Judges Hear Arguments on Rules for Internet

On Monday, the Federal Communications Commission and Verizon, one of the largest Internet service providers, squared off in a two-hour session of oral arguments — three times as long as was scheduled. As Verizon pushed for the authority to manage its own pipes, the government argued that creators of legal content should have equal access to Internet users, lest big players gain an unfair advantage.

But two judges appeared deeply skeptical that the F.C.C. had the authority to regulate the Internet in that manner.

The two jurists, Judge Laurence H. Silberman and Judge David S. Tatel, said that the agency’s anti-discrimination rule — which requires an Internet service provider to give all traffic that travels through its pipes the same priority — illegally imposed rules meant for telephones on the infrastructure of the Web. The F.C.C. itself disallowed the telephone-type regulation a decade ago.

The third judge, Judith W. Rogers, did not ask as many questions but appeared to accept much of the F.C.C.’s position.

Consumers could experience a significant change in the Internet if the United States Court of Appeals for the District of Columbia Circuit strikes down the F.C.C.’s requirement, called the Open Internet Order.

Currently, companies that offer goods or services online do not have to pay anything to get their content to consumers. If Internet service providers started charging fees to reach customers more quickly, large, wealthy companies like Google and Facebook would have an edge, the F.C.C. says. The government argued that such a tiered service could cause small, start-up companies with little money to pay for their access — the next Google or Facebook, perhaps — to wither on the vine.

In any case, the added costs would be likely to be passed on to consumers.

The case, which is expected to be decided late this year or early next year, has attracted enormous interest. On Monday, telecommunications lawyers began lining up to get into the courtroom two and a half hours before the session was scheduled to start. The session was standing room only, with many others left to listen in an adjacent overflow room.

The judges were not entirely hostile to the F.C.C.’s arguments. Judge Tatel, who many telecommunications analysts expect to be the swing vote on the case, pushed lawyers on both sides to concede that the part of the F.C.C. rule that prohibits outright blocking of online content or applications could be allowed.

Judge Tatel also queried each side on whether the two main provisions of the Open Internet Order — no blocking and no discrimination — had to be taken as a whole or could be separated, with the no-blocking rule being upheld.

An opinion that voided one provision yet upheld the other would be more likely to be appealed to the Supreme Court, telecommunications lawyers said, because neither side would be completely happy with the decision.

Helgi C. Walker of the law firm Wiley Rein, who argued the case on behalf of Verizon, said the rules had to be struck down as a whole. Congress never intended the F.C.C. to have authority to regulate the Internet, she said.

Sean A. Lev, who argued the case for the agency, told the judges that the F.C.C. did have the authority to govern the Internet under numerous parts of the Telecommunications Act, including one that gives the commission the duty to work to expand broadband access. Companies that have equal access to consumers are encouraged to innovate, Mr. Lev said, adding that it would result in more vibrant start-ups and a growth in demand for Internet service.

The judges themselves seemed intent on viewing the case from as many sides as possible. Each side was scheduled 20 minutes to present its case and answer questions from the justices. But after spending 30 minutes on Verizon’s presentation, the judges proceeded to grill the F.C.C.’s lawyer for a full hour.

The remainder of the two-hour session was spent hearing from a lawyer representing public-interest groups, who joined the lawsuit on the F.C.C.’s side, and a rebuttal from Verizon.

The F.C.C.’s uphill battle, in part, reflects politics and past decisions by the agency. In 2002, its chairman at the time, Michael K. Powell, a Republican, got the majority of the commission to agree that the Internet was not a telecommunications service like the telephone system. Instead, it classified the Web as an information service, making it subject to much lighter regulation.

A Push to Connect Millions Who Live Offline to the Internet

“The job I’m trying to get now requires me to know how to operate a computer,” said Elmer Griffin, 70, a retired truck driver from Bessemer, Ala., who was recently rejected for a job at an auto-parts store because he was unable to use the computer to check the inventory. “I wish I knew how, I really do. People don’t even want to talk to you if you don’t know how to use the Internet.”

Mr. Griffin is among the roughly 20 percent of American adults who do not use the Internet at home, work and school, or by mobile device, a figure essentially unchanged since Barack Obama took office as president in 2009 and initiated a $7 billion effort to expand access, chiefly through grants to build wired and wireless systems in neglected areas of the country.

