Computers and Information Systems

Introduction
Despite the worldwide recession, e-books, smartphones, and netbooks were hot consumer devices, while Twitter was the cool Web application, and cloud computing gained support in the corporate world. Apple CEO Steve Jobs returned to the company after surgery, and icrosoft introduced Windows 7 to replace the much!critici"ed #ista. $he global economic recession made %&&' a difficult year for technology workers and companies. (n the first )uarter alone, American high!technology firms laid off more than *+,%&& workers, according to ,ob!tracking firm Challenger, -ray . Christmas. $hat was up from the //,0&& laid off in the fourth )uarter of %&&*. (n 1apan financially troubled computer!chip manufacturer $oshiba announced plans to lay off 0,'&& contract workers over the ne2t year, in addition to the +,3&& temporary workers it had already cut from its workforce. As the year ended, computer companies hoped that they were seeing the signs of an economic upturn, spurred in part by icrosoft4s new Windows 5 operating system 6O78, which, it was envisioned, would generate a new round of computer!upgrade purchases. Optimism was based on better!than!e2pected )uarterly earnings reports from several companies, including -oogle, (9 , and (ntel. (t was too early to tell whether an uptick in technology purchasing in the :.7., driven largely by consumer electronics, would spread to the corporate market. Electronic gadgets of all sorts continued to become part of the everyday lives of ordinary citi"ens. A study of American and Canadian consumers by ;orrester <esearch showed that half of all adults played computer games, ,ust under two!thirds of households had a broadband, or high!speed, (nternet connection, three!fourths of households had a cellular telephone, and *= of the consumers surveyed had a smartphone 6essentially a handheld computer integrated with a cell phone8. (n the :.7., ++= of households owned a laptop personal computer 6>C8, and the average family owned two >Cs. ?igh!definition 6?D8 television and home computer networks were among the gadgets most rapidly gaining favour with consumers. Wireless phone companies continued to invest heavily in smartphones and netbooks 6downsi"ed laptops e)uipped with cellular!network (nternet connections8 as new ways to sell more data services@which was necessary if they were to offset declining prices for cellular voice service. One cellular company tried to borrow an audio techni)ue from consumer electronics to make voice calls more appealing. ;rance $elecom offered ?D cellular audio, which brought to cell phones the digital sound reproduction used with digital $#, music compact discs, and ; radio stations.

E-books.
Electronic books, or e!books, caught the eye of publishers as never before in %&&' because of Ama"on4s Aindle and 7ony4s <eader, stand!alone devices designed to read the e!books that were sold online by Ama"on and 7ony, respectively. -oogle also said that it would begin offering e! book downloads, although it was unclear which e)uipment it would use. Other e!book providers included i<e2, a division of <oyal >hilips Electronics, and cell phone company China obile.

9ookstore operator 9arnes . Boble inaugurated an e!bookstore on its Web site and offered e! books that could be read on several devices, including >Cs, Apple4s i>hone and <esearch in otion4s 9lack9erry smartphones, and 9arnes . Boble4s own newly introduced e!book reader called nook. 7ome printed book publishers were compelled to take e!books seriously because e!book sales were growing, while sales of printed books were not. Adding to the appeal of e!books was that they were about as profitable to sell as printed books, even though e!books typically sold for less 6about CD& versus an average of C%/ for a hardcover book8. $hat was because publishers could do away with physical book e2penses such as printing, storage, and transportation. E!books also offered multimedia options that printed editions could not, and te2t could be combined with occasional video snippets and links to Web sites. 9ook publisher 7imon . 7chuster released the first four e!books, which it called vooks, that included videoE these could be read and watched online or on Apple4s i>hone or i>od $ouch devices. (t was unclear how many consumers would shift from printed books to e!booksE in %&&' the latter accounted for only a few percent of unit book sales. 7till, some in the book industry worried about piracy of electronic books via downloads of illegal book copies@similar to what had already happened to the music industry. 7uch illegal book sharing already e2isted on a small scale. (n addition, book publishers worried that letting libraries offer e!books would make consumers less inclined to buy print versions, because downloading e!books made library use easier. As a result, some book publishers refused to allow their e!books to be offered through libraries. $he Aindle produced the first consumer privacy issue associated with e!books when in 1uly Ama"on, reali"ing that it lacked the rights to sell -eorge Orwell4s novels 1984 and Animal arm online, refunded the ''!cent purchase price to customers and remotely deleted copies of the books already downloaded to nearly %,&&& Aindle customers. Ama"on was slammed with a barrage of criticism, made more intense because 1984 details how powerful rulers can dominate peoples4 lives. A ichigan high!school student whose copy of 1984 was deleted sued Ama"on, and in 7eptember the case was settled out of court. Ama"on agreed to pay CD3&,&&& 6to be donated to charity8 and apologi"ed for deleting the books. As part of the settlement, the company also pledged not to delete e!books from :.7. customers4 Aindle units in the future unless the user agreed, the user wanted a refund or failed to make the electronic payment, a court ordered a book deleted, or removing a book was necessary to eliminate malicious software. $he Aindle case illuminated the difficulties of determining ownership in the digital age. :nder the Aindle license agreement, e!books purchased by users were licensed, not owned, and the license also allowed Ama"on to alter the e!book service. Attorneys indicated that it was unclear whether the license agreement allowed Ama"on to delete e!book content that consumers had bought and downloaded to a Aindle.

