Proposed Dept. of Homeland Security (DHS) should fund and coordinate most of its cybersecurity and critical infrastructure protection R&D externally, based on model similar to that of Defense Advanced Research Projects Agency (DARPA), White House advisory panel recommended Mon. President’s Council of Advisers on Science & Technology Policy (PCAST) approved report from its Terrorism Subcommittee that sought to create HS-ARPA entity under umbrella of DHS Undersecy. for Science & Technology (S&T). Unit would be similar to DARPA in that it would “conduct its work principally through contracts and grants to others,” draft report said.

Northrop Grumman and wireless broadband network developer Flarion unveiled homeland security network communication system based on OFDM technology. Northrop’s Information Technology unit and Flarion said they planned to market network to govt. customers seeking advanced, secure broadband network for security and emergency response applications. Companies said solution would provide: (1) Packet-switched voice and data airlink technology for national coverage, which they touted as replicating “wired broadband computing” network. (2) Flarion routers for wireless coverage and access that would be deployed at cellular base stations. (3) PC cards for personal computing use with PDAs and laptops. (4) Interoperability with IP network and “seamless” hand-off to 802.11-based wireless access points. Companies said system would have rapid deployment cellular base station, known as Cell-on-Light- Truck or COLT, that would include 2 base stations with IP network. Northrop and Flarion said that would allow COLT to offer up to 5 miles of cellular coverage and access to secure or public networks that could “be deployed at major disaster scenes” to ensure communications capabilities even if local carriers experienced congestion. Network reportedly could cost up to $2 billion to install, based on company estimates.

Navarre’s acquisition of Gardena, Cal., software publisher Encore was “completed on schedule” after obtaining approval last week from U.S. Bankruptcy Court, Minneapolis, home entertainment distributor’s CEO, Eric Paulson, told financial analysts in conference call Mon. CFO James Gilbertson said principal assets of Encore were acquired for $9.75 million -- $7 million in cash and rest in debt payable over 2 years. Navarre had announced in June that it had agreement to acquire assets of Encore, which distributor called “nation’s largest privately owned entertainment and education PC software publisher” (CED June 11 p6). Paulson said Mon. that purchase"marks our emergence as an owner, marketer and distributor of content that includes PC software and videogames now.”