Administration officials and policy experts say they are increasingly concerned that a significant portion of the population, around 60 million people, is shut off from jobs, government services, health care and education, and that the social and economic effects of that gap are looming larger. Persistent digital inequality — caused by the inability to afford Internet service, disinterest or a lack of computer literacy — is also deepening racial and economic disparities in the United States, experts say.

“As more tasks move online, it hollows out the offline options,” said John B. Horrigan, a senior research fellow at the Joint Center for Political and Economic Studies. “A lot of employers don’t accept offline job applications. It means if you don’t have the Internet, you could be really isolated.”

Seventy-six percent of white American households use the Internet, compared with 57 percent of African-American households, according to the “Exploring the Digital Nation,” a Commerce Department report released this summer and based on 2011 data.

The figures also show that Internet use over all is much higher among those with at least some college experience and household income of more than $50,000.

Low adoption rates among older people remain a major hurdle. Slightly more than half of Americans 65 and older use the Internet, compared with well over three-quarters of those under 65.

In addition, Internet use is lowest in the South, particularly in Mississippi, Alabama and Arkansas.

Willa Ohnoutka, 78, who has lived in the same house in suburban Houston for 40 years, said she did not use the Internet at all. “I use my telephone,” Ms. Ohnoutka said. “I get news on the TV. I’m just not comfortable involving myself with that Internet.”

Others cite expense as the reason they do not use the Internet.

“I am cheap,” said Craig Morgan, 23, a self-employed carpenter from Oxford, Miss. So far, he has made do without the Internet at home, but while he has used a smartphone to connect, that has limitations, he said.

“When we came home from the hospital with our new baby two months ago,” the hospital “took pictures and put them online,” he said. “We had to go to my in-laws to order them.”

Gloria Bean, 41, an elementary school teaching assistant from Calhoun City, Miss., said cost was also a reason she had not had Internet access at home for three years.

“I just couldn’t afford it,” she said. Being cut off, she said, “has affected me and my children.”

“They have to have it for school to do research for a paper or something they need for class,” Ms. Bean said.

As a result, she added, she often rushes from her job at school to pick up her children and take them to the library, where there are 10 computers.

The Obama administration allocated $7 billion to broadband expansion as part of the 2009 economic stimulus package. Most of it went to build physical networks. About half of those infrastructure programs have been completed, with Internet availability growing to 98 percent of homes from fewer than 90 percent.

About $500 million from the package went toward helping people learn to use the Internet. Those programs were highly successful, though on a small scale, producing more than half a million new household subscribers to Internet service, Commerce Department statistics show.

Bits Blog: From North Korea With Love: a Tablet With No Internet Access

F.C.C. Backs Plan to Update a Fund That Helps Connect Schools to the Internet

WASHINGTON — The Federal Communications Commission voted on Friday to overhaul and possibly expand its E-Rate program, a $2.3 billion effort to provide schools and libraries with up-to-date telecommunications service and equipment, including high-speed Internet connections.

A proposal approved by the commission, which will be made available for public comment before a final version is completed, calls for funds to be moved away from outdated uses like paying for paging service and long-distance phone calls and into areas that will accelerate digital literacy, like Wi-Fi connections within a school or library.

The proposal also calls for measures that would drive down the cost of services, like adoption of purchasing consortiums, and the streamlining of administrative requirements — among them, shifting much of the required paperwork for applicants to electronic filings. “One of the biggest obstacles to seizing the opportunities of digital learning in America is inadequate bandwidth at our schools and libraries,” Mignon L. Clyburn, the F.C.C. chairwoman, said before voting. “Simply put, they need faster high-capacity connections and they need them now.”

Just last month in a visit to a North Carolina middle school, President Obama set a goal of connecting 99 percent of school students to the Internet through high-speed broadband and high-speed wireless within five years.

“To get there, we have to build connected classrooms that support modern teaching — investments we know our international competitors are already making,” Mr. Obama said on Friday.

The E-Rate fund has financed Internet connections to more than 95 percent of American public school classrooms, while only 14 percent were connected when E-Rate was established in 1997.

In 2010, however, an F.C.C. study found that more than half of the schools and libraries reported that their Internet connections were too slow to meet their needs. For the coming school year, libraries and schools requested more than $4.9 billion to pay for connections and equipment, more than twice the size of the fund.