Smartphones.
Apple4s i>hone continued to dominate the market for smartphones. $he company introduced the i>hone 0-7 6which added voice controls, a digital compass, and the ability to record video to the third!generation wireless!network platform8 for CD''FC%'' and, in an effort to broaden i>hone

use even further, dropped the price of the previous model, the i>hone 0-, to C''. Apple4s i>od remained the top!selling digital music player, although icrosoft continued to compete with its Gune music player, to which it added the capabilities of playing ?D video and receiving ?D radio signals with better!)uality sound than traditional ; radio. Cell phone companies A$.$ and $! obile sought to differentiate their data!using smartphone services by offering customers free Wi!;i 6wireless fidelity8 connections when they could not get a cellular network connection. A$.$ had faced the bigger problem because its i>hone customers used more data than owners of other smartphones and thus tended to take up more network capacity per user. A$.$ also offered the most free Wi!;i hot spots, about %&,&&&. Apple reported that it had sold its two billionth unit of i>hone and i>od $ouch application software, or app, from its i$unes online store. :sers could choose from among D&&,&&& apps in %& categories, including games, business, and social networking. ?undreds of independent firms wrote apps for the i>hone and i$ouch, but Apple had to approve the programs before they could be sold online through the App 7tore portion of i$unes. ;or the first time, Apple allowed two of its music competitors, on!demand streaming music services <hapsody and 7potify, to provide an app that connected i>hone and i>od $ouch customers to their services. Apple attracted an in)uiry from the ;ederal Communications Commission 6;CC8 when it re,ected an app for -oogle #oice, which provided access to cellular! calling, te2t!messaging, and voice!mail services that competed with those of A$.$, the i>hone4s e2clusive service provider in the :.7. Apple told the ;CC that it was still considering whether to offer the -oogle #oice app. A new type of app called Haugmented realityI was available for the i>hone and phones using -oogle4s Android O7. $his app used the ->7 6global positioning system satellite navigation8 location chip in the phone to overlay the phone4s camera view of a street scene with local tidbits of information, such as the identity of stores, points of interest, or real!estate listings. $he reliability of augmented reality was limited by the accuracy of the ->7 units that the phones contained, but research firm i7uppli concluded that the ->7 capabilities of smartphones were opening up a new area of growth for the devices, particularly the i>hone. One use of ->7 was to enable the i>hone to compete with stand!alone ->7 navigation systems, but there were still technical hurdles in placing comple2 navigation software on cell phones. Apple won in another controversy over whether >alm (nc.4s >alm >re smartphone should be allowed to connect to Apple4s i$unes software, in competition with the i>hone and the i>od. When Apple blocked the connection, >alm complained to an industry oversight group for :79! port connection standards that Apple4s action was improper restraint of trade. $he :79 (mplementers ;orum dismissed >alm4s claim, however, and said that >alm was in the wrong for making its device appear to be an Apple device.

