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Byline: Robert MacMillan

What was already promising to be a day full of juicy technology tidbits got even more exciting late Monday, courtesy of the 9th Circuit U.S. Court of Appeals , which tossed out a 2002 Federal Communications Commission regulation that gave cable Internet service providers a boost in their competition with dial-up and DSL providers.

Specifically, the perennially unpredictable 9th Circuit ruled that cable companies must open their networks to competing Internet service providers, a decision that thrusts "open access" -- a musty old buzzword from the tech boom days -- back into the spotlight.

USA Today did a competent job of serving up the basic facts of a complex case: "Consumers moved a step closer to more choices of Internet service providers via cable broadband connections after a federal appeals court ruling Monday. ... The ruling stems from a five-year battle by ISPs, led by EarthLink , that say they need 'open access' to cable networks to compete. Cable operators mostly offer only their own ISP or others in exclusive deals." * USA Today: FCC Was Wrong, Court Decides * FindLaw.com: Opinion -- Brand X Internet Serv. v. F.C.C. (PDF)

The New York Times, like nearly every other major news source in the nation, quoted EarthLink VP David Baker , who predictably had little love lost for the cable firms. "The decision was hailed by Internet access providers who sued to get the right to lease those lines and offer competing services over them. They said the court decision would give consumers more choice when shopping for a provider of high-speed Internet service. 'This will help drive prices down and quality of service up; it will drive broadband deployment,' said Dave Baker," the Times reported.

More from the Times on the 9th Circuit's decision: The FCC's "approach toward broadband regulation -- for both cable companies and telephone companies -- is to permit the major players to build their high-speed Internet infrastructure without requiring them to open their networks to competitors. The FCC. has said the best way to expand deployment is to give the big companies incentive to invest in new networks. The appellate court, however, found that cable broadband service providers were in part providing 'telecommunications services,' a definition that could subject them to the greater obligations of 'common carriers' under federal law. The court indicated in a footnote in the ruling that 'the practical result of such a classification is that cable broadband providers would be required to open their lines to competing' Internet service providers.'" * The New York Times: F.C.C. Erred in Decision on Net Access (Registration required)

CNET's News.com -- normally more techie-oriented in its copy -- gives a breakdown of the regulatory landscape that actually augments the Times's abovementioned take: "Cable companies such as Comcast and Time Warner Cable currently run broadband services without needing to offer part of their network to third-party services," News.com reported. "Phone companies, such as SBC Communications and Verizon Communications , are required by law to allow third-party Internet providers, such as EarthLink and America Online , to resell digital subscriber lines for their own subscribers." * News.com: Court Rejects FCC Cable Ruling

The Washington Post gave the story lots of love, letting it share the rarified air "above the fold" on the front page alongside its California recall coverage. Expanding on what the decision will mean to consumers, The Post said: "Currently, the vast majority of the nation's approximately 14 million homes that subscribe to cable high-speed Internet service have no choice when it comes to their service provider. If the ruling survives a likely appeal, the decision could provide broadband Internet users with new options for the content they see online, their e-mail addresses and potentially the monthly rates they pay."

Every news account took care to note that the decision is by no means final, but the Boston Globe's take was by far the most cautionary: "It appeared likely, however, that the ruling by a three-judge panel would be appealed to the full Ninth Circuit Court of Appeals, and possibly to the US Supreme Court ."

The Globe and The Washington Post carried the same quote from two different cable industry sources. The Globe gave us: "Today's ruling is one step in a long process," a quote from Brian Dietz of the National Cable & Telecommunications Association . The Post got shunted up a couple of seniority levels to senior VP for public affairs Robert Stoddard , but alas, there was little more forthcoming: "This is one step in a long process. We need the opportunity to review the decision." * The Washington Post: Ruling Opens Cable Lines * The Boston Globe: Ruling Deals Blow to Cable Giants

The Los Angeles Times reported that the decision "represents another legal setback for the [FCC], which in the last two years has seen media ownership rules and some cable TV regulations overturned." FCC Chairman Michael Powell , whose term also has produced unrest among his four fellow commissioners, said the court's decision "throws a monkey wrench into the FCC's efforts to develop a vitally important national broadband policy." * The Los Angeles Times: ISPs to Get a Crack at Cable Broadband (registration required) * FCC Chairman Michael Powell's statement (Word document)

