2G scam: Finance Ministry went along with A Raja, DEA tells JPC

NEW DELHI: The Finance Ministry resisted A Raja's decision not to auction the 2G spectrum, but eventually went along Telecom Ministry's views, a presentation by the Department of Economic Affairs before the Joint Parliamentary Committee probing the scandal said on Thursday. 

In what might exacerbate the perceived rift between Finance Minister Pranab Mukherjee and his predecessor, Home Minister P Chidambaram, DEA said that the note Chidambaram sent to the Prime Minister days after the 2008 spectrum allocation recommended that spectrum allocations made in the past be "treated as a closed chapter." That suggestion was in contrast with efforts made by the ministry in the preceding months to secure greater revenues for the exchequer from spectrum allocation. 

"A note was sent by the then Finance Minister to the Prime Minister on January 15, 2008, on the basis of the additional secretary's note and concept paper. An auction-based mechanism was recommended for future allocation of spectrum (beyond the 'start up' spectrum) with the spectrum allocations having been made in the past to be treated as a closed chapter," the DEA presentation said. 

This note was the source of the sharp criticism against Chidambaram by Public Accounts Committee chairman Murli Manohar Joshi's report. In its draft report, PAC said it considered it, "most unfortunate that the Finance Minister, the guardian of public exchequer and entrusted with principal task of mobilisation of resources, pleaded for treating the matter as closed instead of initiating stringent and swift action against those responsible for huge losses to the exchequer." 

Chidambaram had responded then saying it was a distortion of his note and his recommendation was for spectrum usage charges and not for the entry fee. The Prime Minister has maintained that he has acted on the basis of the advice of his ministers. In a series of letters in mid-2007, the Finance Ministry had asked the Department of Telecom to include the issue of spectrum pricing within the ambit of the group of ministers. 

DoT opposed this, saying spectrum pricing is within the normal scope of work carried out by that ministry. The Finance Secretary had brought this issue to the notice of the Cabinet Secretary as well. After several back and forths, in June 2007, DoT argued that spectrum pricing and charges for the use of spectrum was a dynamic issue and must be reviewed and considered from time to time in the context of the changing technology and international practices in consultation with the telecom regulator. "Thereafter, DEA did not take up the issue, either with DoT or with the Cabinet Secretariat," DEA says in the presentation.

News of the World shutting down amid scandal

LONDON

News International James Murdoch says he's satisfied that embattled executive Rebekah Brooks had no knowledge of phone hacking while she was editor of the scandal-ridden News of the World.

His comments came just hours after the Murdoch media empire unexpectedly jettisoned the News of the World on Thursday, the best-selling tabloid at the center of the phone hacking scandal.

The tabloid, long known for its dubious undercover reporting techniques, had gravely offended the British public by hacking into the cell phone voicemail of a missing teenage girl, possibly even interfering with the police investigation into her murder.

But Murdoch expressed confidence in Brooks' leadership during an interview broadcast on British media.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

LONDON (AP) -- The Murdoch media empire unexpectedly jettisoned the News of the World on Thursday, the best-selling tabloid at the center of an ugly phone hacking scandal.

The tabloid, long known for its dubious undercover reporting techniques, had gravely offended the British public by hacking into the cell phone voicemail of a missing teenage girl, possibly even interfering with the police investigation into her murder.

What was an acceptable, if illegal, tactic used to gather scoops on drug-using celebrities, philandering politicians or cheating film stars suddenly became completely unacceptable when missing children, the relatives of soldiers slain in Afghanistan or the families of victims of London's 2005 terror attacks were targeted.

Rupert Murdoch's son, James Murdoch, who heads European operations for the paper's parent company, said the 168-year-old weekly newspaper would publish its last edition on Sunday, without ads. The closure was spurred in part by the decision by many large advertisers to withdraw their ads in protest of the paper's gross intrusions of privacy.

News International says shuttering the scandal-wracked News of the World will cost about 200 tabloid staffers their jobs. Journalists at the paper had no advance word of the decision.

However, some analysts said decision may make strategic business sense for Rupert Murdoch if it allows him to salvage a controversial bid to fully take over the broadcaster British Sky Broadcast in a deal estimated at 12 billion pounds ($19 billion). Murdoch might even be able to fill the gap left by the News of the World with one of his other media properties.

"News Corp. has taken a bold decision to stop printing the News of the World and close the title. Mr. Murdoch was clearly not willing to jeopardize his bid for BSkyB," said markets analyst Louise Cooper of BGC Partners in London. "Murdoch has shown what a brilliant operator he really is."

She said the financial impact of the paper's closure will be small to parent company, far less than the value wiped off of News International's stock price by the hacking scandal.

News International spokeswoman Daisy Dunlop denied rumors that The Sun, the News of The World's sister paper that publishes Monday through Saturday, would become a seven-day operation to pick up the slack and restore Murdoch's financial position in the vital Sunday market.

"It's not true at the moment," she said.

She said employees laid off in the closure will be able to apply for other jobs within the sprawling media company.

