TIME Copyright

This Is How the Patent Trolls and Trial Lawyers Won

Capitol
The early morning sun rises behind the US Capitol Building in Washington, DC. Mark Wilson—Getty Images

For over a year, intellectual property reform advocates and their allies in Congress have been trying to advance legislation designed to crack down on so-called patent trolls, which are firms that don’t build products, but rather seek to extract license fees or legal judgments from other companies. Until recently, prospects for reform appeared good, as lawmakers honed legislation that would curb the worst kind of patent troll abuse.

But this week, the process ground to a halt, after Sen. Pat Leahy, the powerful Vermont Democrat who chairs the Senate Judiciary Committee, abruptly yanked the “Patent Transparency and Improvements Act” from the Senate agenda, effectively killing the bill for the foreseeable future.

Patent reform advocates reacted with dismay, but Sen. Leahy said he had no choice because lawmakers had been unable to bring the issue’s various stakeholders together. “I have said all along that we needed broad bipartisan support to get a bill through the Senate,” Sen. Leahy said in a statement. “Regrettably, competing companies on both sides of this issue refused to come to agreement on how to achieve that goal.”

“If the stakeholders are able to reach a more targeted agreement that focuses on the problem of patent trolls, there will be a path for passage this year and I will bring it immediately to the Committee,” Leahy added.

The bill would have increased transparency in patent ownership, allowed patent infringement cases to be stayed while the suits are litigated, and cracked down on frivolous demand letters. The bill would have also opened to the door to what’s known as “fee shifting,” which is the idea that if plaintiffs lose a patent case, they should be on the hook for the defendant’s legal fees.

According to multiple reports, Sen. Majority Leader Harry Reid, the Nevada Democrat, pressured Leahy to abandon the legislation, warning that the bill had no chance of passing the full Senate. “While the announcement came from Leahy, sources close to the negotiations all pointed to [Reid] as the one who really killed the bill,” Ars Technica reported. Reid “played a decisive, behind-the-scenes role in the legislation’s fate, according to sources on and off the Hill,” Politico added.

Several powerful D.C. lobbying interests, including trial lawyers and the pharmaceutical industry, opposed the bill, according to multiple reports. Reid has raised nearly $4 million in campaign contributions from individuals and political action committees associated with the legal profession since 2009, according to the Center for Responsive Politics. Lawyers and law firms groups are Reid’s top donors over that period of time.

Needless to say, trial lawyers are among the groups that benefit the most from rampant patent litigation. Engine Advocacy, a non-profit group that works to advance the agenda of startups on Capitol Hill, expressed disappointment at Leahy’s action.

“This news is devastating to the welfare of startups who will continue to face the threat of patent trolls,” wrote Engine Advocacy executive director Julie Samuels. “That no agreement could be reached, especially in light of the efforts being made across the committee to find common ground, is also bad news for the economy where annual losses from patent troll litigation are billions of dollars.”

Patent troll lawsuits have tripled in the last two years, rising from 29% of all infringement suits to 62% of all infringement suits, according to a recent study by the National Economic Council and the Council of Economic Advisers.

Researchers at Boston University estimate that patent troll lawsuits accounted for $29 billion of direct costs to defendants in 2011, and are “associated with half a trillion dollars of lost wealth to defendants from 1990 through 2010, mostly from technology companies.”

TIME Internet

How the NSA Tapped AT&T’s Network

The NSA and AT&T refuse to discuss exactly what was going on in now-legendary Room 641A at 611 Folsom Street.

In 2002, an AT&T technician named Mark Klein discovered that the National Security Agency had installed a secret monitoring facility at the San Francisco building where he worked.

Four years later — after reading a New York Times story detailing the George W. Bush administration’s secret warrantless wiretapping program, Klein finally went public with what he’d seen.

Today, both the NSA and AT&T refuse to discuss what was going on in now-legendary Room 641A at 611 Folsom Street, as whatever was happening there remains classified.

In “United States of Secrets: Privacy Lost” — part two of FRONTLINE’s in-depth examination of the NSA’s secret surveillance programs — veteran correspondent Martin Smith explores the relationship between the U.S. surveillance state and America’s largest tech and telecom companies.

Part two premieres Tuesday, May 20 at 10 p.m. ET on PBS stations nationwide. FRONTLINE was kind enough to share an exclusive advance look with TIME.

TIME media consolidation

Critics Are Mercilessly Slamming the AT&T-DirecTV Deal

Public interest groups argue that none of the proposed mega-deals will benefit consumers

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Prominent public interest groups criticized AT&T’s plan to buy satellite giant DirectTV in a deal worth about $48.5 billion, calling it an example of out-of-control media consolidation that will do little to benefit consumers.

AT&T’s proposed purchase of DirecTV comes as U.S. broadband leader Comcast is trying to convince federal regulators to let it buy Time Warner Cable in a $45 billion deal. That merger would combine the two largest U.S. cable companies.