In case you were worried that this case was just about one list of corporate giants battling another over who could abuse Internet users most, it's important to point out that Earthlink and the other ISPs challenging the FCC rule were backed by some of the nation's leading consumer organizations. Consumers Union 's Chris Murray offered up this quote: "Many consumers hate their cable companies' privacy policies and their failure to deal with spam effectively. Giving consumers a choice of Internet service providers would open the door to more competition, and let people choose services with better privacy and less spam." * Press Release: Consumer Groups Applaud Appeals Court Rebuke of FCC's Deregulation of High-Speed Internet Services

Motorola Joins the Spinners

Motorola chief executive Chris Galvin probably wishes he were joining the Spinners, but for now he's busy spinning off his company's semiconductor unit into a separate company and planning his departure.

"Galvin, grandson of Paul Galvin , who founded the company 75 years ago, said the new Motorola will focus on its cell phones, satellite TV boxes, electronics for cars and two-way radios for emergency services," the Chicago Sun-Times reported. "He said of the planned spinoff, 'We can create shareholder value. Remember, the only thing I ever wanted for this company to do is for shareholders to win, and rebuild this company. ... We think this is the right time and the right way to go about it.' Motorola's Austin, Texas-based chip-making business has been a drag on Motorola's bottom line. Although the unit generated $4.8 billion in sales last year, it produced $1.5 billion in red ink. Overall Motorola tallied $6.4 billion in losses in 2001-2002 while sales slumped 29 percent in the last two years."

The Sun-Times said that shareholders agreed with Galvin's assessment that "the most effective way to enhance the success of Motorola and [the semiconductor business] is to enable each one to pursue independently its own focused strategy." The spinoff move sent Motorola stock up $1.22 yesterday -- nearly 10 percent -- to close at $13.50. * The Chicago Sun-Times: Chipped Off the Ol' Block

The Chicago Tribune, meanwhile, devoted some space in its pages to the mysterious drama between Galvin and his family's company. "Monday's disclosure comes only two weeks after the 53-year-old Galvin, citing a disagreement with the company's board over strategy and other issues, surprised investors by announcing his plans to step down. Galvin will remain in the top job until a successor is found. The source of that conflict has not been explained. But Galvin denied that the plan to spin off the semiconductor group was the divisive issue. He said he had personally recommended the divestiture after an extensive review. 'There is absolutely no conflict' regarding the company's portfolio of operating assets, he contended."

The Tribune also included a paragraph noting that not everyone is convinced by Motorola's explanation for spinning off the chip unit: "'Chris, you've always said the semiconductor group was a very integral part of Motorola, and that had it generated a lot of synergies,'" noted one Wall Street analyst during a conference call Monday. 'How has your thinking changed?' Changes under way in the semiconductor industry, combined with the floundering company's need to focus on its core lines, Galvin replied, made it apparent that now is 'the right time' for a spinoff.'" * The Chicago Tribune: Motorola to Spin Off Chipmaking Unit (Registration required)

The Los Angeles Times offered some other blunt assessments, quoting Alliance Bernstein analyst Paul Sagawa : "It's something they should have done years ago." Also from the Times: The spinoff probably will be one of Galvin's final acts as chief executive. Three weeks ago, he announced his intention to resign after a disappointing six-year tenure during which the company eliminated nearly 60,000 jobs. Motorola lost $2.5 billion in 2002. Under Galvin, grandson of Motorola founder Paul Galvin, the company's share of the global cell phone market fell from 26% in 1996 to 14.6% in the second quarter of this year. Finland's Nokia claims the No. 1 spot, with 36% of the market as of June. 'The inability of their semiconductor business to compete with rivals has outweighed any minor cost synergies or technology synergies they might have gotten,' said Sagawa, who does not own Motorola shares." * Los Angeles Times: Motorola to Spin Off Unit (Registration required)

Most news sources today noted that the spinoff details are sketchy, but the Financial Times offered some of the clearest glimpses into the crystal ball: "Motorola, which has been advised by Goldman Sachs , has not finalised details of the demerger and did not give the timing of its proposed initial public offering of the division. However, it plans a partial listing, with remaining shares distributed among existing shareholders. Wojtek Uzdelewicz , analyst at Bear Stearns , said he expected the IPO in the first half of next year and estimated it could be valued at $11bn-$13bn excluding debt, about 2.5 times expected sales for 2004. However, the demerger plan could also open the door to potential acquirers of the business, which include ST Microelectronics , the biggest European chipmaker." * The Financial Times: Motorola to Spin Off Semiconductor Division