Computer Games.
7ales of video games and the game consoles that played them suffered from poor economic conditions, even though the sector had been e2pected to be recession!proof@on the theory that the games represented stay!at!home escapist entertainment. E2perts attributed the sales decline to

both tight consumer budgets@new console games cost about C/& each@and a lack of new must! have games. As a result, Bintendo dropped the price of its Wii game console by C3&, to CD'', 7ony reduced the price of its most!e2pensive >lay7tation 0 model by CD&&, to C0'', and icrosoft cut the price of its most!e2pensive Jbo2 0/& model by CD&&, to C%''. (n an effort to boost the industry4s sales, game companies emphasi"ed new titles with familiar names, such as the space!war game !alo "# $%ST and T&e 'eatles# (ock 'and) in which the music and images of the legendary D'/&s band were paired with a play!along game. $he gaming industry also began to embrace a new trend, playing casual games on cell phones. $he i>hone4s App 7tore had made hundreds of low!cost or free games available to consumers for downloading, and there were concerns that cell!phone games could take attention away from more! e2pensive games for other portable gaming devices.

Social Networking.
A study by ;orrester <esearch showed that half of American adults who spent time online used social networks such as ;acebook or Kinked(n, a +/= rise from the year before. ost of the increased use was among adults aged 03 and older. Another survey, by Common 7ense edia, a group that monitored children4s issues, demonstrated that while teenagers were big users of social networks, most parents did not understand the e2tent to which the teens used the networks. $he survey showed that %%= of teens checked their social networks more than D& times daily, but only += of parents believed that their children were so heavily involved. uch of the attention in %&&' was focused on $witter, a social!networking service that allowed people to e2change short 6D+&!character8 messages, or Htweets,I on any topic via computer or cell phone. 6See 7idebar.8 On the basis of its popularity, $witter was able to raise CD&& million in new funding, even though it was a start!up with little or no revenue. $witter4s founders@ entrepreneur Evan Williams, social!networking e2pert H9i"I 7tone, and software engineer 1ack Dorsey@sought to e2pand the reach of the service that they had launched in %&&/ without a formal business plan. Overall, te2t messaging@sending short written messages via bursts of data from one cell phone to another@grew in popularity, but the activity became controversial when more people began driving and te2ting at the same time. >olls in the :.7. found that more than '&= of adults favoured a ban on te2t messaging while driving. <esearch into so!called distracted driving found that drivers using cell phones were four times as likely to have a crash as other drivers. :.7. government employees were banned from sending te2t messages while driving government vehicles. $he state of :tah enacted the harshest penalties in the :.7., treating te2ting as reckless driving. (n addition, the :tah law punished te2ting drivers that caused fatal accidents in the same way that it would punish drunk drivers. Another problem of cell!phone te2ting was the transmission of se2ual images or messages, which became known as Hse2ting,I between teenagers. (n the :.7. the problem posed new issues for schools and courts. $he (owa state 7upreme Court upheld a misdemeanor conviction of an D*!year!old boy who had sent a nude photo of himself to a D+!year!old classmate via te2t messaging. (n ?ouston, public schools banned se2ting. While the e2tent of the problem was hard to gauge, a survey by the Bational Campaign to >revent $een and :nplanned >regnancy showed

that %&= of young Americans between the ages of D0 and D' had either te2ted or posted online partially or completely nude pictures or video of themselves.