The news of the shutdown and mass job loss sparked outrage at the paper's headquarters, especially because Rebekah Brooks -- the editor in charge at the time, now one of Murdoch's top lieutenants -- is keeping her highly paid executive position as News International chief.

The abrupt decision to shut the newspaper follows an extraordinary three days in which multiple revelations about intrusive phone hacking cost the paper its advertising base and reader support. The tabloid was found to have hacked into the phone message of a teenage murder victim and was suspected of targeting the relatives of slain soldiers in its quest to produce attention-grabbing headlines.

Britons of all stripes said they were disgusted and revolted by the Rupert Murdoch-owned newspaper's tactics and British lawmakers held an emergency debate on Parliament on Wednesday in which many condemned the paper.

The tabloid's executives had already admitted the widespread hacking of cell phones used by celebrities, film stars, royal aides and politicians and reached cash settlements with prominent victims. But the intrusion into -- and possible interference with -- an ongoing murder investigation of a child proved to be the final straw in losing the public's trust.

Police are now examining 4,000 names of people who may have been targeted by the paper.

Murdoch said in a memo to staff that all revenue from the final issue, which will carry no ads, would go to "good causes."

The announcement took British media-watchers -- and the newspaper's staff -- by surprise.

The News of the World, which sells close to 3 million copies a week, has acknowledged that it hacked into the mobile phone voice mails of politicians, celebrities and royal aides. A reporter and a private investigator working for the paper were jailed for phone hacking in 2007.

But in recent days the allegations have expanded to take in the phones of missing children who were found slain, the relatives of terrorist victims and families of soldiers killed in Afghanistan.

James Murdoch said if the allegations were true, "it was inhuman and has no place in our company."

"Wrongdoers turned a good newsroom bad," he said, "and this was not fully understood or adequately pursued."

"While we may never be able to make up for distress that has been caused, the right thing to do is for every penny of the circulation revenue we receive this weekend to go to organizations -- many of whom are long-term friends and partners -- that improve life in Britain and are devoted to treating others with dignity," he said.

Shares in News Corp. were up 1.6 percent at $18.22 on the Nasdaq index in New York, though they have fallen from above $18.50 since Tuesday.

Some of the tabloid's tactics had involved illegal payoffs to police officers for tips and information.

The Independent Press Complaints Commission announced a review Thursday into the corruption charges, which are apparently based on information provided to London police this week by the tabloid.

Police Commissioner Paul Stephenson said Thursday that any officers who took illegal payments should face criminal prosecution.

"I am more than ashamed -- I am determined to see them in a criminal court," Stephenson said.

The involvement of the independent commission means police will have impartial outside help in determining whether officers should face corruption charges.

Deborah Glass, deputy commissioner of the Independent Police Complaints Commission, said she will personally supervise the investigation into the possible News of the World payoffs. She said she wants to assure the public that the police have done everything possible to identify offenders.

Many in Britain have long assumed that some police got bribes from journalists. The practice was admitted in 2003 by Rebekah Brooks, then the editor of The Sun -- another Rupert Murdoch tabloid -- and now chief or Murdoch's U.K. newspaper operations, in testimony before Parliament. But details about suspected corruption are starting to emerge because of the increased focus on shoddy journalistic practices at Britain's highly competitive tabloids.

Brian Paddick, a former senior police commander, told the BBC that journalists used to make clandestine cash payoffs to police in envelopes handed over at a drive-thru fast food restaurant near the News International headquarters in London.

Sometimes the reporters sought information about celebrities in trouble -- Paddick cited a 2010 car crash in north London involving singer George Michael, who was using marijuana and alcohol at the time -- and sometimes they were making deals regarding ongoing police investigations.

Paddick said sometimes payoffs were "jeopardizing serious criminal investigations by giving out confidential information that could be useful to criminals."

Police officials have said only a handful of police are suspected of receiving payments, but declined to say how many.

Paddick, a former London mayoral candidate who may run again in 2012, said one journalist said he had paid 30,000 pounds ($50,000) for police information.

"All of this is done in a very clandestine way," said Paddick, who added he had never personally seen money being exchanged.

HTC Buys S3 Graphics, Grows Patent Portfolio

Smartphone maker HTC is bulking up its graphics capabilities and patent portfolio by buying S3 Graphics from Via for $300 million.

HTC is making an aggressive move in the highly competitive smartphone world, buying S3 Graphics from chip maker Via Technologies and investment firm WTI Investment International for $300 million.

The move not only gives HTC greater graphics capabilities—S3 makes graphics chips for mobile phones, tablets, PCs and game consoles—but also more leverage in its ongoing legal dispute with Apple over alleged patent infringements.

The two companies have been trading legal shots since last year, when Apple officials in March 2010 filed a lawsuit against HTC, claiming the Taiwan-based device maker had infringed on almost two dozen Apple patents for its iPhone, relating to the smartphone's hardware, architecture and interface. HTC executives denied the claim, and in May 2010, in a filing with the International Trade Commission, accused Apple of infringing on HTC patents and asking that such popular Apple devices as the iPad, iPhone and iPod not be allowed in the United States.

