyers) but it is one of the biggest players. Negative reviews on Yelp, particularly if a business has a small number of reviews, can really impact sales.

Last year Yelp’s CEO Jeremy Stoppelman responded to the article in the East Bay Express saying that claims of manipulation of reviews result from the fact that the businesses do not know how Yelp’s proprietary review algorithm works.

Yelp is hugely popular. It seems unlikely it would engage in wholesale extortion. It doesn’t need it. User generated content is the key to Web 2.0 and Generation X likes Yelp. Perhaps individual Yelp employees in their zeal to make a sale may have promised more, much more, than they could deliver.