LookSmart, 'Cause You're Out of a Job

Microsoft will drop Internet search company LookSmart , which judging by its wan stock performance yesterday, was far too dependent on Redmond's good graces. "San Francisco-based LookSmart's market capitalization dropped by 56 percent after the announcement in after-hours trade when its stock price fell to $1.32 from the Nasdaq close of $3.02," Reuters reported. "LookSmart said Microsoft chose not to renew its distribution and licensing deal with the company, which is best known for its paid-listing services that allow advertisers to pay to have more of their Web pages included in Internet searches." * Reuters via The Houston Chronicle: Loss of Microsoft Contract Hammers LookSmart Stock

News.com added some "value" to the portrayal, i.e., it painted a pretty depressing picture of the situation: "The loss of the MSN deal is a severe blow to LookSmart, given than Microsoft was its largest customer. The relationship with the MSN Internet division accounted for 65 percent of LookSmart's listings revenue and all of its licensing revenue in the second quarter ended June 30, according to the search technology company. LookSmart reported revenue of $38.4 million in that quarter. ... 'We are very disappointed with the outcome of efforts to renew our agreement with Microsoft,' Jason Kellerman , chief executive officer of LookSmart, said in a statement." * News.com: Microsoft Drops LookSmart Search Tool

Whose Got Game?

After all that jazz about cable ISPs and pallid tech companies wracked by business problems, it's time to focus on some real news -- hackers stealing game code. Some people might find hacking pretty cool, but Valve Software is pretty unhappy that it's the latest victim of cybercrime.

Bellevue, Wash.-based Valve spent years developing "Half Life 2," the sequel to a widely popular first-person shooting game, and now it appears hackers have made off with the new game before it could be released in stores. Valve "didn't return calls for comment Monday. But gamer Web sites were abuzz over one of the highest-profile cases of cybercrime yet to hit the $10 billion videogame industry," the Associated Press reported. "The original Half-Life game, released in 1998, is still one of the most played action games online. On Monday afternoon more than 44,000 online gamers were playing it, while all other online games registered less than 10,000 players, according to GameSpy.com , an online gaming service provider."

The gaming community's upset has less to do with moral outrage that the code is available all over the Kazaa file-sharing network than with some other more, er, pragmatic concerns. "Gamers denounced the posting of the stolen code, fearing it might delay the game's release, or worse, make it easier for hackers to develop ways to cheat -- a problem that already dogs online gaming. Hackers can modify videogames to give their characters special powers, and thus an unfair advantage over opponents," the AP noted. "Some gamers vowed to help find the hackers in response to a call for their support in a statement posted on a Half-Life enthusiast Web site from someone purporting to be Valve founder Gabe Newell . The identity of the poster couldn't be confirmed. Industry analyst Michael Pachter of Wedbush Morgan Securities called the code theft 'horribly embarrassing' for Valve, but said the financial impact to the closely held software developer remains unclear." * The Associated Press via The Wall Street Journal: Hackers Steal Source Code Of a Popular Videogame (Subscription required)

The Seattle Times did not confirm that Newell posted the statement, but cited it liberally: "[He] wrote that last month he started to notice problems with the company's computers. Someone appeared to be accessing his e-mail account on days when he was traveling. His computer was 'acting weird,' he wrote. After searching in vain for a harmful virus, he reinstalled the software. For the next week, he wrote, there was suspicious activity on his e-mail account. At some point, he wrote, someone installed software on Valve's computers that would secretly keep track of what was being typed. It was possible that someone was trying to collect computer passwords and other information, he wrote. Newell wrote that he didn't know how someone gained access to Valve's computer network: He has found anecdotal evidence that other game developers have been targeted by the same attackers." * The Seattle Times: Long-Awaited Game's Code Leaked, May Delay Debut

Filter author Cindy Webb is out this week on vacation. Robert MacMillan is filling in today.

Filter is designed for hard-core techies, news junkies and technology professionals alike. Have suggestions, cool links or interesting tales to share? Send your tips and feedback to cindyDOTwebbATwashingtonpost.com .

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