The acquisition of S3 Graphics would further bolster HTC's patent portfolio, giving it more leverage and protection when dealing with Apple and the like in an increasingly litigious smartphone space. HTC will gain 235 patents and pending applications from S3, according to reports.

S3's image-compression technology is used in a number of game consoles, including Nintendo's Wii and Sony's PlayStation, and is increasingly being incorporated in other devices, including smartphones and tablets. And the company is no stranger to patent litigation. On July 1, the ITC ruled that Apple had infringed on two S3 patents involving image compressing and image data formats.

"Buying a patent portfolio will be very useful to us," HTC CFO Winston Yung said, according to Bloomberg News, though he did not comment on specific legal disputes.

Apple officials have been aggressive in pursuing legal action against smartphone competitors they say have infringed on Apple patents. The company also recently bulked up its own patent portfolio, as part of a consortium that bought bankrupt Nortel Networks' patents for $4.5 billion. Also in the consortium were Microsoft, BlackBerry maker Research In Motion, Sony, EMC and Ericsson. Google lost out on the patents, which some analysts said the company needed to protect itself from litigation in the mobile-technology market. Googe's Android mobile operating system is used by a growing number of mobile-device manufactures—including HTC—and is the key competitor to Apple's iPhone and iPad devices.

In the Nortel deal, Apple and the others reportedly bought 6,000 patents and patent applications that cover such areas as wireless, 4G technology, Web search, social networking, data networking, Internet, service providers and semiconductors.

News of the S3 deal came the same day that HTC announced record second-quarter financial numbers, including $608 million in income, more than doubling the income from the same period last year. HTC was helped in large part by demand for a number of popular smartphones, including the Desire HD, Thunderbolt and Sensation devices.

The HTC-S3 deal had the fingerprints of WenChi Chen and his wife, Cher Wang, all over it. Cher Wang is chairman of both HTC and Via, and is also a large shareholder in WTI. WenChi is CEO of Via. Via bought S3 in 2001 to improve the integration of graphics capabilities in its processors and chipsets. It sold part of the company to WTI in 2005.

Of the $300 million HTC will pay for S3, Via will get $147 million and WTI $37 million. While HTC will own S3, it reportedly will give a perpetual license of the S3 patents to Via, enabling the x86-based chip maker to continue to strengthen the graphics capabilities in its products.

HTC and Via officials expect the deal to close before the end of 2011.

Technology: The end of all-you-can-eat wireless data plans

It's hard to be grateful to a company that offers its customers less value. But give Verizon Wireless this much credit, at least: When it announced that new subscribers would no longer be able so sign up for unlimited data use with the smartphones they buy, at least it gave them the chance to spend lessif they don't do much streaming or downloading.

According to my colleague Nathan Olivarez-Giles, Verizon will replace its $30-per-month unlimited data plan Thursday with four alternatives: $10 a month for 75 megabytes, $30 for 2 gigabytes, $50 for 5 gigabytes and $80 for 10 gigabytes. Going over your limit will cost you $10 per gigabyte. But if you're an average user -- according to Cisco, the average iPhone user consumes 355 megabytes per month and the average Android user consumes 209 megabytes -- you can take the entry-level tier and still keep your bill well below $30.

Now, compare Verizon's move to AT&T's announcement  earlier this year that it was ending its unlimited data plans for DSL customers (it already had bandwidth limits on its wireless plans). In AT&T's case, no one will pay less. Instead, some customers -- those who exceed the new bandwidth cap -- will pay more.

I don't blame wireless carriers for seeking to make the heaviest users pay the most for data plans. All of their customers in a given coverage area share bandwidth with one another, and those who stream video take up more of this shared resource than those who are just sending sending tweets. And network operators say a small percentage of their customers are responsible for a hugely disproportionate share of the traffic. 

The caps will be problematic, though, if they don't grow over time. As it shifts to 4G technology, Verizon will not only have more bandwidth, it will be able to make more efficient use of it. The same is true for the other carriers that have invested in similar 4G technology. At the same time, the average amount of bandwidth used by its customers is expected to grow rapidly, encouraged by a proliferation of bandwidth-hungry apps.

Verizon's move strikes me as less troubling than AT&T's in one other way as well: Consumers typically have more choices in wireless than they do in fixed broadband. The wireless market has four major players today, but in most communities there are only two wired broadband providers: the local cable operator and the local phone company.

Of course, if federal regulators approve AT&T's proposed purchase of T-Mobile, there will be only three mobile carriers left. That's assuming Sprint, the smallest of the three, isn't killed off  by the market muscle of Verizon and AT&T.

Verizon has said it doesn't plan to oppose  the AT&T-T-Mobile merger. Its shift to limited data plans, however, may make regulators less receptive to the idea of letting AT&T swallow up a competitor with a penchant for discounting and a different approach to bandwidth caps.