“AT&T’s takeover of DirecTV is just the latest attempt at consolidation in a marketplace where consumers are already saddled with lousy service and price hikes,” Delara Derakhshani, policy counsel for Consumers Union, the advocacy arm of Consumer Reports, said in an emailed statement. “The rush is on for some of the biggest industry players to get even bigger, with consumers left on the losing end.”

AT&T will add its five million U-verse television subscribers to DirecTV’s 20 million satellite customers, in a deal that will “redefine the video entertainment industry and create a company able to offer new bundles and deliver content to consumers across multiple screens – mobile devices, TVs, laptops, cars and even airplanes,” AT&T CEO Randall Stephenson said in a statement.

“The captains of our communications industry have clearly run out of ideas,” Craig Aaron, president and CEO of Free Press said in a statement. “Instead of innovating and investing in their networks, companies like AT&T and Comcast are simply buying up the competition.”

Both mergers will face intense scrutiny from the Justice Department, which is charged with ensuring the deal doesn’t violate antitrust laws, and the Federal Communications Commission, which must ensure that the tie-ups don’t harm the public interest.

DirecTV has the second largest pay-TV subscriber base in the country but lacks a competitive broadband Internet offering. AT&T is forging ahead with its own broadband plans but wants DirecTV’s satellite-TV business. “The industry needs more competition, not more mergers,” John Bergmayer, senior staff sttorney at Public Knowledge, said in a statement “The burden is on AT&T and DirecTV to show otherwise.”

Taking a page out of the Comcast-Time Warner Cable playbook, AT&T said it would abide by the FCC’s now-defunct 2010 Open Internet order for three years, in a concession aimed at winning over federal regulators. But that pledge rang hollow for some open Internet supporters.

“I don’t think the open Internet should come with an expiration date,” says Josh Stearns, a veteran public interest advocate. Interestingly, AT&T said it will use the merger to build and enhance high-speed broadband service to 15 million customer locations, in an effort “to be completed within four years after close.”

A combined AT&T-DirecTV would hold a vast swath of wireless spectrum — the public radio signals that make smartphones and tablets work — and would also be better positioned to compete against Comcast, the industry giant.

“AT&T already has overwhelming spectrum holdings relative to most of the wireless industry,” says Bergemeyer. “AT&T will need to explain how this merger wouldn’t harm wireless competition, and how whatever new services it plans to offer by combining with DirecTV would offset any harms to wireless and video competition.”

TIME Tech

Apple and Google Call a Truce in Patent Wars

Apple Google
Apple CEO Tim Cook and Google CEO Larry Page. From left: Paul Sakuma—AP; Justin Sullivan—Getty Images

After years of legal wrangling over intellectual property, Apple and Google have agreed to dismiss all current patent disputes between the two companies, marking an extraordinary de-escalation of the patent wars between the Silicon Valley tech giants

Apple and Google, two of Silicon Valley’s top intellectual property antagonists, have declared a ceasefire in their long-running war over patents, the companies said late Friday night.

The two tech titans said they signed a landmark agreement to settle all outstanding patent litigation between them, in a marked de-escalation of the smartphone patent wars that have gripped the tech world in recent years.

“Apple and Google have agreed to dismiss all the current lawsuits that exist directly between the two companies,” the companies said in a joint statement emailed to TIME. “Apple and Google have also agreed to work together in some areas of patent reform.” The companies said their deal didn’t include an agreement to license technology to each other, which would be virtually unthinkable because Google’s Android OS and Apple’s iOS compete as the top two mobile operating systems in the world.

The stunning Apple-Google patent détente comes two weeks after a jury in California awarded Apple $119.6 million in damages against Samsung, in a case that what widely viewed as a proxy-war against Google’s Android operating system. Apple had been seeking more than $2 billion in damages.

For several years, the largest tech companies in the world—including Apple, Google, and Samsung—have engaged in very costly and time-consuming patent litigation in multiple jurisdictions around the world. Apple’s late co-founder Steve Jobs famously felt that Google “f—ing ripped off the iPhone,” and he pledged to devote his “last dying breath” to “destroy Android, because it’s a stolen product.” Jobs vowed “thermonuclear war.”

“It’s a huge relief to see these companies finally recognize that competing in the courtroom doesn’t make sense,” said Julie Samuels, a top intellectual property lawyer who served as a staff attorney at the Electronic Frontier Foundation.

“Instead of spending millions of dollars enriching patent lawyers, they’ll put those resources into real competition—in the marketplace,” said Samuels, who is now executive director of Engine Advocacy, a nonprofit tech policy group.

Apple already won one major patent infringement case against Samsung, resulting in damages that were ultimately pegged at $930 million. Samsung, which is apparently not a party to the new agreement, is appealing that verdict.

Almost two years ago, Apple CEO Tim Cook and Google CEO Larry Page reportedly held clandestine talks about ending the patent dispute between the two companies, but no agreement materialized.