New De elopments.
icrosoft, admitting that users had been disappointed with the Windows #ista O7 6introduced in early %&&58, launched the ne2t!generation Windows 5 in October %&&'. Windows 5 was said to address complaints about #ista@slowness, software crashes, and software incompatibility issues @while keeping the underlying #ista architecture. Windows 5 improvements included more efficient use of memory, which caused a >C to start up faster and run more smoothly. When #ista was announced, its high computing demands meant that it would not run well on many e2isting computers. $hat was e2pected to be less of a problem with Windows 5, which was said to work on nearly all new computers as well as those that were up to three years old. 7atisfactory performance on older >Cs was said to vary, although icrosoft4s official system re)uirements were set fairly low. (n December icrosoft reached an agreement on Windows antitrust issues with the European :nion. $he E: reacted favourably to icrosoft4s offer to alter the way that it combined its (nternet E2plorer Web browser with Windows. :sers would be given a choice of browsers when setting up the operating systemE (nternet E2plorer could be turned off and another browser downloaded. icrosoft also won a patent victory when a federal ,udge in >rovidence, <.(., overturned a C0** million penalty against the company, one of the largest amounts ever awarded in a civil patent! infringement lawsuit. 7oftware firm :niloc :7A, (nc., had won damages from icrosoft in an earlier ,ury trial on the basis of claims that icrosoft had infringed on :niloc4s security software patents. Another patent!infringement suit involved icrosoft5. A federal court in $e2as in ay ruled in favour of the Canadian firm i+i, (nc., which claimed in a lawsuit filed in %&&5 that icrosoft4s Word software infringed on an i+i patent. 6$he technology involved J K, or e2tensible markup language, which was used in electronically encoding documents.8 (n August the court ruled that icrosoft should pay more than C%'& million in damages and issued an in,uction that would prohibit the company from selling versions of the Word program that contained the patented technology. icrosoft obtained a temporary stay of the court4s order and in 7eptember told a federal appeals court that the lower court had erred in interpreting i+i4s patent claim, but i+i told the appeals court that icrosoft had known about i+i4s patent before using the technology and had simply disregarded it. icrosoft lost its appeal and agreed to replace the infinging code in Word %&&0 and Word %&&5. $he court ruling might force the software company to make technical changes to the ne2t version of Word, planned for release in %&D&. icrosoft4s new search engine, 9ing, won favourable reviews, but according to (rish Web! traffic!statistics firm 7tatcounter, icrosoft4s share of the American Web!search market remained under D&= and dwindled slightly in the months after 9ing was launched, which left it in third place behind -oogle and LahooM -oogle4s :.7. market share grew slightly during the same period, to *&=. Worldwide, -oogle held about '&= of the search market.

icrosoft and LahooM formed a D&!year partnership to combat -oogle, but it was unclear how successful the companies were likely to be, given the market leader4s dominant position. :nder the agreement, icrosoft was to provide 9ing4s search technology on LahooM4s Web sites. $he goal was to increase the number of people using the LahooM search service in order to boost revenue from the advertising that accompanied the search results. $he agreement came about after icrosoft failed in its hostile bid to ac)uire LahooM in %&&* for C+5.3 billion 6about C00 per share8. icrosoft eventually withdrew its offer, and LahooM replaced its CEO, cofounder 1erry Lang, who had reportedly opposed the ac)uisition unless icrosoft increased its bid to C05 a share. $here were more delays in -oogle4s settlement with authors and publishers in a %&&3 copyright! infringement case over scanned library books that were to appear online. -oogle4s original settlement called for -oogle to pay CD%3 million to compensate authors and publishers of books that were still protected by copyright and to help locate the copyright holders for out!of!print books covered by the law. $he :.7. Department of 1ustice 6DO18 raised legal and antitrust ob,ections to the agreement on the basis of complaints that it gave -oogle too much power over copyrighted works. Ama"on complained that the settlement would give -oogle a monopoly over Horphan works,I copyrighted books whose owners could not be found, and would allow authors and publishers to set e!book prices@an e2tension of their influence in what was a key new business area for Ama"on. $here were also allegations that the agreement violated ;rench law. $he two sides in the copyright case@the defendant, -oogle, and the plaintiffs, the Authors -uild and the Association of American >ublishers@negotiated a replacement agreement, which was awaiting court approval at year4s end. (n a related matter, -oogle ac)uired reCA>$C?A, a company that created visual pu""les to ensure that people and not automated bots 6short for robots8 were signing up for (nternet services. -oogle sought to adapt the technology to improve optical character recognition 6OC<8 for out!of!copyright books that it scanned and offered for downloading. 7ome of the one million books that were already available contained errors that were traceable to flaws in OC<.