“We fail our students if we expect digital-age learning to take place at near dial-up speeds,” said Jessica Rosenworcel, an F.C.C. commissioner. “Contrast this with efforts under way in some of our world neighbors. They are pouring resources into these subjects, into schools and connectivity.”

The E-Rate program has been faulted for inadequately allocating money in the fund, which is provided through a tax on consumers’ phone bills, a monthly charge between 50 cents and $1.

Commissioner Ajit Pai, the lone Republican on the five-member commission (where two seats are vacant), criticized allocations of the fund, saying an average of only $1.8 billion had been spent in each of the last 10 years, leaving more than $5 billion unused in the E-Rate account.

Mr. Pai also complained that the program placed greater emphasis on the wrong services.

“E-Rate today prioritizes long-distance telephone calls and getting phone service to a school’s bus garage over wiring up a classroom,” Mr. Pai said in a speech this week at the American Enterprise Institute. “How can it be that E-Rate in the last few years committed about $600 million, more than one-quarter of its annual budget, to support voice telephone services while at the same time denying eight out of 10 applicants’ funding for connecting classrooms?”

At a Senate Commerce Committee hearing this week, both Republicans and Democrats spoke favorably of the fund, although some quoted Mr. Pai’s observations in a warning of reckless spending.

F.C.C. Backs Plan to Update a Fund That Helps Connect Schools to the Internet

WASHINGTON — The Federal Communications Commission voted on Friday to overhaul and possibly expand its E-Rate program, a $2.3 billion effort to provide schools and libraries with up-to-date telecommunications service and equipment, including high-speed Internet connections.

A proposal approved by the commission, which will be made available for public comment before a final version is completed, calls for funds to be moved away from outdated uses like paying for paging service and long-distance phone calls and into areas that will accelerate digital literacy, like Wi-Fi connections within a school or library.

The proposal also calls for measures that would drive down the cost of services, like adoption of purchasing consortiums, and the streamlining of administrative requirements — among them, shifting much of the required paperwork for applicants to electronic filings. “One of the biggest obstacles to seizing the opportunities of digital learning in America is inadequate bandwidth at our schools and libraries,” Mignon L. Clyburn, the F.C.C. chairwoman, said before voting. “Simply put, they need faster high-capacity connections and they need them now.”

Just last month in a visit to a North Carolina middle school, President Obama set a goal of connecting 99 percent of school students to the Internet through high-speed broadband and high-speed wireless within five years.

“To get there, we have to build connected classrooms that support modern teaching — investments we know our international competitors are already making,” Mr. Obama said on Friday.

The E-Rate fund has financed Internet connections to more than 95 percent of American public school classrooms, while only 14 percent were connected when E-Rate was established in 1997.

In 2010, however, an F.C.C. study found that more than half of the schools and libraries reported that their Internet connections were too slow to meet their needs. For the coming school year, libraries and schools requested more than $4.9 billion to pay for connections and equipment, more than twice the size of the fund.

“We fail our students if we expect digital-age learning to take place at near dial-up speeds,” said Jessica Rosenworcel, an F.C.C. commissioner. “Contrast this with efforts under way in some of our world neighbors. They are pouring resources into these subjects, into schools and connectivity.”

The E-Rate program has been faulted for inadequately allocating money in the fund, which is provided through a tax on consumers’ phone bills, a monthly charge between 50 cents and $1.

Commissioner Ajit Pai, the lone Republican on the five-member commission (where two seats are vacant), criticized allocations of the fund, saying an average of only $1.8 billion had been spent in each of the last 10 years, leaving more than $5 billion unused in the E-Rate account.

Mr. Pai also complained that the program placed greater emphasis on the wrong services.

“E-Rate today prioritizes long-distance telephone calls and getting phone service to a school’s bus garage over wiring up a classroom,” Mr. Pai said in a speech this week at the American Enterprise Institute. “How can it be that E-Rate in the last few years committed about $600 million, more than one-quarter of its annual budget, to support voice telephone services while at the same time denying eight out of 10 applicants’ funding for connecting classrooms?”

At a Senate Commerce Committee hearing this week, both Republicans and Democrats spoke favorably of the fund, although some quoted Mr. Pai’s observations in a warning of reckless spending.

Bits Blog: Why Asian Internet Companies Struggle to Become Global

Bobby Yip/Reuters Tencent, one of China’s most valuable technology companies, owns WeChat, an online messaging service that’s growing in popularity across borders.