TIME insider trading

Hedge Fund Manager Gets 3 Year Sentence for Insider Trading

Michael Steinberg SAC
Michael Steinberg, former SAC Capital portfolio manager, leaves Federal Court after sentencing in New York City on May 16, 2014. Andrew Gombert—EPA

Michael Steinberg was sentenced to 3 1/2 years in prison for insider trading on Friday. His prosecution was part of a decade-long federal investigation into former hedge fund giant SAC Capital and its billionaire founder Steven A. Cohen

Michael Steinberg, a top lieutenant to billionaire hedge fund mogul Steven A. Cohen, was sentenced to 3 1/2 years in prison for insider trading on Friday after being found guilty last year of securities fraud and conspiracy charges.

Steinberg’s sentencing is the latest black mark on Cohen’s former hedge fund, SAC Capital, which last fall pleaded guilty to securities fraud and agreed to pay $1.8 billion in the largest insider trading fine in U.S. history.

“Michael Steinberg traded on information from company insiders at Dell and NVIDIA to reap nearly $2 million in illegal profits,” Manhattan U.S. Attorney Preet Bharara said in a statement emailed to TIME late Friday. “Today he has learned the steep cost of those transactions.”

Steinberg, 42, was found guilty last December of conspiracy to commit securities fraud and four counts of securities fraud for insider trading involving two tech stocks, Dell and NVIDIA, that reaped $1.8 million.

“For most people on the planet, $1.8 million of gain is a lifetime of accumulated wealth,” U.S. District Judge Richard Sullivan said before he sentenced Steinberg to prison, according to Bloomberg. “Maybe in a hedge fund it’s no big deal but it’s a lot of money to most people.”

Prosecutors had urged Judge Sullivan to sentence Steinberg to more than six years in prison.

Steinberg’s prosecution was part of a decade-long federal investigation into SAC Capital. Last year, SAC was charged with securities and wire fraud for a scheme in which the fund engaged in a pattern of “systematic insider trading” that allowed it to reap hundreds of millions of dollars in illegal profits.

In April, a federal judge in New York accepted SAC’s guilty plea and approved a landmark $1.8 billion settlement with the government, effectively concluding a decade-long criminal investigation. SAC agreed to shut down its investment advisory business, but was allowed to continue to do business under a new name as a so-called “family office” managing Cohen’s $9 billion fortune.

Federal authorities have been investigating SAC for a decade — rumors of insider trading have been swirling around the hedge fund for years — and have secured guilty pleas or convictions from eight of its former employees. Cohen, who remains under investigation by the FBI, has never been charged with a crime.

It appears unlikely that Cohen will ever be personally indicted for his role leading a firm that was “riddled with criminal conduct,” according to federal prosecutors. Cohen does face civil charges from the Securities and Exchange Commission alleging that he failed to supervise his employees, and could ultimately be banned from the securities industry for life.

Steinberg has been granted bail, pending an appeal, according to Reuters.

TIME Net neutrality

8 Things You Should Know About Net Neutrality

Federal Communications Commission Proposes New Open Internet Rules Tom Wheeler
Federal Communications Commission (FCC) Chairman Tom Wheeler listens during a news conference after an open meeting to receive public comment on proposed open Internet notice of proposed rule-making and spectrum auctions on May 15, 2014 at the FCC headquarters in Washington. Alex Wong—Getty Images

As the Open Internet debate intensifies, here's a guide to the FCC, net neutrality, and what's at stake for the future of the Internet

For many years, net neutrality was a relatively obscure policy topic that mostly preoccupied phone and cable companies, D.C. telecom lawyers, Open Internet activists and a handful of tech firms and startups. Compared to major national issues like the economy, national security, healthcare and immigration, net neutrality barely registered a blip on the American consciousness.

Those days are over.

Over the last three weeks, net neutrality has become front page news across the country, after a U.S. plan to update its Internet regulations was leaked to the press. The Internet exploded in commentary, tens of thousands of people called and emailed the FCC, the nation’s largest Internet and broadband companies weighed in, dozens of U.S. lawmakers registered their views, and protestors established an encampment outside the FCC’s D.C. office.

On Thursday, the FCC passed a crucial hurdle advancing the public comment process that will ultimately lead to new net neutrality rules. Four demonstrators had to be dragged away after disrupting the proceedings. Let’s take a take a step back and examine what this whole kerfuffle is about.

1. What is net neutrality?

Net neutrality is the idea that the Internet should be an open platform, and broadband companies shouldn’t be able to interfere with your right to access content and services online. Another way of putting this is that broadband giants like Comcast, Verizon, and AT&T shouldn’t be able to block or discriminate against certain content — especially rival content — as it enters your home and reaches your computer.