Communications industry will rebound in 2nd half of 2002 from industry’s “worst recession in decades,” said merchant bank Veronis Suhler Stevenson’s (VSS) Communications Industry Forecast. But Forecast said industry growth “will be tempered by the sluggish consumer magazine and business-to- business media sectors, as well as increased consumer anxiety, slow growth in corporate spending and tentative investors.” Report said communications spending in U.S. would increase 4.8% to nearly $610 billion this year, up from $580 billion in 2001, and would grow at moderate 5.5% compound annual rate 2001-2006, reaching $760 billion, and slightly outpacing predicted 5.4% growth in nominal gross domestic product over same period. Forecast said positive indicators began to emerge in first 2 quarters of 2002 and would set stage for modest recovery in late 2002 and 2003. However, VSS foresaw communications dropping to 5th fastest- growing sector of U.S. economy for 2001-2006 period, after construction, services, finance, insurance/real estate and retail; it was 3rd in 1996-2001. VSS said compound annual growth rate of communications spending was 6.5% in 1996-2001. “We believe that all of these negatives will remain short- term influences and largely will have played themselves out by the end of this year,” said James Rutherfurd, VSS exec. vp and head of investment banking. “Then we foresee a return to an expansive attitude toward communication spending, though we aren’t projecting anywhere near a repeat of the super- heated growth of the late nineties.” VSS said consumer-end spending would drive communications growth in over next 5 years, rising compound annual rate of 6.5% through 2006 (7.5% in 1996-2001), due to solid expansion in cable and satellite TV, consumer Internet, videogame and box-office film makers. Institutional end-user spending will grow at compound annual rate of nearly 6% over next 4 years, VSS projects, compared with rate of 6.6% annually from 1996 through 2001. Institutional spending includes spending on TV programming; professional, educational and training media; business-to- business magazine circulation and trade-show exhibition space; and business information services. Advertising spending is expected to grow about 4% through 2006, down from its “heated” annual pace of 6% from 1996 through 2001. VSS said regardless of economic and social backdrop, consumers will spend more time with information and entertainment over next 5 years. Average American spent 3,570 hours with various forms of media in 2001, 1.4% increase over previous year. This number will expand at compound annual rate of 1.2% in forecast period, ending up at nearly 3,800 hours in 2006. Time spent with advertising-supported media accounted for about 3/5 of total, while consumer-supported media accounted for remaining 2/5. VSS said advertising recession and reaction to Sept. 11 sent broadcast TV advertising into tailspin in 2001. Ad expenditures dropped 8.6% to $38.7 billion for year, first decline in 10 years. However, this year, Forecast projects 4.1% rise in broadcast TV expenditure, to $42.9 billion. Total spending on broadcast- TV advertising will grow at compound annual rate of 3.8% from 2001 to 2006 and reach $49.6 billion, VSS said. Spending on cable and satellite TV advanced 9.7%, to $70.2 billion last year, VSS said. Total spending grew at compound annual rate of 11.7% from 1996 through 2001. This year, VSS projects, spending will increase 9.5%, to $76.9 billion. Overall expenditures for this year through 2006 will rise at compound annual rate of 7.1%, to $106.3 billion in 2006, making cable and satellite TV largest segment of media industry. Following 9 consecutive years of accelerating growth, radio ad expenditure declined 6.2%, to $17.9 billion, in 2001. However, VSS said local ad spending would rebound 3% to $14.6 billion this year, while national radio would post 4% growth, to $3.2 billion. From this year through 2006, spending will grow 6.2% on compound annual basis, reaching $24.1 billion.

Amid recent wave of telecom accounting disclosures and continued downturn in sector, policymakers are expected to step up their focus on role that financial viability of carriers plays in overall network security, experts and industry sources said. Even before companies such as WorldCom and Qwest revealed accounting errors in recent months, Richard Clarke, special adviser to President Bush for cyberspace, flagged financial health of carriers as key concern involved in network security at March meeting of National Security Telecom Advisory Committee (NSTAC), several sources said. Numerous sources and industry experts said they viewed financial health of carriers as emerging issue in network security that would become increasing govt. focus in coming months. Still, groups such as NSTAC haven’t been formally asked to examine that as standalone issue, and exactly how Administration would address issue in light of homeland security policies remains something of open question, said several people following issue closely.

CTIA urged congressional appropriators to provide full funding of $73 million for wireless priority access service (PAS). In July 25 letter to House Appropriations Committee Chmn. Byrd (D-W.Va.), CTIA Pres. Tom Wheeler said Administration’s budget request had contained $73 million for wireless PAS. National Communications System in April awarded contract to VoiceStream Wireless to provide priority access service for Washington and N.Y. metro areas, with agency planning to provide national capability for national security/emergency personnel by end of 2003. After Sept. 11 attacks, NCS and other federal agencies refocused on providing wireless emergency communications capability akin to Govt. Emergency Telephone Service (GETS) that already exists on wireline side. President Bush sought $73 million for wireless PAS effort, but Wheeler said “unfortunately, full funding has not yet been provided by either the House or the Senate Appropriations Committees.” He said wireless industry didn’t seek out PAS funding, “but out of a sense of national purpose has been working with the NCS to develop a voluntary, workable and efficient system to provide this capability.” Wheeler said that in May policy statement, Administration had cited wireless PAS program as critical element in homeland security effort and said its implementation shouldn’t be delayed. “The wireless industry agrees with NCS that failure to provide full funding of this request would hinder deployment and implementation of this initiative,” Wheeler said. Richard Clarke, special adviser to Bush for cyberspace, said Tues. (CD July 31 p4) that PAS was among issues he had discussed with CTIA executive board at meeting that day. Navy Capt. Katharine Burton, assistant deputy mgr. of NCS, said at wireless security conference Tues. that NCS still planned to have wireless PAS system fully operational by Dec. 2003 for both CDMA and GSM-based phones “to make sure whatever device an individual has, that that device has access to a wireless priority mechanism.” She spoke at conference sponsored by Center for Strategic & International Studies and ITAA. She was followed by Defense Dept. Chief Information Office John Stenbit, who told reporters Pentagon was poised to announce policy that would restrict personnel use of wireless devices based on security concerns. In other areas, Burton said NCS continued to work on Emergency Telecom Service (ETS), which is designed to provide emergency notification capabilities for next- generation networks, to ensure emergency capability in devices, whether pager service, Internet-capable PDA or other system. As public switched telephone network and Internet converge, “that’s going to bring about some new capabilities and new devices and we need to make sure those work together,” Burton said. Point would be to also make that capability available nationwide to designated users, she said. In emergency notification service, NCS is examining broadcast mechanism through different devices to transmit emergency messages quickly to users “within a relatively short time frame,” she said.