Asia is home to nearly half of the 2 billion Internet users in the world. It makes most of the hardware — laptops, smartphones, tablets and other gadgets — that is used to gain access to the Internet. In countries like South Korea and Japan, it has some of the fastest wired and wireless networks for carrying Internet traffic.

Yet in one aspect of the high-technology economy, Asia still struggles. It has yet to create an Internet company with the global scale of a Google, Facebook or Amazon. A report published Wednesday by the Economist Intelligence Unit, a research outfit affiliated with the Economist magazine, examines some of the possible reasons for this.

In some cases, the study says, Asian Internet companies have simply been held back by a lack of international ambition. In countries like China or India, domestic markets are so big that expanding abroad has not always been seen as a necessity. Other companies are reluctant to tackle the cultural challenges of operating in the West, according to the report, whose conclusions were reached after interviews with Internet entrepreneurs and others.

But that is starting to change. A new generation of Asian Web companies is seeing rapid cross-border growth — including, in some cases, in the West. These include online messaging services like Line, from Japan, and WeChat, which is owned by a Chinese Internet business, Tencent. Social gaming companies, like GungHo of Japan, have also achieved strong international growth.

Meanwhile, Alibaba, an e-commerce giant in China, has increasingly international ambitions, and is expected to offer stock to the public soon to finance them. Another Asian e-commerce company, Rakuten of Japan, has moved to expand abroad through acquisitions of companies like PriceMinister of France, and it has adopted English as its official language.

Yet these are the exceptions. The study says Asian Internet companies have been hobbled by factors like a lack of trusted online payment systems, a reluctance among Internet users to pay for digital content and restrictions on hiring foreign workers. The report also highlights burdensome regulations, including laws in countries like India and Thailand that make Internet companies responsible for the content posted on their sites.

“In many markets around the region, change must begin with a better understanding, on the part of governments, of the specific challenges facing Internet businesses, and a more general recognition of the growth opportunity that online commerce represents,” the authors write.

Asia is not alone in struggling to export home-grown Internet services. If anything, Europe has had an even harder time — despite lesser regulatory, linguistic and cultural hurdles to international expansion.

The report was sponsored by the Asia Internet Coalition, a group that was formed by five American Internet companies — Google, Facebook, Yahoo, eBay and Salesforce. The Economist Intelligence Unit says it was written independently. But some of the issues that are highlighted – especially the effect of regulation – do mirror the complaints from American Internet entrepreneurs and executives about operating in Asia.

In addition to the well-known restrictions that American Internet companies face in China, where services like Facebook and Twitter are blocked, Silicon Valley giants have also struggled in some other Asian markets. In South Korea, for example, the Internet search business is dominated by two local players, Naver and Daum, and not by Google.

The report makes clear recommendations for stimulating the Internet economy in Asia, urging governments there, for instance, to make regulatory changes to allow efficient online payments systems to develop.

Who would be the main beneficiaries? That is less clear.

Media Decoder: Apple Is Said to Be Pressing to Complete Deals for Internet Radio

After months of stalled negotiations over its planned Internet radio service, Apple is pushing to complete licensing deals with music companies so it can reveal the service as early as next week, according to people briefed on the talks.

News from the technology industry, including start-ups, the Internet, enterprise and gadgets.
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Apple’s service, a Pandora-like feature that would tailor streams of music to each user’s taste, has been planned since at least last summer. But Apple has made little progress with record labels and music publishers, which have been seeking higher royalty rates and guaranteed minimum payments, according to these people, who spoke anonymously about the private talks.

While it is still at odds with some music companies over deal terms, Apple is said to be eager to get the licenses in time to unveil the service — nicknamed iRadio by the technology press — at its annual developers conference, which begins June 10 in San Francisco.

Apple has signed a deal with the Universal Music Group for its recorded music rights, but not for music publishing — the part of the business that deals with songwriting. Over the weekend, Apple also signed a deal with the Warner Music Group for both rights. It is still in talks with Sony Music Entertainment and Sony’s separate publishing arm, Sony/ATV, whose songwriters include Taylor Swift and Lady Gaga.

Representatives for Apple and the music companies declined to comment.

Apple’s Internet radio feature is expected to be free and supported by advertising, and would represent a relatively late arrival by the company into what has become a fast-growing — if low-margin — sector of the music business. Pandora has more than 70 million regular users, the vast majority of whom do not pay, and similar features have been introduced by Google, Spotify and the radio company Clear Channel Communications.