Net neutrality advocates believe that all Internet users should have unfettered access to the Internet, just like all Americans have the right to travel anywhere in the 50 states without a passport. Without this open access, which many Internet users take for granted, startups like Google, Twitter and Facebook might never have flourished, net neutrality advocates argue.

2. Why is net neutrality important now?

The FCC’s net neutrality policies have been in limbo since a federal court struck down most of the agency’s 2010 open Internet order in January. That order prohibited broadband providers like Comcast and Verizon from blocking traffic like Skype or Netflix or putting them into an Internet “slow lane.”

Without such protections, net neutrality advocates fear the Internet could turn into a two-tiered system — or worse, something akin to cable TV with premium bundles and packages.

3. What is the FCC and what does it do?

The Federal Communications Commission is an independent federal agency overseen by Congress that regulates all communications “by radio, television, wire, satellite and cable” throughout the country. As such, the FCC has broad regulatory authority over corporate giants like CBS, AT&T, Comcast, DirectTV, among many other companies. The agency is also responsible for managing the nation’s wireless spectrum — the radio airwaves that make our smartphones and tablets connect to each other and the Internet.

In recent years, the FCC has increasingly focused on Internet access, both wired and wireless, which has become a crucial communications medium. Among the most important FCC mandates are promoting competition, innovation and media diversity in order to advance the public interest. The FCC is an independent agency, which means the White House can’t tell it what to do.

4. How is the FCC organized?

The FCC is led by five commissioners who are appointed by the president and confirmed by the Senate for five-year terms. The president appoints one of the commissioners to be chairman of the commission, which is usually split along party lines 3-2, depending on who is in the White House. Historically, the FCC chairman has had broad power to determine the agenda’s agency.

The current FCC chairman is Tom Wheeler, a Democrat and former venture capitalist who served as the top cable and wireless lobbyist two decades ago, and raised hundreds of thousands of dollars for Obama’s presidential campaigns. The two other Democratic commissioners are Mignon Clyburn, a former public official from South Carolina, and Jessica Rosenworcel, a lawyer and former senior Senate staffer. The two Republican commissioners are Ajit Pai, a former senior FCC official and Michael O’Rielly, a former senior Congressional staffer.

5. What just happened?

On Thursday, the FCC approved what’s called a “notice of proposed rulemaking” (NPRM) on party lines making Wheeler’s draft open Internet proposal available for public review, and triggering four months of public comment. The proposal seeks public input on the best way to ensure the Internet stays open, and to prevent broadband companies from blocking or discriminating against rival services, especially startups, potentially harming innovation.

Wheeler’s draft opens the door to so-called “paid prioritization,” in which broadband providers could strike special deals with Internet companies for preferential treatment. Commissioners Clyburn and Rosenworcel both oppose such special deals, and offered their views in statements on Thursday. Commissioners Pai and O’Rielly oppose regulating the Internet-based on free-market principles and said as much in their own statements.

6. Why are net neutrality advocates upset?

Open Internet advocates argue that strong net neutrality rules are essential in order to ensure that the Internet remains the open, dynamic platform that has spawned a generation of technological innovation and generated billions of dollars in economic growth — much of it coming from tech startups. As a presidential candidate, Obama famously declared that he would “take a backseat to no one in my commitment to network neutrality,” and vowed to appoint FCC commissioners who felt the same way.

Many net neutrality advocates feel burned by Obama. And they weren’t amused when he chose Wheeler, who once served as a top industry lobbyist, as president of the National Cable Television Association (NCTA) and later as CEO of the Cellular Telecommunications & Internet Association (CTIA), to be FCC chairman. Wheeler insists he supports open Internet principles, but many net neutrality advocates are still skeptical. “Tom Wheeler spoke passionately about the open Internet, but his rousing rhetoric doesn’t match the reality of his proposal,” says Craig Aaron, president and CEO of Free Press.

7. Why are broadband providers and their allies upset?

Net neutrality advocates want the FCC to reclassify broadband companies under the Title II “common carrier” provisions of the Communications Act that have governed traditional phone companies for decades. Such reclassification, which Wheeler says he’s considering, would subject the broadband companies to tighter regulation. The broadband giants oppose such reclassification with every fiber of their being.

“Reclassification of broadband Internet access offerings as Title II — telecommunications services would impose great costs, allowing unprecedented government micromanagement of all aspects of the Internet economy,” twenty-eight CEOs including Lowell McAdam of Verizon, Randall Stephenson of AT&T, Robert Marcus of Time Warner Cable, and Brian Roberts of Comcast, wrote in a letter to the FCC. “Under Title II, new service offerings, options, and features would be delayed or altogether foregone. Consumers would face less choice, and a less adaptive and responsive Internet.”

8. How will the process work moving forward?

The FCC vote to approve the NPRM triggered a four-month comment period for the public to weigh in: 60 days (until July 15) to submit initial comments and another 57 days (until September 10) for reply comments. The agency is seeking input on several crucial questions including whether the FCC should prohibit paid prioritization completely, whether the new rules should apply to mobile broadband service, and whether the agency should reclassify broadband service under Title II “common carrier” principles.