!ersonal Computers.
$he >C industry waited for signals that the recession was over, but the outlook was not good in the first part of the year. <esearch firm (DC said that worldwide >C shipments were down %.+= in the second )uarter from a year earlier, and the value of >C shipments dropped about D'=, in part because of price discounting. (t was hoped that the year!end holiday season would signal the return of better economic times@and there were early indications that could be true. (n the third calendar )uarter of the year, all >C companies 6with the e2ception of Dell8 reported rising sales. Kate in the year, according to (DC, >C maker Acer replaced Dell as the second!ranked >C market!share holder, with D+= of the worldwide market. ?ewlett!>ackard remained number one, with ,ust over %&= of the world >C market. Apple boosted its :.7. market share with record nonholiday sales in the third )uarter, but the acintosh remained a minor player internationally. Betbooks were the fastest!growing >C category and were seen as bridging the gap between smartphones and laptop computers. Betbooks were small notebook computers with slower processors, smaller screens, shrunken keyboards, and lower!capacity disk drives that nonetheless could handle (nternet browsing and routine computing tasks. $hey were aimed in part at users

who were comfortable with using online applications for common productivity tasks, such as document or spreadsheet creation. $here was concern in the computer industry, however, that netbooks simply represented a new, less!e2pensive product category and that their sales would cut into sales of traditional laptop >Cs. Computer manufacturers e2perimented with a >C even smaller than a netbook but larger than a smartphone@called a Hmobile (nternet deviceI or Hsmartbook.I Designed to fit in a pocket or purse, it was intended for e!mail or Web browsing via cellular network or Wi!;i (nternet connection. -oogle, which already made the Android O7 used on some cell phones, declared that it would compete with icrosoft and Apple in the market for >C operating systems. -oogle planned to challenge the Windows and ac O7 J operating systems, using an e2tension of its Chrome Web browser technology in a product that it e2pected to introduce in late %&D&. As a result, -oogle CEO Eric 7chmidt resigned in August from Apple4s board of directors. Apple said that potential conflicts of interest made it difficult for 7chmidt to remain on Apple4s board.

Companies.
7teve 1obs, the charismatic Apple CEO and cofounder who had been given credit for Apple4s dominant position with the i>hone and i>od, returned to his ,ob after having taken a medical leave of absence for much of the year. During that time he had a liver transplant that was needed because he had suffered complications from pancreatic cancer. ?is return was considered likely to reassure Apple shareholders who were concerned that 1obs was an irreplaceable part of Apple4s financial success. Apple in August introduced an undramatic upgrade to its acintosh operating system, called ac O7 J 7now KeopardE it incorporated many small improvements rather than high!profile changes. Oracle continued its ambitious growth plans in the software industry, which had resulted in the purchase of more than +& companies in four years. Oracle4s plan to ac)uire 7un icrosystems, a computer hardware and software firm, for C5.+ billion was announced early in the year. Analysts said that the deal would make Oracle more competitive against (9 in the corporate computing market. Oracle4s plan was delayed when the European Commission decided to e2tend its investigation of the ac)uisition4s ramifications. E: officials e2pressed concern that the ac)uisition of 7un by Oracle, one of the world4s largest software firms, could reduce competition in the market for database software. $he delay was une2pected because the :.7. DO1 had already approved the transaction. Oracle CEO Karry Ellison said that he was eager to complete the ac)uisition because, he said, 7un was losing CD&& million a month. (ntel appealed a CD.+3 billion antitrust fine levied against it by European :nion regulators, asking that the fine be overturned or reduced. (ntel was accused of having provided rebates to some >C makers who were heavy users of (ntel chips and of having rewarded them for delaying the production and release of >Cs using chips from (ntel competitor Advanced icro Devices 6A D8, which filed a related lawsuit in %&&3. (ntel maintained that A D was not hurt by (ntel4s practices.

