Neil MacBride, the U.S. Attorney for the Eastern District of Virginia, is the former general counsel and antipiracy enforcer for the Business Software Alliance, a trade group representing software producers such as Apple, Microsoft, Adobe, and Intuit.

MacBride has accused DotCom and six others of operating MegaUpload, a cyberlocker service that has allegedly generated more than $170 million in criminal proceeds. The government asserts that MegaUpload enabled and encouraged users to uploaded pirated movies and other media to one of his digital lockers and then share with others. MegaUpload then profited by selling advertising on the site and premium subscriptions to users, the government contends.

MegaUpload is among the largest criminal copyright cases ever brought against an Internet company and if convicted of the charges against them, DotCom and his accomplices could face 20-year jail sentences. Following his arrest in New Zealand on Thursday, when police there conducted a large-scale raid at his Auckland mansion, DotCom’s attorneys say he is innocent.

During a court hearing today to determine whether DotCom should be released on bail, his lawyers told the judge there is nothing criminal about his operation. Last week, Ira Rothken, one of DotCom’s U.S. lawyers told CNET that at most this is a dispute over copyright and should be handled in a civil proceeding. DotCom’s lawyers say the United States has erred about the nature of MegaUpload’s business.

Once the issue of bail is settled, the U.S. is expected to file extradition papers to try and get DotCom and three other suspects in custody in New Zealand brought back to this country to stand trial. Another suspect was arrested over the weekend in the Netherlands and the U.S. government is expected to also seek his extradition. The two remaining suspects are at large.

If DotCom is brought to trial in the United States, the case will undoubtedly bring mass press coverage from all over the world. DotCom is a well known hacker, a twice convicted felon, street racer, who once offered to pay a $10 million reward for information leading to the capture of Osama bin Laden. On the other side of the courtroom will be MacBride.

In 2009, McBride was appointed to a senior position in the Department of Justice by the Obama administration and appointed to his current position later that year. Prior to that, he spent two years at BSA., where he oversaw global piracy issues for the group.

According to a story by my CNET colleague Declan McCullagh, MacBride oversaw the BSA program that rewarded people for phoning in tips about suspected software piracy.

A spokesman from MacBride’s office declined to comment.

Rothken told CNET that DotCom is putting together his own legal team. According to published reports, one member of that team was supposed to be Robert Bennett, the attorney who represented former U.S. President Bill Clinton in a sexual harassment case brought by Paula Jones. Bennett, however, has had to step down from the case because of a conflict involving his firm and another client.

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Apple

Introduced at Apple’s Worldwide Developers Conference in June, iMessage lets users on iOS devices chat with one another like they would send a text message. Like the BlackBerry Messenger, iMessage allows them to bypass the SMS text-messaging network–along with carriers’ texting charges.

Instead of routing the text message over the cellular network using SMS, it sends the message over a wireless Internet data connection. The service itself is not tied to any carriers and is designed to work on the iPhone, as well as on non-cellular devices like the Wi-Fi only version of the iPad and current model iPod Touch.

At a time when many wireless carriers are charging customers 20 cents to send a text to a phone, and another 20 cents to the person receiving the text, Apple is poised to take a big bite out of the sector.

Text messaging generates more than $20 billion in revenue for the wireless industry, Craig Moffett, an analyst at Sanford C. Bernstein told The New York Times. Texting revenue accounts for 12 percent of Verizon Wireless’ revenue, he noted.

Apple is “undermining the core business model for an industry that makes most of its money from services that are high priced and low bandwidth, like texting,” he told the newspaper.

Microsoft, which is in the process of acquiring Internet phone giant Skype and group messaging service GroupMe, is widely expected to incorporate similar features in its Windows smartphones. A handful of apps also allows people to inexpensively text their friends.

However, some carriers have anticipated the shift and possible lost revenue. AT&T recently announced that it was phasing out its $10 for 1,000 texts plan in favor of a $20-per-month unlimited plan.

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“Regulation can get in the way of innovation,” said Kevin Lo, who as general manager of access oversees the Google Fiber project to bring extremely fast Net access to Kansas City in Missouri and Kansas. “Regulations tied to physical infrastructure sometimes defer the investment altogether,” he said in a speech at Broadband World Forum here.

Tension between private-sector ambitions and public-sector constraints have endured for centuries, but Google–an Internet juggernaut that tries to move at startup speeds–feels it particularly acutely. Much of the company’s ambitions are held back by broadband access that’s too slow or missing altogether.

“We’re about moving the Web forward,” Lo said. “We have product managers who are very frustrated. They have apps that don’t work because they don’t have the speeds.”