The licensing fees paid by Pandora have been a sore spot for music companies, which see promise in Apple’s service, particularly since it can be linked to sales through Apple’s iTunes store, but want higher rates. Publishers, for instance, are paid about 4 percent of Pandora’s revenue, but want as much as 10 percent from Apple.

Apple is said to be negotiating directly with the music groups because it wants more extensive licensing terms.

You're the Boss Blog: For Local Businesses, the Internet Threat Isn’t Just the Sales Tax

An owner’s dispatches from the front lines.

I am a third-generation retailer. My father and grandfather owned a “dime store” (Google it), and working there gave me a foundation that would allow me to become a successful entrepreneur.

Because my father was unable to teach me anything about management (only one nonfamily employee), marketing (didn’t do any) or finance, I learned most of what I know about business through trial and error. But I did learn something more valuable, something more basic from my father. What I learned has since been termed customer service, but it is something I have been giving since I was 7 years old.

My father was good at it. But in the end, it couldn’t make up for the competition from bigger stores that slowly put him, and thousands like him, out of business. All of these years later, I wonder whether specialty stores like mine — picture framing, art, a furniture store — will be put out of business by the latest version of bigger stores, the Internet retailers.

Small retailers have been under attack for 40 years. The number of local hardware stores, shoe stores and clothing stores has fallen drastically. Other small businesses — privately owned drugstores, office supply shops and small electronics stores — have all but disappeared. But some small businesses are at least holding their own, and some are even doing well. The local bakery, locksmith, jewelry store, shoe repair store, bike shop, frame shop, cleaners, hair salon, pizza parlor, tailor and florist still occupy space in strip centers across America.

Many of these businesses have a strong service component, which means they don’t really have Internet competitors. But some do. In particular, I think of the local shoe store. Customers can come into the store, try on numerous pairs of shoes and walk out empty-handed — only to go home and order online, perhaps saving sales tax and maybe a few dollars more. Great customer service may help the local retailers, but nothing is going to stop some people from stealing their time.

A recent You’re the Boss blog post on this topic got quite a response, with many people agreeing that “showrooming” is wrong. But the responses also reminded me that many people do not understand what happens on the other side of the counter. There are many misconceptions about why there are cost savings from buying on the Internet, with some of them stemming from the phrase “bricks and mortar.” There is a common assumption that local retailers charge more because they have to pay more in rent. But that generally is not the case. As a retailer who sells both on the Web and off, I can assure you that competing on the Web is not free. The cost of building and maintaining a Web site can easily eat up whatever savings you enjoy paying warehouse rent instead of retail rent.

So what are the differences? Well, the big Internet businesses are going to have lower costs because of their economies of scale. And labor can be a huge savings. Web retailers don’t have to pay commissions, and they don’t pay people to stand around and wait for the opportunity to serve customers. But much of this cost advantage can disappear if the site offers free shipping.

On the other hand, the advantage Internet retailers have enjoyed by not having to collect sales tax has been greater than many realize. If you have bought from Zappos, you may have noticed that its prices are often the same as the local shoe store’s — until the local store charges for sales tax. Forcing Internet retailers to collect this tax will do much to level the playing field. But there is another reason that some of these big companies charge less, or more accurately choose to charge less, and it is one that is poorly understood. They charge less because they are O.K. with not making a profit. Most small businesses can’t afford to do that.

Why would a company choose to operate without a profit? Because it wants to provide great value? Check. Because it wants everyone to love the brand? Check. Because it wants to gain market share? Check. Because it wants to put everyone else out of business, so that it can one day flick a switch to raise prices and make a fortune? CHECK!

Don’t believe me? Well, here is Jeff Bezos of Amazon, explaining why making a profit isn’t important. Of course, he doesn’t say he’s planning to raise prices after he puts a lot of people out of business, but let me translate something for you: Gaining market share by not taking a profit makes the most sense if you are planning to raise prices later when you have less competition.

If this competition with giant Internet companies seems like some kind of Brave New World, it’s really not. It’s pretty much the same strategy the robber barons employed in the 19th century. Today’s combination of tax avoidance and profit delay enjoyed by the Web retailers has made it very difficult for some local retailers. But is the end near?