Kate in the year, (ntel agreed to pay CD.%3 billion to settle all antitrust and patent claims made by A D. A D in turn agreed to withdraw its worldwide regulatory complaints about (ntel4s alleged pressuring of computer makers to use (ntel chips instead of those from A D. $he two companies also agreed to a five!year cross!licensing of each other4s patents, a potentially large benefit to A D. (t was unclear how the settlement would affect the ongoing government antitrust actions against (ntel in Europe, Asia, and the :.7., although it would end private antitrust cases pending in the :.7. and 1apan. Computer storage firm E C Corp. paid C%.+ billion to ac)uire Data Domain, which had Hdata deduplicationI software that helped corporations sharply reduce the amount of computer storage they re)uired. $he technology altered the practice of storing multiple versions of a file that had only minor variationsE instead, a single copy of the file was stored once and the minor changes were stored daily. Adobe 7ystems, known for its >hotoshop and document! reading software, bought Omniture, a Web!traffic!analysis firm, for about CD.* billion. Omniture4s software was designed to facilitate online marketing, while Adobe4s focus was on software to create online and offline content. Cisco 7ystems was in the process of ac)uiring $andberg, a Borwegian videoconferencing company, for C0.+ billion after initially having bid C0 billion. $andberg sold videoconferencing e)uipment and software that could make connections between different types of video e)uipment. ?ewlett!>ackard said that it would ac)uire network e)uipment company 0Com for C%.5 billion in order to compete more effectively with Cisco, the networking market leader. Dell ac)uired >erot 7ystems for C0.' billion in an effort to e2tend its reach into corporate computer services, an area where it competed with (9 and ?ewlett!>ackard. $e2as!based >erot 7ystems, which was founded in D'** by businessman ?. <oss >erot, a former :.7. presidential candidate, provided services ranging from data centre management to consulting. Kegal opposition was resolved to allow e9ay4s C% billion sale of the ma,ority interest in (nternet phone service 7kype to a consortium of investors. Copyright lawsuits had been filed in 9ritish and American courts by the 7kype founders, who sold 7kype to e9ay in %&&3. $he founders accused e9ay of having violated copyright by changing and sharing key software code associated with the 7kype service, which consisted of free (nternet!based voice and video messages between users of 7kype software on computers and smartphones and of for!pay calls from 7kype software to conventional landline and cell phones. E9ay settled the lawsuits filed by the 7kype founders by giving the founders a D+= ownership position in 7kype and two seats on 7kype4s board of directors. (n return, the founders were to transfer to 7kype the intellectual property that was the basis for the lawsuits. 7kype was ac)uired to help e9ay connect buyers and sellers via (nternet phone service, but analysts said that 7kype never fit in with e9ay4s business. $here was an une2pected new development in a legal issue that had swept through the computer industry over the previous several yearsN the illegal backdating of stock options that led to regulatory investigations of more than D&& companies and the conviction of some e2ecutives on criminal charges. A federal appeals court overturned the %&&5 conviction of -regory <eyes, the former CEO of computer data centre supplier 9rocade Communications 7ystems, citing improper actions by prosecutors. ?e had been sentenced to %D months in prison and a CD3 million fine for illegal backdating of stock options to increase employee pay, but in %&&' he faced a new trial. <eyes had resigned from 9rocade in %&&3 after accounting problems were

connected to the stock!option grants. >rior to the investigations, it had been common practice in some corporations to backdate the grant date of stock options to a day when the stock price was low, which presumably would increase the value of the options when they were eventually e2ercised at a higher price. While not illegal in itself, the practice re)uired a special accounting treatment to avoid artificially increasing company profits, a rule not always followed. 7ome si"able layoffs were announced late in the year. AOK said that it would eliminate %,3&& ,obs, or one!third of its workforce, as part of its spin!off from media company $ime Warner (nc. $he spin!off reversed the highly publici"ed but largely unsuccessful merger of HoldI and HnewI media firms nine years earlier. Applied aterials, which made e)uipment used in the manufacture of semiconductors, planned to cut D,0&&FD,3&& ,obs, or D&FD%= of its total employment. #ideo!game maker Electronic Arts announced that it would eliminate D,3&& ,obs, or D5= of its workforce.