Lo called for three specific reforms: ease access to public rights-of-way where fiber-optic cables can be laid; ease access to utility poles; and enable special service districts to free sections of municipalities from zoning restrictions. He also said the Kansas City’s “very pro-business” attitude was key to its selection for the Google Fiber project. “They demonstrated they could work at Google speeds,” he said.

After Pandora filed its IPO offering in February, the SEC  reviewed the filing. In March, the SEC asked Pandora to make it more clear that it was highly dependent on its lawyers, and that it would go out of business if it couldn’t renegotiate its music license fee schedule:

In order to provide greater balance to your summary, highlight that:

You currently operate under a business plan strongly reliant on lobbied concessions and federal court and federal agency consent decrees and settlements, setting reduced royalty and licensing rates that expire in 2015 and that ordinary rates, not subject to such extraordinary measures, to which you may be subject upon the expiration of these exceptions make your current business plan unsustainable, as discussed in your risk factors on page 15 and 16; …

Pandora did disclose its fee schedule in June, but it represented its fees-per-song as fractions of a penny. The maximum it will pay to serve one song to a listener is 0.0025 cents.

It is only when you convert those penny fractions into percentages that it becomes obvious Pandora’s costs are about to go through the roof. They will rise between 37 percent and 47 percent when its current agreement with licensing body SoundExchange expires in 2015. In Q1 2011, license fees at Pandora were $29.2 million, or 57 percent of its $51 million in total revenue. The company lost $6.7 million as a result.

Obviously, the music industry will have to be persuaded that Pandora should get generous, special terms if artists want it to stay in business and continue receiving money from the company. (Sirius XM (SIRI), by contrast, is profitable on the current terms.) In its most recent S-1, Pandora admits it is “unsustainable” if it cannot negotiate reduced fees in the future:

We do not know what rates will be available to us following that period and there is no guarantee that the royalty structure that emerged from the negotiations with SoundExchange pursuant to the Webcaster Settlement Acts will be available after 2015. The CRB, which still has rate-making authority over us upon expiration of our agreement with SoundExchange, has consistently established royalty rates that would, if paid by us, consume an unsustainable percentage of our revenue. If we are unable to reach a new agreement with SoundExchange for the period after 2015, our operating costs may significantly increase, which could harm our financial condition and inhibit the implementation of our business plan.

That renegotiation appears to be the only hope for Pandora, as CEO Joe Kennedy recently told Bloomberg that there was a lack of demand for ads on its mobile service, which now constitutes 60 percent of all Pandora’s listeners. Pandora closed at $13.41 Aug. 3, down from both its high of $20.04 in July and the $17.42 it closed at on its first day of trading in June. A message left for Pandora last night was not immediately returned.

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Those poorly written spam e-mails often seem more annoying than threatening, but they can wreak financial havoc on their victims. Precise statistics are hard to pin down, but experts believe global Internet fraud scams people out of hundreds of millions to billions of dollars each year.

Internet fraudsters have traditionally preyed on the vulnerable, including older victims who aren’t as well-versed in computer technology. But scammers’ skills at deception have improved so greatly over the years that even seasoned Internet users often have to do a double-take before they realize they’ve been duped.

For instance, a widely used, relatively new scheme that’s difficult to detect features pop-up notifications that look just like antivirus software alerts. They usually say something to the effect of, “Your computer has been infected with 49 viruses, click OK to quarantine them.”

Clicking OK sends the user to a website that claims their antivirus software license has expired, and a payment needs to be made before the virus problem can be mitigated.
Gallery: The cost of cybercrime

These sites look completely legitimate — and, adding to the scheme’s plausibility, many of the spoofed websites even have working customer service phone numbers with “operators” on the other end of the line who will gladly take your money.

Another stealthily and fast-growing attack is called “spear phishing”: sending e-mails to specific recipients from spoofed addresses that look completely legitimate. The attacks often appear to be from loved ones, claiming to be in an emergency situation and asking for money.

These schemes show that Internet scam artists, who had long been thought of as too unsophisticated to be considered real “hackers,” are venturing into the realm of some of the more expert cybercriminals.

“Now, there isn’t a very big gap in their capabilities,” said Dave Aitel, president of security firm Immunity Inc. and a former computer scientist at the National Security Agency. “Re-shippers and check fraudsters are now just an arm of organized cybercrime.”
Social hacking

Unlike their organized counterparts, online fraudsters tend to live below the poverty line and lack legitimate employment opportunities, according to Eric Fiterman, founder of security startup Rogue Networks and a former FBI cybersecurity special agent. Many steal to survive.

Even without the vast resources or technical skill of their more advanced criminal peers, Internet fraudsters are good enough at trickery to make their schemes successful.