Well, the Internet’s free ride on sales tax may be. And I believe that if that ends, the game will change. It may be too late for some, but it will make it easier for local companies to compete. Of course, there will continue to be some casualties because of inventory levels, buying power, and maybe even service. And make no mistake: not all local retailers learned the customer-service lessons my father taught. Meanwhile, some Web retailers do give great service, including Zappos.

But here is some sobering math — and perhaps the ultimate misconception. When a local store loses 10 percent of its business to Internet competition (or for any other reason), it doesn’t sound devastating. But that 10 percent decline in revenue can easily mean a 100 percent decline in profit. Here is the (simplified) math. Let’s say a store has $1 million a year in revenue and a 5 percent profit at the end of the year, or $50,000. If sales fall 10 percent, to $900,000, and the business’s cost of goods sold is 50 percent, the $100,000 drop in revenue will wipe out the entire $50,000 in profit. And if sales should fall 20 percent, the store will post a $50,000 loss. That can’t last long.

People are often surprised when a local store or restaurant that seemed busy closes down. But would an outsider even notice a 10 percent drop in business? Of course, the person paying the bills — or not paying the bills, in this case — will always notice.

So what is the moral of this story? If you are a retailer facing Internet competition, the new sales tax law — if it passes — should help, but it may not solve all of your problems. And if you are a customer, please think twice before you use the services of a local retailer without any intention of buying. We all may pay a hefty price for your “savings.” Empty storefronts don’t help a neighborhood.

Jay Goltz owns five small businesses in Chicago.

Amazon Plans an Internet Video Device

The company is developing a television set-top box and has begun discussions with outside providers of content to distribute their video services to the device, according to three people briefed on the plan, who spoke on condition of anonymity because the Amazon product had not yet been announced and remained confidential.

Amazon is planning to introduce the set-top box in the fall, one of these people said.

Bloomberg Businessweek first reported news of Amazon plans on Wednesday.

Kinley Pearsall, an Amazon spokeswoman, declined to comment.

It was not immediately clear why Amazon would bother designing its own set-top box. The device will most likely showcase Amazon’s own online video offerings, which include Prime Instant Video, a Netflix-like subscription video service with more than 40,000 movies and television episodes that is included as part of Amazon’s broader Prime membership.

Among other benefits, Prime members, who pay $79 a year, get free two-day shipping on orders bought through Amazon’s site.

Amazon also offers a much broader library of video content, totaling 150,000 titles, that anyone, including people who aren’t Prime members, can buy and rent.

But Amazon’s video services are already available on hundreds of devices, many of which connect to television sets, like game consoles, digital video recorders and Blu-ray players. An app for using Amazon’s video service is even embedded in some television sets, including models from Sony, Panasonic and Samsung.

Although Amazon was an early entrant in the e-reader market with the Kindle, the company is late to the market for set-top boxes, where the incumbents include Apple’s Apple TV device and a family of products from Roku.

Amazon, though, has considerable strengths and has shown an aptitude for reinventing itself in new categories, like cloud computing and tablet computers. One media executive who has participated in discussions with Amazon about its set-top box said he thought the company’s standing as a top shopping destination would allow it to promote its new device and give it a strong chance of attracting an audience.

The company could use other creative techniques for getting its set-top box into more living rooms.

Michael Pachter, an analyst at Wedbush Securities, said one approach that could make sense was for Amazon to sell the device for $100 or less, about what Internet set-top boxes cost today, and to include a free year of its subscription video service.

At the end of the term, customers would have an incentive to sign up for Amazon Prime to continue receiving all of its membership benefits, including the video service. “I think this is a Trojan horse to get people to join Prime,” Mr. Pachter said.

Amy Chozick contributed reporting from New York.

Devices Like Cable Boxes Figured in Internet Attack

The organization most suspected, victims said, was Stophaus, an elusive group of disgruntled European Internet users, although Sven Olaf Kamphuis, its spokesman, denied he was responsible for the attacks. At the same time, he shifted blame to Russian Internet service providers, which he said were retaliating against Spamhaus, a European anti-spam group, for blacklisting them.

But the real enablers of the attack were the operators of more than 27 million computers around the globe who left their equipment wide open to a motivated attacker. Those enablers are not just companies, but regular people with home cable boxes.

“There is a big possibility that you are part of the problem without even knowing it,” said Paul Vixie, chairman of the Internet Software Consortium, a nonprofit company responsible for the software used by many of the servers that power the Internet.