The FCC has encouraged the public to participate in the process. Interested parties can submit their comments here, or at Docket 14-28: “Protecting and Promoting the Open Internet.” Recent public comment filings can be found here. Email comments are also accepted at openinternet@fcc.gov. (Remember, you’ll be filing a document into an official FCC proceeding, and any information submitted, including names and addresses, will be publicly available via the web.)

TIME Net neutrality

FCC Net Neutrality Vote Faces Furious Last-Minute Lobbying Push

Tom Wheeler FCC Chairman
Tom Wheeler, chairman of the FCC, listens during a House Energy and Commerce Committee hearing in Washington on Dec. 12, 2013 Andrew Harrer—Bloomberg/Getty Images

FCC Chairman Tom Wheeler is caught between net neutrality advocates and industry giants ahead of today's vote on his 'Open Internet' proposal, which could allow broadband providers to create "fast lanes," as both sides warn the web's future hangs in the balance

The Federal Communications Commission is poised to vote on the most controversial Internet policy proposal in years, after opponents of the plan — from both sides of the political spectrum — launched a furious last-minute lobbying campaign to influence the outcome.

Thursday’s vote on FCC Chairman Tom Wheeler’s new Open Internet proposal has become a flash point in the intensifying public debate about “net neutrality,” the principle that broadband providers like Comcast and Verizon should treat all Internet traffic equally.

Wheeler, a former venture capitalist who’s only been on the job for six months, finds himself squeezed in a vice-like grip between net neutrality advocates and public interest groups, who argue his rules don’t go far enough, and industry giants and their allies on Capitol Hill, who oppose net neutrality regulations altogether.

Both sides warn that the very future of the Internet — which has spawned a generation of technological innovation and billions of dollars in economic growth — hangs in the balance. The fundamental question is whether broadband regulation should move in a direction that treats Internet service more like a utility and less like a premium service.

Net neutrality advocates have been camping out for days in front of the FCC’s office, which has struggled to maintain open phone lines under a torrent of calls. Wheeler, an avowed supporter of Open Internet principles, came out to chat with the protestors on Wednesday morning, and was even photographed wielding a “Honk for the Open Internet” sign.

Thursday’s vote wouldn’t enshrine the new rules, it would only approve what’s called a “notice of proposed rulemaking” (NPRM) making the draft proposal available for public review, and trigger several months of public comment. Wheeler hopes to have the new rules in place by the end of the year. The FCC’s meeting starts at 10:30 a.m. on Thursday.

Net neutrality advocates want Wheeler and his colleagues to reclassify broadband companies under Title II “common carrier” provisions of the Communications Act that have governed traditional phone companies for decades. Such rules would subject the broadband companies to tighter regulation.

“We urge the FCC to use its clear authority under Title II of the Communications Act to reclassify the transmission component of broadband Internet access as a telecommunications service,” thirty-six U.S. lawmakers wrote in a letter to the FCC on Wednesday. “Recognizing our nation’s communications providers as common carriers under the law is common sense.”

The nation’s largest broadband companies strenuously oppose such reclassification, arguing that it would “threaten new investment in broadband infrastructure and jeopardize the spread of broadband technology across America, holding back Internet speeds and ultimately deepening the digital divide.”

“Reclassification of broadband Internet access offerings as Title II — telecommunications services would impose great costs, allowing unprecedented government micromanagement of all aspects of the Internet economy,” twenty-eight CEOs including Lowell McAdam of Verizon, Randall Stephenson of AT&T, Robert Marcus of Time Warner Cable, and Brian Roberts of Comcast, wrote in a letter to the FCC. “Under Title II, new service offerings, options, and features would be delayed or altogether foregone. Consumers would face less choice, and a less adaptive and responsive Internet.”

Wheeler’s plan would reportedly allow broadband providers to strike special deals with Internet companies for preferential treatment — sometimes called “paid prioritization” — in the “last mile” to consumers’ homes. Such Internet “fast lanes” would threaten innovation, net neutrality advocates argue, because they would put Internet startups — the next YouTube, Skype or Netflix, perhaps — at a disadvantage compared to deep pocketed media giants.

In January, a federal court struck down most of the FCC’s 2010 Open Internet order prohibiting broadband providers like Comcast and Verizon from blocking traffic like Skype or Netflix on wired networks or putting them into an Internet “slow lane.” (Comcast is currently the only broadband company bound by the Open Internet order, as a result of an agreement it made with the government as part of its purchase of media giant NBC Universal.)

Wheeler’s plan — which was leaked to the press two weeks ago — would allow companies to strike paid-prioritization deals as long as they acted in a “commercially reasonable manner subject to review on a case-by-case basis.” It’s unclear what kind of financial agreement would be considered “commercially reasonable” because Wheeler’s draft proposal hasn’t even been made public.