Security.
Computer security e2perts said that the risks from hackers were changing. $here was a decline in attacks on security flaws in the ubi)uitous icrosoft Windows O7, which had been made more impervious to attacks. (nstead, hackers were shifting to attacks on security holes in other programs found on many >Cs, including the icrosoft Office software package, Adobe4s ;lash >layer 6used to display video animations8, and Apple4s Ouick$ime video player software. (n addition, hackers increased the number of attacks on corporate Web sites, either to steal information or to convert legitimate Web sites into distribution points for malicious software that could take over >Cs. $he theft of data and intellectual property via Web site break!ins reached a value of more than CD trillion in %&&*, the security firm cAfee said. ?arder to calculate was the damage done by armies of >Cs that were secretly taken over and turned into botnets 6groups of computers used for other hacker attacks8. A hacker in one of the largest identity!theft cases in :.7. history pleaded guilty in late August and faced up to %3 years in prison. (t was a turnabout for Albert -on"ale" of iami, who had been arrested in %&&0 but was not charged because he had become a government informant in the case. Among other charges, -on"ale" and two cohorts in %&&' stood accused of having used a laptop computer to pick up wireless data signals in order to access credit card and debit card numbers for more than +& million accounts from ma,or retailers, including $.1. a22, 9arnes . Boble, 7ports Authority, and Office a2. 1ust days before his guilty plea, -on"ale" was indicted in another hacking case, the theft in %&&5F&* of more than D0& million credit card and debit card numbers from Bew 1ersey payment processor ?eartland >ayment 7ystems and others. One of the most infamous (nternet sources of pirated movies, music, and video games, the file! sharing service the >irate 9ay, was to be converted to a legitimate business after being ac)uired by the 7wedish firm -lobal -aming ;actory for C5.53 million. $he >irate 9ay had an estimated %& million users worldwide, but it ran aground in early %&&' when a 7wedish court convicted its three founders and one of their investors of copyright law violations. Each was sentenced to a year in prison, and they were collectively fined C0./ million in damages. Kater the three founders were threatened by a Dutch court with C' million in additional fines unless they removed links on the >irate 9ay service to copyrighted material owned by a group of Dutch musicians and

filmmakers. $he founders claimed that they had no power to do so because they were no longer affiliated with the company, which was now owned by <iversella Ktd. of the 7eychelles. Ouestions remained about how the >irate 9ay could be turned into a legal business without either losing its file!sharing audience or violating copyrights. Data security was a big issue in negotiations between the :.7. and the E: over sharing banking data across country lines to help fight terrorism. $he issue arose when it was announced that the database that enabled the financial tracking was being moved from the :.7. to $he Betherlands, which brought into play European data!privacy rules that more tightly controlled the sharing of information about trans!Atlantic financial transactions. An interim one!year data!sharing agreement was in the works, but critics )uestioned its legality. eanwhile, :.7. >res. 9arack Obama4s administration announced that it would devote more attention to cybersecurity to protect an American computer infrastructure that was vulnerable to foreign attack. $heft, alteration, or destruction of data could reduce public trust in information systems. icrosoft ,oined a small number of companies that provided antivirus software free instead of selling it. Observers stated that icrosoft4s 7ecurity Essentials product was not so much an effort to steal business from for!pay antivirus!software companies as it was an attempt to prevent virus attacks among Windows users who did not take proper security precautions. Adobe and security firm cAfee said that they would adapt digital!rights!management software@long used to protect digital music from unauthori"ed use@to protect corporate documents from unauthori"ed viewing. Access to documents would be controlled by the level of security classification they carried.

"roadband.
9roadband speeds improved worldwide. A university study sponsored by Cisco 7ystems found that the best!performing broadband connections 6based on download and upload speeds and the time it took to get an online connection8 were in 7outh Aorea, 1apan, and 7weden. (n rankings of both broadband performance and market penetration, the leaders were 7outh Aorea, 1apan, and ?ong Aong. As part of the :.7. government4s economic stimulus plan, the Departments of Commerce and Agriculture were to award C5.% billion in broadband stimulus grants beginning in %&&'. $he E: predicted that improved broadband would aid economic recovery in Europe and could help create two million additional ,obs by %&D3. 9roadband adoption also sparked discussion of fair!use policies. $he Obama administration4s new ;CC chairman, 1ulius -enachowski, claimed that Hnet neutralityI would be the federal government4s policy toward the (nternet. Bet neutrality, as advocated by Web companies and consumer groups, would re)uire that all data flowing over the (nternet be treated e)ually. $hat ran counter to the wishes of some cable!television and telephone companies that wanted to provide different priorities for broadband (nternet traffic depending on how much was paid to transport the data. Bet neutrality also affected the free flow of information, because it was designed to prevent unpopular views from being blocked by data!transmission companies. -enachowski affirmed that wireless data carriers should be held to the same network!neutrality standards as wired carriers, a situation that did not e2ist currently.