FCC Chmn. Powell told Senate Commerce Committee that it needed to expand scope of Sec. 214 of Communications Act for Commission to ensure continuity of variety of telecom services. Powell made comments in committee hearing Tues. on financial turmoil in telecom industry that also featured high-level officers of Global Crossing, Qwest and WorldCom. Committee Chmn. Hollings (D-S.C.) agreed Congress should broaden scope of Act’s section that gave FCC power to prevent communications networks from cutting service as result of bankruptcy and said he would try to make legislative changes before Congress’s adjournment scheduled for first week of Oct. Hollings asked Powell to send recommendations to Committee. Powell wouldn’t elaborate on how broad Sec. 214 scope should be, although he did mention cable companies and Internet service providers. He said there often was conflict between bankruptcy law and Commission’s powers under Sec. 214. Although he said he could envision scenario where scope of Sec. 214 could hamper FCC efforts to prevent loss of service, there were no current bankruptcies where agency didn’t have power to act.

Rent-to-own (RTO) business is drawing even with CE retail in customer demand for new technologies after years of lagging behind, industry officials said at Assn. of Progressive Rental Organizations (APRO) show in Las Vegas this week. Digital TVs are edging their way into market, while PC specs rival those available at retail, they said. Gap between availability of new technology at retail and RTO typically stretched 18 months in past, but Internet has forced dealers to bridge divide because of increased demand from customers, they said.

One day after Leichtman Research Group reported that PVRs wouldn’t be widely adopted in U.S. (CED July 23 p5), Carmel Group came out with its DVR Competitive Market Report that predicted that by end of 2008 there would be 28.6 million PVR users in nation, representing 25% penetration. While LRG report said demand would be supply-side driven, Carmel Group said PVRs “are going to be a central media hub for cable and satellite operators” for advanced applications. Group said that by end of 2005, U.S. cable operators would have estimated 4.8 million PVR- based users and U.S. DBS operators 4.9 million PVR-based users. Carmel also said 2 “pure-play” PVR providers would emerge from pack, TiVo and Metabyte Networks, and cable operators would be more inclined to go with unbranded PVR products such as those provided by Metabyte and OpenTV. Report made no mention of RCA Scenium-branded DVD/PVR combo, announced July 10.

One day after Leichtman Research Group reported that digital video recorders (DVRs) wouldn’t be widely adopted in U.S., Carmel Group came out with its DVR Competitive Market Report that predicted that by end of 2008 there would be 28.6 million DVR users in nation, representing 25% penetration. While LRG report said demand would be supply-side driven, Carmel Group said DVRs “are going to be a central media hub for cable and satellite operators” for advanced applications. Group said that by end of 2005, U.S. cable operators would have estimated 4.8 million DVR-based users and U.S. DBS operators 4.9 million DVR-based users. Carmel also said 2 “pure-play” DVR providers would emerge from pack, TiVo and Metabyte Networks, and cable operators would be more inclined to go with unbranded DVR products such as those provided by Metabyte and OpenTV.