Yahoo, SoftBank and the Alibaba Group have reached an agreement in their contentious dispute around the Alipay payments unit.

The trio have been in extended talks since Alibaba’s CEO Jack Ma spun Alipay out from Alibaba without the approval of Yahoo and Japan’s SoftBank, which own large stakes in Alibaba.

At the time, he said he did so in order to get critical regulatory approvals from the Chinese government. The move prompted an ugly fight between Alibaba and its partners.

In a statement, the trio said:

“The agreement is consistent with the two agreed-upon principles established at the outset of the negotiations: structure the inter-company relationship between Alipay and Taobao in order to preserve the value within Taobao and, by extension, within Alibaba Group; and provide that Alibaba Group is appropriately compensated for the value of Alipay.”

Under terms of the agreement, the three companies said that Alipay will continue providing payment services to Alibaba’s Taobao commerce site and other subsidiaries; Alibaba will be paid almost half of Alipay’s pretax income; and Alibaba will get between $2 billion and $6 billion — or 37.5 percent of the total equity value — in the event of an Alipay IPO or other liquidity event.

Yahoo has also filed a very detailed account of the deal here with the Securities and Exchange Commission, which you can read here and especially here.

Yahoo’s stock has risen 3.6 percent on the news so far this morning, but it is still just below $14 a share.

There will be a call at 5:45 am PT to explain it all, which I will be liveblogging, but here’s the full press release:

alipay

Groupon’s S-1 filing for an IPO last month certainly got a lot of ink.

Unfortunately, much of it was negative, focused on several controversial parts of the document. Most scrutinized were large slugs of money taken out of the social buying site by its founders, as well as aggressive accounting terminology to make large losses look less, well, large.

Rattled by the intense media and analyst reaction to the filing, sources said the Chicago-based company commissioned a poll of its consumers and merchants to gauge the impact.

One source familiar with the survey said that top execs and its board wanted concrete reaction from key constituencies, instead of relying on “noise from the echo chamber” of Wall Street and Silicon Valley.

And, said several people who had seen the poll, it should probably come as no surprise that the impact of the drumbeat of Groupon-is-doomed news on merchants and consumers was low, with only one percent saying that they had formed a negative opinion of the company from the filing.

That, of course, does not mean that those important groups for Groupon aren’t disgruntled about a whole laundry list of other issues.

But — for now, at least — an S-1 with some warts isn’t one of them.

Whatever the case, Groupon will continue to face scrutiny as it moves to amend the filing after comments from government regulators, and also when it reports its latest financial results soon for the three months ended June 30, 2011.

And those are numbers that everyone will surely be paying attention to.

Here’s a handy helper for those following the fate of the Hulu premium online video service, whose noisy efforts to sell itself have gotten a lot of attention of late:

“In preliminary talks” = “hawking itself to one of a half dozen big moneybag tech companies who will visit with Hulu’s bankers and management to see its presentation at Morgan Stanley’s office in Century City in Los Angeles.”

Last Friday, for example, that meant a look-see for Microsoft execs, to show the software giant the story of how paying top dollar for the popular Hulu would be a great investment.

This week, sources said, Yahoo will get the expected gander at the books too, among the other companies targeted by Hulu as part of a sales process in its very early stages.

Among those companies on the short list, sources said, along with Microsoft and Yahoo are: Google, Verizon, AT&T and Amazon.

None of these should come as a surprise, since they all have a big interest in the digital distribution of content business.

Google is perhaps the most interesting and difficult of the group, due to both its massive YouTube unit and the even more massive interest by government regulators about its disturbing massiveness.

Amazon is the company that seems most suited as a Hulu buyer, since it already makes its business selling and distributing content. In addition, Hulu CEO Jason Kilar was a former exec — bringing a certain level of familiarity and presumably much less of the grumpy disgruntlement that he experienced with Hulu’s current media giant owners.

Microsoft seems like the longest shot and least enthusiastic, although it certainly could afford it.