Last week, more than 100 Internet giants and startups sent a letter to the FCC expressing alarm over Wheeler’s proposed net neutrality rules. In response, Wheeler wrote that he has “made clear that if someone acts to divide the Internet between ‘haves’ and ‘have nots,’ I will use every power at my disposal to stop it, including Title II. I will not allow some companies to force Internet users into a slow lane so that others with special privileges can have superior service.”

In the wake of an intense backlash from Internet giants, startups, venture capitalists, public-interest groups and consumers, Wheeler modified his draft proposal to make Title II reclassification a more realistic option, a FCC official told TIME earlier this week. But any proposal that doesn’t include strict safeguards preventing the largest broadband giants from establishing what net neutrality advocates consider to be a “two-tiered Internet” is unlikely to quell the firestorm.

TIME deals

AT&T Aiming at Comcast With Planned $50-Billion DirecTV Merger

A view shows the AT&T store sign in Broomfield, Colorado
Rick Wilking / REUTERS

AT&T wants DirecTV but the proposed $50 billion telecom deal, which would be the largest in years and reshape the television business at a time of rapid change in the industry, would pose headaches for regulators already mulling a Comcast merger with Time Warner Cable

AT&T, the deep-pocketed national telecom giant watching policymakers gnash teeth about the proposed $42-billion merger between Comcast and Time Warner Cable, is close to sealing the deal on a big corporate marriage of its own. It’s soon-to-be partner, according to multiple reports Monday: satellite giant DirectTV

The proposed $50-billion merger between the two tech titans—which would be the largest telecom deal in years—is not unexpected, but multiple reports indicate a deal is closer than ever, perhaps just weeks away. AT&T and DirecTV are aiming to reshape the TV business at a time of rapid change in the industry. The deal would be another example of the decades-long consolidation of the telecom and cable industries.

The Wall Street Journal, citing unnamed sources familiar with the matter, reports the two companies are discussing a deal that would involve a mix of cash and AT&T stock. Executives hope to hammer out an agreement in the next few weeks. DirecTV shares shot up nearly 6% in early trading Tuesday on the deal talk.

DirecTV has the second largest pay-TV subscriber base in the country but lacks a competitive broadband-Internet offering of its own. AT&T is moving ahead with its own broadband plans, but DirecTV’s satellite-TV business would be a major prize. AT&T, which is currently worth $185 billion, can definitely afford the deal.

A combined AT&T-DirecTV would hold a vast swath of wireless spectrum—the public radio signals that make smartphones and tablets work—and would also be better positioned to compete against Comcast, the industry Goliath.

U.S. broadband leader Comcast is currently trying to persuade regulators to let it buy Time Warner Cable in a $42 billion deal. That review will extend into next year, as would a review of a AT&T-DirecTV merger. Comcast’s proposed merger with Time Warner Cable, its smaller rival, already faces intense scrutiny from the Justice Department over competition concerns, not to mention the Federal Communications Commission (FCC), which must ensure the deal advances the public interest. An AT&T merger with DirecTV would face equally intense scrutiny.

If AT&T and DirecTV join forces, the deal could complicate the review of Comcast’s bid for Time Warner Cable, because antitrust regulators might want to consider both deals simultaneously, the New York Times reports. That might throw a screwball into the notoriously understaffed FCC office.

The Times also suggests the deal might be a strategic move to rattle Dish honcho Charlie Ergen, the legendary media operator who is also on the prowl for acquisitions. Industry watchers have been speculating about a Dish-DirecTV merger for years, but most analysts believe U.S. antitrust regulators would not allow the nation’s two largest satellite-TV firms to become one company.

That’s why AT&T wants to buy DirecTV.

AT&T also appears to be taking advantage of the simmering furor about “Net neutrality“—the principle that all Internet users should have open access to the Internet—as well as the Comcast–Time Warner deal, to float a $50 billion deal of its own.

TIME Net neutrality

FCC Net-Neutrality Plan in Chaos

Tom Wheeler FCC Chairman
Tom Wheeler, chairman of the FCC, listens during a House Energy and Commerce Committee hearing in Washington on Dec. 12, 2013 Andrew Harrer—Bloomberg/Getty Images

Tom Wheeler appears to have misjudged public opinion and fellow commissioners as a campaign is mounted to urge him to adapt his proposal on allowing broadband providers to strike special deals with web giants for preferential treatment in the "last mile" to consumers

Federal Communications Commission chairman Tom Wheeler is scrambling to change his “open Internet” proposal after a torrent of criticism from Internet giants, startups, venture capitalists, public-interest groups and consumers.

Net-neutrality advocates are mounting a campaign to persuade Wheeler to reclassify Internet broadband service under Title II of the Communications Act, which would subject companies like Comcast, Verizon and AT&T to “common carrier” regulation.