The servers the attackers used — what the Internet community calls open recursive servers or, more commonly, open resolvers — are simply home Internet devices, corporate servers, or virtual machines in the cloud that have been sloppily configured to accept messages from any device around the globe.

Open resolvers have been set up in such a way that they are not unlike the naïve users of public Wi-Fi who forget to turn off their file-sharing settings, so that any hacker on the Internet can creep inside the computer. It’s similar to PC users who do not realize that by not updating their software, they let their computers get infected with malware and used as a zombie in a cyberattack.

The difference is that if you think of a computer as a digital weapon, then an open resolver is a machine gun. Attackers can use open resolvers to amplify the strength of a cyberattack by a factor of 100.

In this week’s attack on Spamhaus and the company hired to fight it, CloudFlare, attackers made use of more than 100,000 open resolvers to inflict an attack that reached 300 billion bits per second, the largest such attack ever reported. When they could not take down those targets, they aimed and fired open resolvers at the world’s major Internet exchanges, first London, then Amsterdam, Frankfurt and then Hong Kong.

“At some point, we thought, ‘They are going to hit everything at once, and that’s when this gets real,’ ” said Matthew Prince, the chief executive of CloudFlare. “That’s the nightmare scenario that hasn’t happened — yet.”

“We’ve now seen an attack that begins to illustrate the full extent of the problem,” Mr. Prince wrote in a blog post.

Closing an open resolver, unfortunately, is not as simple as flipping a switch or downloading some software. Finding out if your home cable box is an open resolver, for instance, requires you to call your cable company and tell them that you do not want to be running an open resolver — a tough request when most of the world’s population does not even know what an open resolver is.

Recent efforts have been made to increase awareness of the issue. Computer security experts have recently started “naming and shaming” the operators of open resolvers. The DNS Measurement Factory, one such group, published a survey of top offenders by network, and more recently the Open Resolver Project published a full list of the 27 million open servers online.

The campaign is making slow progress; thousands dropped off those lists in the last few months.

But Dr. Vixie calls the open resolvers just the low-hanging fruit. Even if they were all fixed tomorrow, there are other types of servers that could just as easily be used to amplify an attack, a fact that hackers are eager to point out.

Internet Law: Trial Courts Yet to Find Consistency in 'Facebook Race'

Highlighting the need for guidance from the state's appellate courts, a Monroe County judge's recent decision on a discovery motion into a woman's social media account appears to have deviated from the growing school of thought among Pennsylvania jurists.

DealBook: Wilson Sonsini Retools Strategy to Land Internet Start-Ups

Peter DaSilva for The New York TimesYoichiro Taku, left, and Todd Carpenter of the Wilson Sonsini law firm, which opened an office for start-ups in San Francisco’s SoMa neighborhood.

SAN FRANCISCO — The ground floor of 139 Townsend Street has all the markings of a start-up: exposed lighting, long communal tables and an odd assortment of knickknacks, including a fire-engine-red British telephone booth.

But the brick industrial building, in San Francisco’s SoMa district, is not the home of Twitter, Zynga or another up-and-coming Internet company. It’s the office of Wilson Sonsini Goodrich & Rosati, the half-century-old law firm.

“There’s a marketing benefit,” said Yoichiro Taku, a partner at Wilson Sonsini who represents many early-stage companies. “It definitely makes us hipper.”

Wilson Sonsini’s new outpost reflects the firm’s evolving mind-set as lawyers jockey for the attention of start-ups. In an effort to build credibility among new technology companies, Wilson Sonsini and others are employing a broad set of tools, including offering free services, cozying up to incubators and writing blogs.

Such efforts are critical. While early-stage ventures represent just 20 percent of the firm’s business, those companies can generate hefty fees as they mature. Wilson Sonsini and other firms also make small investments in young start-ups, which can pay off in later years.

“Small deals would not have interested these firms a few years ago,” said Joseph A. Grundfest, a Stanford law professor. “Now, it’s the new normal.”

For years, Wilson Sonsini dominated Silicon Valley, shepherding young technology companies like Apple, Netscape Communications and even the ill-fated Webvan. In 1998, Lawrence W. Sonsini, the firm’s patriarch, introduced two Stanford graduate students to Sequoia Capital and Kleiner Perkins Caufield & Byers, two top venture capital firms. Six years later, Wilson Sonsini helped their company, Google, go public.