Another federal agency, the ;ederal $rade Commission, imposed new regulations on bloggers, those who voiced their opinions online on Web logs. :nder updated federal rules covering endorsements and testimonials in advertising, bloggers and others who posted product reviews online would be re)uired to disclose whether they were paid for the reviews in money or free merchandise. $he rules were updated because advertisers were believed to be using paid endorsements on blogs and social networks to promote their products under the guise of personal recommendations.

#echnology.
$he blurring of the distinction between television and (nternet services continued. American viewing of $# and movies over the (nternet@using a process called streaming video that allowed content to be watched but not downloaded intact@more than doubled from %&&*, according to a study by market research firm (psos. -ermany and 9ritain planned hybrid $# and (nternet services. -erman public broadcasters planned to let viewers catch up on previous episodes of $# shows via computer (nternet connections. $he 9ritish system would go farther by combining digital $# broadcasts with a companion (nternet service that included special $# content. <enting movies online became an alternative to renting movies on D#D. Betfli2, Ama"on, and Apple all offered online movie rentals, and -oogle4s Lou$ube offered some older movies free. -oogle had e2perimented with video rentals but stopped offering the service after it bought Lou$ube. Airlines moved ahead with Wi!;i (nternet access service on planes in flight. (t was still not clear how many passengers would pay as much as CD0 per flight for the service, because consumers were accustomed to finding Wi!;i free at coffee shops, restaurants, some hotels, and other hot spots. Another limiting factor was believed to be the lack of power outlets for computers on planes, which meant that laptops using the in!flight Wi!;i service might run out of battery reserves before the flight ended. Bearly all ma,or airlines in the :.7., however, had either installed Wi!;i on some planes or planned to do so. Cloud computing@providing computing power to customers over the (nternet@continued to gain traction in the corporate world, despite some embarrassing setbacks. Cloud computing could be used to develop products on someone else4s computers 6platform as a service8, to access software such as e!mail or databases run on others4 computers 6software as a service8, or to use network e)uipment or data centres operated by others 6infrastructure as a service8. 7ome corporations considered cloud computing to be less e2pensive and easier to scale up than self!run computing operations. Cloud computing had its problems, however. When a icrosoft!run remote server for $! obile failed, users of $! obile 7idekick phones were cut off from (nternet services such as e!mail and Web browsing. When icrosoft restored the server, part of the data@phone numbers, photos, calendars, and other information@was inadvertently corrupted. (t was unclear how many of the one million users of 7idekick phones were affected.

-oogle also had cloud problems when a computer error redirected some of its Web traffic through Asia, creating data congestion that slowed or stopped -oogle online services such as e! mail, calendars, and office!productivity software for some D+= of its users. $he significance of the interrupted -oogle service was that -oogle accounted for 3= of all (nternet traffic. (n a separate incident, -oogle4s -mail suffered an outage that affected the ma,ority of the service4s appro2imately D+/ million worldwide users. (nternet radio stations, which had faced much!higher recording industry fees than broadcast radio stations for each song they played, reached a new royalty agreement with the record labels. $he two sides had been set on a collision course in %&&5 when the :.7. Copyright <oyalty 9oard ruled that (nternet radio stations needed to pay a fee for streaming songs online. $he fee was to increase to D' cents per song in %&D&, and the (nternet radio stations claimed that their modest advertising revenue would not support the cost. $he newly agreed!upon rate for the largest radio Web sites would be either %3= of revenue or a fee per song that started at about half the federally mandated amount and gradually increased. 7maller sites would pay D%FD+= of revenue.

Chinese (nternet users play video games or watch movies online at an (nternet cafP in the Q

China demanded that all new >Cs sold in the country be outfitted with (nternet!filtering software preinstalled by computer manufacturers. (n the face of computer industry opposition and Chinese citi"en protests, however, Chinese officials softened the re)uirement to apply only to >Cs in schools and public places such as (nternet cafPs. $he software, called -reen DamFLouth Escort, was ostensibly developed to block pornography and violence on the (nternet in an effort to protect children, but it had the capability to block any content that Chinese officials designated as undesirable. >Cs would receive automatic downloads of updated lists of prohibited content, and Chinese hackers reported that the lists included political topics. 7teve Ale2ander 9ack to $op

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