“You could be a check fraudster with no technical skills, just social engineering skills,” said Ajay Gupta, CEO of Gsecurity, an IT security contractor.
LulzSec and Anonymous: Big talk. Little threat.

One common scheme asks people to deposit a check in their bank for a large sum and then wire most of that money to a recipient in a foreign country — usually Nigeria.

“It sounds so obvious; alarm bells should be going off that this is a crime,” Gupta said. “But the check that person receives look absolutely legit. Banks think it’s real too.”

Of course, check fraud and other scams are far from a new phenomenon. But the Internet has given fraudsters the platform they need to make their “business” profitable.

“Check fraud has been going on since we have had checks,” said Bill Pennington, CEO of WhiteHat Security, a website security company. “What’s new is that the Internet has taken down all geographical barriers. My grandmother did not have to worry about running into a Nigerian check fraudster at the grocery store.”

The vast majority of people immediately identify these schemes as frauds, so fraudsters like to cast as wide a net as possible. Spam is one of the primary tools they use. The fraudsters often rent out botnets — very large groups of compromised computers — to send their messages to thousands, even millions, of recipients.

“They’re casting wider and wider nets,” said Angelo Comazzetto, product manager at IT security company Astaro Corp. “If they used to send 10,000 e-mails and get just a 1% response, now they’ll send 10 million e-mails and get a 0.03% response.”

Fraudsters don’t just spam; they also prey on people using dating sites, job sites and classifieds.

For instance, AOL (AOL) autos, Craigslist or other online used car classifieds often host ads for cars at half their Kelley Blue Book value. If you inquire about the car, the seller will ask you to wire them a down payment before they ship you the car — an irreversible transaction that siphons off money you’ll never see again, never mind the car.

Just like in the offline world, Internet scam artists lure unsuspecting victims in by using very real-sounding, but fake charities, “make money from home” schemes, and deals. As you’d suspect, fraudsters don’t have many scruples. Some recently took advantage of the California wildfires, for instance, setting up fake insurance websites aimed at victims.

Individuals aren’t the only ones to be targeted by scam artists.

E-tailers face the threat of so-called “re-shippers,” who buy merchandise with stolen or fake credit card numbers, or reverse their PayPal or credit-card payments after they’ve received the goods.

There are a few tip-offs of likely fraud — mismatched billing and shipping addresses are a big red flag — but few e-tailers have the resources to investigate every suspicious order.

“It’s a sad call I have to make when someone pays with a stolen credit card, and I have to let the credit card’s real owner know,” said Michael Ellison, vice president of IT solutions retailer Virtual Graffiti. “It happens all the time.”

When done well, the schemes can be very difficult to detect. Still, even with their improving skills, Internet scam artists don’t come close to the capabilities — or success rate — of their counterparts in organized crime syndicates.

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Apple‘s patent, which the company applied for in 2007, boils down to one simple focus: when a person uses their fingers to interact with the touch screen, the software reacts to that gesture. Images that Apple included with its patent application show that functionality being implemented across several different applications, including a Web browser and a home screen.

Here’s the more technical description:

“A computer-implemented method, for use in conjunction with a portable multifunction device with a touch screen display, comprises displaying a portion of page content, including a frame displaying a portion of frame content and also including other content of the page, on the touch screen display,” the patent abstract reads. “An N-finger translation gesture is detected on or near the touch screen display. In response, the page content, including the displayed portion of the frame content and the other content of the page, is translated to display a new portion of page content on the touch screen display.”

Even though it’s still undergoing beta testing, Klout is a social media force to be reckoned with. Users are invited to link up their Twitter and Facebook accounts (with LinkedIn functionality on the way as well), to the site. Once entered, Klout scours your accounts, looking at what you post about, who you talk to, repost, and who is following your every online move. The service then uses this information to provide you with a number of metrics–Score Analysis, Network Influence, Amplification probability and True Reach–to provide you with an over all view of how effectively you’re leveraging your social network contacts.
Are you a Specialist? A Networker? Maybe a Broadcaster? Klout will give you the lowdown.
Best of all, Klout rewards your social media excellence with some pretty impressive swag from a wide variety of sponsors, finally giving you a truly valid excuse to push for more online followers.

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Google, Apple, and Amazon are pushing more and more of your entertainment, your data — heck, your life — into the cloud. But what’s it mean for the wireless network operators who are already struggling to keep up with heavy data demand?

Each of these companies recently announced new digital storage services for music. The idea is that people can put their music in the “cloud,” which is really a remote data center. The “cloud” becomes the central repository for all of your music, pictures, and other data. And you simply connect to it via any broadband connection available to access it.