Today, the firm plays in an increasingly crowded space. In the 1960s when it was first founded, only a handful of law firms had offices in the region. Now scores blanket the Bay Area.

“We were left alone in this market for an absurdly long period of time in the ’80s and ’90s,” said Steven E. Bochner, a partner at Wilson Sonsini. “Everyone is here now.”

According to Dow Jones VentureSource, the firm represented the most venture capital deals in the first half of this year, with 157 transactions, nearly double its closest competitor. But its once-absolute grip on the market has slackened.

In the last wave of Internet initial public offerings, the law firm picked up LinkedIn’s prized sale, as well as those of Splunk and Palo Alto Networks. But it did not land Zynga, Groupon or, most significantly, Facebook, which went to its rival, Fenwick & West.

While no one at Wilson Sonsini is exclusively focused on start-ups, a few lawyers have emerged as leaders in this area. Mr. Taku, 44, a native of Japan who joined the firm 16 years ago, has helped broker partnerships with several incubators like AngelPad and Founder Institute, which help Wilson Sonsini get a first peek at fledgling start-ups. And he runs startupcompanylawyer.com, a personal Web site where he muses on topics like incorporation and financing. Mr. Taku often collaborates with Todd Carpenter, who helped lead the effort to open the SoMa office. And Mr. Sonsini still tries to meet with one or two start-ups a week.

For big law firms, courting young companies is something of a balancing act. On the one hand, a firm wants to reach the highest number of top-shelf start-ups. But it has limited resources, so it has to be choosy.

To that end, many have taken steps to reduce the cost of early-stage venture financing for entrepreneurs, while automating the process to make it easier for lawyers. Fenwick & West has been at the forefront of this trend. Two years ago, the law firm created and posted standardized deal documents online for free downloading.

Earlier this month, Wilson Sonsini teamed up with Angelist, a network for investors and entrepreneurs, to also offer free standardized deal documents online. Although start-ups can use any law firm to process the forms, Wilson Sonsini has offered to do it pro bono if a start-up becomes a client.

“We’re trying to show we can add value to the community.” said Mr. Carpenter, who worked on the Angelist project with Mr. Taku and Mr. Bochner. “So hopefully, when these start-ups need a lawyer, they think of us.”

Jack Smith, a recent London transplant and co-founder of Vungle, a video advertising platform, met Mr. Taku through AngelPad. Mr. Taku offered to defer legal costs up to $5,000. Mr. Smith, who had read Mr. Taku’s blog, was sold. He was also able to wring out additional hours with Mr. Taku, known as Yokum, who often holds free office hours at AngelPad.

“Yokum was kind of a celebrity for us,” he said. Months later, the start-up remains a client, but it now has to adjust to a more normal fee structure. “They are charging us more — you quickly learn what you can bother your lawyer with.”

The initiatives aim to be founder-friendly. In August, Mr. Taku worked with Adeo Ressi, the founder of the Founder Institute, to create a financing alternative to convertible debt, which has been popular among entrepreneurs but can burden start-ups with debt. Mr. Taku and Mr. Ressi came up with standardized convertible equity documents. Convertible equity solves some of the problems of debt financing by eliminating the interest rate and the need for repayment.

Like the Angelist program, those documents are available free online. The initiative set off lively debate, prompting blog posts from several influential venture capitalists, including Fred Wilson of Union Square Ventures and Mark Suster, a partner at GRP Partners.

Several of Wilson Sonsini’s competitors said they were skeptical that these broad efforts would amount to much. Indeed, some initiatives have been expensive ones.

Earlier this year the firm signed a five-year lease on the SoMa locale, shorthand for the neighborhood South of Market Street, a mile away from the company’s flagship San Francisco office. While four partners work out of the SoMa office, it’s also intended to be an open, collaborative space that can be used by start-ups and entrepreneurial organizations.

On a recent Tuesday, the office was co-hosting a pitch event for 30 new start-ups, a chance for companies to present their products to potential investors and win entrance to a coming technology conference.

Although the event was organized by DEMO, a technology conference business, Wilson Sonsini provided free pizza and Trumer Pils, a popular beer brewed in nearby Berkeley. At other times, the firm has held seminars on hiring, employee liquidity events like an I.P.O., and data privacy, which featured regulators from the Federal Trade Commission.

“Being a mile away can be a huge difference,” said Mr. Carpenter.