As for Yahoo: Good lord, it needs something sexy to tell weary investors.

Not in the initial round, but other possible acquirers Hulu is targeting: Facebook, Netflix, Samsung and Liberty Media.

And definitely not among those kicking the tires: Disney, News Corp. and Comcast, the trio of partners who own Hulu, along with Providence Equity Partners.

The big question, of course, is whether media-focused Apple — a notorious buyer of almost nothing — would be interested in Hulu.

These blind dates with the best possible buyers will presumably give each insight into Hulu’s business and give Hulu information on what they are looking for.

Sources who have heard the pitch said Hulu is positioning itself as an inevitable competitor to cable, which seems an odd position to take, unless it can get regular access to the kind of top-drawer content that consumers want.

And that will be the most important issue for anyone buying Hulu: The time and terms of rights to the television and movie content on the site, which has been a critical part of its success.

Buyers I have interviewed said Hulu has to offer at least an 18-month license for its content and a pile of rights to hit shows to differentiate itself from competitors.

As Peter Kafka wrote, Hulu buyers would indeed get exclusive content, but with strings attached.

He also noted that the latest content licenses for Hulu’s owner/partners — Disney’s ABC and News Corp.’s Fox — have recently been completed, deals that will stay intact if Hulu is sold.

Unlike Netflix, which has had to pay top dollar for a small pile of premium content while deftly using a large archive of older content to attract subscribers, Hulu’s success has had a lot to do with more access to popular current shows offered by its media giant owners.

Those shows include TV hits such as “The Office” and “Glee.”

That access has become a point of contention with those owners, who have differed with Hulu management about what comes next for the mostly advertising-supported site, even though its slick product has been a clear hit with consumers.

Of course, some speculate that Hulu might not sell at all, just as it never went public as it had said it might do previously. In that case, it will be interesting to see what will become of Hulu once the music stops.

(And, if anyone would like to email me the Hulu presentation or notes on it, please do, so I can formulate a bid myself!)

But, until this deal churns slowly, leakily and loudly forward — let’s enjoy some apt Hulu content. As usual, the fun version of ABBA’s “Dancing Queen” by the kids from “Glee” was not available on the site.

Thus, I selected frequent “Glee” guest star Gwyneth Paltrow belting out Joan Jett’s “Do You Wanna Touch Me” on the show, as a good alternate metaphor for the sales process:

Though it isn’t finalized, the proposed agreement would allow some government antitrust monitoring of its operations for the first time, potentially setting a benchmark for any future acquisitions by Google.

The settlement with the Justice Department over ITA could be just days away, the people familiar with the matter said, though the possible government shutdown at the end of this week might delay a final resolution.

Read the rest of this post on the original site »

Yesterday, the Obama administration dribbled out the news that it was going to nominate current Commerce Secretary Gary Locke as the next ambassador to China.

If approved, Locke will surely have his hands full on a wide range of issues, many of them impacting the tech sector, including piracy, privacy and government-sponsored censorship.

Perhaps more interestingly, the move leaves open a post–which the Obama administration actually had a hard time filling initially–that could get a true turbocharge if it were filled by an exec from the fast-growing digital arena.

It’s not a bad idea, since tech is probably now the most critical business arena in the U.S. and one of the only markets in which this country innovates and excels at.

While the Commerce Department has a huge and disparate domain, from international trade to the census to promoting American businesses, its digital footprint has been much less profound than the industry’s increasing importance to the U.S. economy.

After all, despite some interesting international efforts, most of the current crop of tech stars are U.S. born and bred and leading the way in digital innovation.

In fact, every big trend right now in value creation are all coming out of tech.

Gaming? Zynga.

Social networking? Facebook and Twitter.

Retail? Groupon.

Mobile? Google and Apple.

So, why not pick a business person from the area to lead the government agency dedicated to business?

But that’s where it gets dicey.

One more obvious candidate would be outgoing Google CEO–and Obama favorite–Eric Schmidt.