For decades, the FCC has regulated traditional phone service under common carrier provisions that require phone companies to connect all calls to people around the country. But in 2002, the FCC made the fateful decision to classify broadband as an “information service” not a “telecommunications service” — paving the way for Internet fast lanes and setting the stage for a decade of legal wrangling.

The FCC’s Internet-governance policies have been in limbo since a federal court struck down most of the agency’s 2010 open Internet order in January. That order prohibited broadband providers like Comcast and Verizon from blocking traffic like Skype or Netflix on wired networks or putting them into an Internet “slow lane.”

“Chairman Wheeler has heard the American people, and he has changed the item significantly to make Title II a more robust option,” a senior FCC official told TIME on Monday. It’s unclear what that would actually mean, because the draft proposal has not yet been released to the public.

The Internet has become a new public utility, many Net-neutrality advocates argue, and should be treated as such. The nation’s largest cable and phone companies fiercely oppose that idea — fearing greater regulation — and are mobilizing their lobbyists and allies on Capitol Hill to push back.

The FCC’s eighth-floor executive office has been thrown into chaos amid a mounting backlash that shut down its phone lines as a growing number of open-Internet advocates camp out in front of their office.

“Since Wheeler’s proposal was first reported in the media we’ve sent hundreds of calls to the FCC on a daily basis,” says Tim Karr, senior director of strategy at D.C.-based public-interest group Free Press, a longtime Net-neutrality-advocacy group.

Wheeler, the former top cable and wireless-industry lobbyist, is facing a crucial vote on Thursday about whether to advance his plan to allow broadband providers to strike special deals with Internet companies for preferential treatment — sometimes called “paid prioritization” — in the “last mile” to consumers’ homes.

Wheeler says he supports the idea of an open Internet — and opposes a system in which deep-pocketed tech titans can discriminate against startups — but he failed to anticipate the depth of public opinion on this issue, not to mention skepticism by his fellow Democratic FCC commissioners.

Late last week, commissioner Jessica Rosenworcel said she has “real concerns” about Wheeler’s plan and called for the FCC to delay next week’s crucial agency vote on the matter. Commissioner Mignon Clyburn has also raised concerns.

Wheeler plans to press ahead with Thursday’s vote, an FCC official told TIME late on Monday. The vote wouldn’t enshrine the new rules, it would only approve what’s called a “notice of proposed rulemaking” (NPRM), and make the draft proposal available for public review and comment.

“It’s not even halftime and they’re 20 points down,” a senior tech-industry executive told TIME. “But they have a deep bench and there’s plenty of time left.” If Wheeler does not feel he has the three out of five votes needed to approve the NPRM, he has the power to postpone the vote until the FCC’s next meeting. But it appears he’s moving forward.

The crisis facing the FCC is not surprising. For nearly a decade, the FCC has been trying to implement rules that would ensure that the Internet remains open for the next generation of tech startups like YouTube, Skype and Netflix. Open-Internet advocacy groups appear to be trying to mobilize a grassroots response like the one they successfully mounted against the 2012 SOPA/PIPA Internet copyright bills.

Last week, more than 100 Internet companies — from Google down to the smallest startups — sent a letter to the FCC expressing alarm over the agency’s proposed Net-neutrality rules and imploring regulators to protect Internet openness.

“Young, high-tech firms have represented all net new job growth in this country for the last 30 years,” wrote Julie Samuels, executive director of Engine Advocacy, the nonprofit tech policy group that organized the letter. “It is these startups that drive our economic prosperity, create jobs and improve our lives. Yet these companies stand to suffer the most when faced with uncertain, discriminatory rules that threaten the open Internet.”

Wheeler’s plan — which was leaked to the press two weeks ago — would allow companies to strike paid-prioritization deals as long as they acted in a “commercially reasonable manner subject to review on a case-by-case basis.” Wheeler has not defined what type of agreement would be considered commercially reasonable, but even if he does, it’s unlikely that most Net-neutrality advocates would support the plan.

Open-Internet advocates have long considered such Internet “fast lanes” to be anathema to Net-neutrality principles because they would give deep-pocketed companies an advantage over startups.

“Startups are often unable to compete at scale to overcome, negotiate with and manage thousands of discriminatory carriers and networks,” says Samuels. “Young, high-tech firms must rely on the certainty of nondiscriminatory rules to continue to grow, create jobs and build new technologies. This is why we urge the FCC to protect the open Internet.”

On Monday, Wheeler prepared to circulate a new proposal that would stop short of Title II reclassification, but would make that option more realistic for the FCC. But after nearly a decade of patchwork Net-neutrality protections, open-Internet advocates remained skeptical.

“Chairman Wheeler is feeling the grassroots pressure against his pay-for-prioritization proposal,” says Craig Aaron, president and CEO of Free Press. “But he still isn’t giving Internet users the Net-neutrality protections they demand. He needs to abandon the flimsy and failed legal approach of his predecessors and reclassify Internet service providers as the common carriers they are.”