There are plenty of benefits to this, of course. For one, it’s incredibly convenient, especially when you’re connecting wirelessly. As Apple CEO Steve Jobs pointed out during his keynote earlier this week where the iiCloud service was announced, he said that it will eliminate the headache of syncing each device.

But using these services will no doubt eat up a lot more bandwidth than just downloading a song one time to your computer or smartphone. Once music moves to the cloud, you could be downloading that same song every time you sync your device or even every time you listen to it. And once Apple or Google start offering video in the cloud, the problem may get even worse.

Can wireless networks, which are already buckling under the load of simple mobile browsing, handle it?

That’s the big question.

“The tonnage of traffic on the network is growing,” said Fared Adib, vice president of product development for Sprint Nextel. “That’s an issue we [wireless service providers] are dealing with. And I think it’s too early to say how the cloud services will affect all of us. As an industry, the ecosystem needs to work together on these issues.”

Heavy data loads
Indeed, wireless carriers are already feeling the pain of consumers’ increasing appetite for wireless data. AT&T has become the poster-child for carriers struggling to keep up with heavy loads. AT&T, which used to be the exclusive carrier for the iPhone, has said publicly that the company’s data traffic on its network has increased 8,000 percent over the past four years.

AT&T Chief Executive Randall Stephenson said at the Telecommunications Industry Association 2011 conference last month that by 2015, AT&T will handle as much wireless data in a month and a half as it did in all of 2010.

Stephenson said the only way to accommodate that kind of growth is to add more spectrum to its network. In addition to asking the Federal Communications Commission to open up more spectrum, AT&T also plans to spend $39 billion to buy T-Mobile USA to get access to more spectrum in dense urban areas, like New York City.

Without T-Mobile’s spectrum, AT&T has said that consumers will not see improvements in dropped calls, faster speed networks, or improved access to “state-of-the-art mobile broadband Internet service.”

While AT&T may be the most vocal right now about its network capacity constraints, there is growing data to suggest that other wireless operators will also be challenged in the future. Network equipment maker Cisco Systems said recently in a report that worldwide data traffic in 2010 just on mobile devices was three times all global Internet traffic in 2000.

Internet traffic in general is expected to quadruple over the next four years. And by 2015, Cisco estimates that the amount of traffic traversing the Internet will reach 966 exabytes per year. Between 2014 and 2015 network traffic is expected to grow by 200 exabytes, more than the total amount of Internet traffic generated worldwide in 2010.

A large contributor to this growth is a surge in network-connected devices. This includes everything from smartphones to notebooks to tablets to home appliances. On average, a U.S. consumer will likely have seven connected devices by 2015.

And if Apple, Google, and Amazon have their way, many of these consumers will be using cloud-based services to share their content among their multiple devices.

Working together
While it appears that Google, Apple, and Amazon may be on a collision course with wireless carriers, it’s in everyone’s best interest for the two sides to work together. And it seems like they are.

“The sense we’ve gotten from working with Google is that they get it,” said Sprint’s Adib. “They know we have to balance the traffic loads with the service they’re trying to offer. And the truth is none of us want the consumer to have a bad experience.”

Indeed at the e-G8 Forum in Paris last month, Google Executive Chairman Eric Schmidt said wireless operators and content companies are “incredibly co-dependent.” He added that the two groups can work together to spread out data demand to ensure these networks aren’t overloaded.

Using Wi-Fi to offload heavy traffic loads is one solution. The cloud services that have already been introduced rely heavily on Wi-Fi networks to provide the network connection between devices and the “cloud.”

“Doing the bulk of uploads via Wi-Fi will help alleviate some of the network issues,” said Ross Rubin, an analyst with NPD Group.

Sprint’s Adib agreed. He said that nearly 80 percent of mobile data usage on its network is done by subscribers at home or in the office, where Wi-Fi is typically available. He said that the company is working on ways to make discovering and connecting to these networks easier so that devices do it automatically and seamlessly. For now the company doesn’t have anything to announce, but it’s working with its device partners to come up with better solutions.

But Adib said concerns about “cloud” services may be slightly overblown. While it’s true consumers may be downloading or syncing content more frequently from their digital “lockers” in the cloud, he doesn’t believe people will stream content constantly.

“These cloud service are about making sure that people get access to their content on multiple devices,” he said. “And that’s a good thing for carriers. We want people using more than one device.”

In the end, carriers benefit from these new services, and companies such as Apple and Google also depend on the increasing capacity and reliability of wireless networks.

“There is no question that Google and Apple would like to treat bandwidth as unlimited,” said Charles Golvin an analyst with Forrester Research. “But carriers increasingly aren’t able to provide that. But neither one wants to frustrate consumers. So they must figure out a way to work together.”

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