I would assume he might welcome such a prominent post, although putting him in place at Commerce would be a tough road.

Issue one and only: The investigations of Google’s aggressive business practices by federal regulators make this an awkward decision for Obama, given Schmidt would be open to a lot of scrutiny going through confirmation.

But there is a long list of others who could be considered to serve, especially if you think well outside the box.

What about former Xerox CEO Anne Mulcahy, who certainly has the management cred?

Or mega-VC John Doerr, who–despite his recent social fever–might finally get to push his beloved clean-tech agenda onto a larger stage?

What about Facebook COO Sheryl Sandberg, who recently showed she could deliver a boffo speech and who might lend some Silicon Valley magic to her former Washington, D.C. rep?

And while Amazon’s Jeff Bezos’ laugh would have a hard time getting Congressional approval, why not consider someone who has profoundly changed the way an entire business sector does business?

In that vein, Reed Hastings of Netflix also fits the bill.

Except these three execs are pretty busy these days. So, what about former eBay CEO Meg Whitman, whose failed bid to be California’s governor as the Republican candidate leaves her without a post.

President Barack Obama had picked a GOP pol as his second choice for Commerce head, in fact, so Whitman or even Cisco CEO John Chambers are not out of the question.

The point is to perhaps move outside the Beltway’s comfort zone and pick a Commerce Secretary who represents the future rather than the past.

An astonishing spike. And it’s even more astonishing when you break it down by sector. In the global home or consumer market, the Mac posted shipment growth of 17.1 percent, while the broader market posted a decline of .6 percent. In the business market, Mac shipments grew 65.4 percent compared to the market growth rate of 9.7 percent. And in government, they grew 549.5 percent compared to the broader market’s 8.4 percent. Of course, government sales represent only 1 percent of total Mac sales, so that spike appears more dramatic than it really is, but still…

So what’s the engine for all this growth? Needham analyst Charlie Wolf thinks it’s a halo effect from Apple’s iOS device trinity–the iPod, the iPhone and the iPad–particularly, the latter two, which are gaining lots of traction in both the home and business markets (Oddly, Apple suffered a decline in the education segment, where it has traditionally been pretty strong).

“The surge in Mac sales in the business market coincided with the introduction of the iPad in the second quarter of 2010,” says Wolf. “It would be foolish to assign a cause and effect connection between the two events. However, in less than a year, the iPad has been deployed or piloted in 80 of the Fortune 100 companies, and it’s reasonable to assume the device has invaded smaller businesses at a similar pace. It’s likely, then, that the halo effect emanating from the iPad will be far stronger than the iPhone halo effect in the business market if only because the iPad is a kissing cousin of Apple’s family of notebook computers.”

Yesterday, in a major policy speech in Washington, D.C., Secretary of State Hillary Clinton jumped on the Internet bandwagon again, unveiling a $25 million government investment for entrepreneurs to allow dissidents to thwart “thugs, hackers and censors.”

Since that’s about the amount a third-string social photo-sharing site gets while walking down University Avenue in Palo Alto, Calif., from venture capitalists with bags of money to spend, let me just say the money is, well, underwhelming.

Luckily, Clinton’s speech–the latest chapter of the Obama administration’s “Internet Freedom Agenda”–was much better.

In fact, it was a sobering look at the situation, replete with all its conflicts and compromises, including some related to the State Department of late (hello, WikiLeaks!).

While more of a gimmick, Clinton outlined what she called a “venture capital-style approach” to stopping governments from closing down digital communications platforms.

In Egypt, that has included the whole dang Internet after times got tough and protesters tweeted too much.

Even still, said Clinton, such efforts–however effective now–were ultimately useless.

“Those who clamp down on Internet freedom may be able to hold back the full expression of their people’s yearnings for a while, but not forever,” she said.

Still, even though Facebook and Twitter have been lauded as critical tools in the reform protests in the Mideast, those Luddite strongmen did manage to put up a very good fight in shutting them down.