TIME Tech

The Reason for Apple’s Massive $3 Billion Beats Deal? Spotify

The era of digital downloads is coming to an end and Apple is still without its own streaming music product. That's why it looks poised to buy Beats for $3.2 billion, which would be its biggest acquisition ever

Why would Apple want to buy Beats Electronics?

It’s a question many tech observers have been asking since the Financial Times reported Thursday that the Silicon Valley behemoth is “closing in” on a $3.2 billion acquisition of the “high quality” headphones maker founded by music producer Jimmy Iovine and hip-hop artist Dr. Dre.

The FT suggested that Apple might be interested in Beats in order to recharge its “cool” factor at a time when streaming music services like Spotify, Pandora and Rdio have become increasingly popular with young people.

Apple’s iTunes service long dominated digital music sales, but the company never quite figured out how to present a streaming music product. Apple’s flagship music brand iTunes has been criticized over its user interface — so it makes sense that the company would be eager for outside help.

At $3.2 billion, the Beats deal would be more than three times larger than any acquisition in Apple’s history.

Apple can definitely afford the transaction — it’s sitting on more than $150 billion in cash and investments — but the company has traditionally preferred to build from within. Apple’s late co-founder Steve Jobs was fiercely proud of that fact. Unlike other tech giants, Apple has never made an acquisition larger than $1 billion.

Until now, perhaps.

Bolt-on acquisitions are in vogue in the tech world these days: Recent examples include Facebook’s acquisition of WhatsApp and Oculus (not to mention Instagram), as well as Google’s purchase of Nest and Waze, and Yahoo’s Tumblr buyout.

Dr. Dre, a musician and producer who co-founded the seminal Compton, Calif.-based hip-hop group NWA, has said that he was inspired to create Beats by the poor sound quality in many headphones. He teamed up with legendary producer Jimmy Iovine, a veteran music industry executive, to launch a brand that has proved remarkably popular.

“I knew people were going to dig it, but I didn’t know it was going to be this big,” Dre told TIME in a recent interview. “I didn’t know it was going to be at this magnitude. I know that people really care about the way their music sounds. So did I know it was going to work? Yeah, but I had no idea it was going to be this massive.”

For Apple, the streaming music service that Beats recently launched may be the most attractive part of the deal. Apple revolutionized digital music with the iPod and iTunes, but the company has yet to find a new formula to challenge Spotify, the streaming music darling of the moment.

“This is a reactive move — at best,” writes veteran tech journalist Om Malik. “Steve Jobs’ Apple would have pushed to make something better, but even he struggled to come to terms with the Internet and Internet thinking. That hasn’t changed.” (TIME’s Harry McCracken also poses some good questions about the deal.)

Subscription services are growing faster than any other area of the music industry. Music subscription revenue increased by 50% to $1.1 billion in 2013, according to a report by IFPI, the global music industry association, cited by my colleague Eliana Dockterman. Downloads fell 2% last year, in the first annual decline since Apple launched the iTunes store in 2003.

Spotify is valued at more than $4 billion, and the Swedish company is among the most high profile candidates likely to go public over the next few years. A Spotify IPO would likely blast the company’s market value into the stratosphere, so it would make sense for Apple to make a run at the company now.

But why has Apple been unable to develop a credible streaming music service internally? After all, the company has a multitude of talented software and hardware engineers.

Three reasons.

First, Apple was late to the streaming music game, perhaps because its iTunes franchise was built around buying individual music tracks. Simply put, the iTunes business model is not about streaming music.

Second, Apple’s specialty is hardware and software design, not media. The company has run into trouble in its negotiations with big media companies.

Third, Apple CEO Tim Cook is an operational wizard — and a genius at managing Apple’s supply chain and inventory — but he’s not a product visionary like Jobs.

Cook failed to anticipate that music streaming would become the new industry business model. As a result, Apple simply wasn’t set up to launch a successful streaming service of its own. And it’s not because Apple didn’t have the resources or Los Angeles connections to secure the necessary rights. It’s because the company failed to anticipate a major consumer entertainment trend.

“The age of digital downloads is basically over,” Aram Sinnreich, a media professor at Rutgers University who studies the intersection of technology and music, told Bloomberg. So now, Apple reportedly wants to buy Beats for $3.2 billion.

This situation raises a now-familiar question: What’s up with innovation inside Apple? The company makes the best consumer hardware and software in the world, but it hasn’t launched a new product category since the iPad launch in 2010. Incremental improvements to the iPhone, the iPad and the Mac computer line have been impressive, but what’s next?

One possible explanation for Apple’s interest in Beats might be the booming “wearable computing” space. After all, Beats’ signature product is the high-bass headphone unit. If Apple can incorporate the Beats product into its wearable computing system — think Internet connected headphones — then the deal could pose a threat to Google, Facebook, and other companies that are forging ahead on smart glasses and watches.

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