But Clinton advocated pressing on. Along with the seed funding for firewall-piercing and evading technologies, she also announced the creation of a new coordinator for cyber issues and the fact that the State Department had just begun to tweet in Arabic and Farsi and would soon be doing so in Chinese, Hindi and Russian.

All very nice steps, but the overall arrival of the long-promised global “strategy for cyberspace,” which has gotten bogged down in politics, is still to come.

In fact, a GOP-fueled criticism of the State Department was also released yesterday, designed to muck up Clinton’s speech, about how another $30 million in digital investments was being spent or, more precisely, being spent badly.

Clinton answered critics:

“Some have criticized us for not pouring funding into a single technology–but there is no silver bullet in the struggle against Internet repression. There’s no ‘app’ for that.”

Well, actually, since there is an app that turns your Apple iPhone into a hand massager, there certainly should be.

Speaking of that, Clinton was deft at dealing with the obvious delta between pressing for Internet freedom, even as U.S. government lawyers were whacking away at WikiLeaks–and, by association, Twitter itself.

Clinton noted the release of a mass of classified State Department documents “began with an act of theft,” arguing that this was the real issue.

She went on to further argue:

“I said that the WikiLeaks incident began with a theft, just as if it had been executed by smuggling papers in a briefcase. The fact that WikiLeaks used the Internet is not the reason we criticized its actions. WikiLeaks does not challenge our commitment to Internet freedom.”

Actually, the issue is that the Internet, once it really gets going, doesn’t really want to be controlled by anyone.

Kind of like humanity.

Or as Clinton so correctly noted about the various protests taking place abroad:

“In each case, people protested because of deep frustrations with the political and economic conditions of their lives. They stood and marched and chanted and the authorities tracked and blocked and arrested them. The Internet did not do any of those things; people did.”

In any case, judge for yourself: Here’s the video of the speech at George Washington University from the State Department’s Web site, as well as the full text below:

Thank you all very much and good afternoon. It is a pleasure, once again, to be back on the campus of the George Washington University, a place that I have spent quite a bit of time in all different settings over the last now nearly 20 years. I’d like especially to thank President Knapp and Provost Lerman, because this is a great opportunity for me to address such a significant issue, and one which deserves the attention of citizens, governments, and I know is drawing that attention. And perhaps today in my remarks, we can begin a much more vigorous debate that will respond to the needs that we have been watching in real time on our television sets.

A few minutes after midnight on January 28th, the Internet went dark across Egypt. During the previous four days, hundreds of thousands of Egyptians had marched to demand a new government. And the world, on TVs, laptops, cell phones, and smart phones, had followed every single step. Pictures and videos from Egypt flooded the web. On Facebook and Twitter, journalists posted on-the-spot reports. Protestors coordinated their next moves. And citizens of all stripes shared their hopes and fears about this pivotal moment in the history of their country.

Millions worldwide answered in real time, “You are not alone and we are with you.” Then the government pulled the plug. Cell phone service was cut off, TV satellite signals were jammed, and Internet access was blocked for nearly the entire population. The government did not want the people to communicate with each other and it did not want the press to communicate with the public. It certainly did not want the world to watch.

The events in Egypt recalled another protest movement 18 months earlier in Iran, when thousands marched after disputed elections. Their protestors also used websites to organize. A video taken by cell phone showed a young woman named Neda killed by a member of the paramilitary forces, and within hours, that video was being watched by people everywhere.

The Iranian authorities used technology as well. The Revolutionary Guard stalked members of the Green Movement by tracking their online profiles. And like Egypt, for a time, the government shut down the internet and mobile networks altogether. After the authorities raided homes, attacked university dorms, made mass arrests, tortured and fired shots into crowds, the protests ended.

In Egypt, however, the story ended differently. The protests continued despite the internet shutdown. People organized marches through flyers and word of mouth and used dial-up modems and fax machines to communicate with the world. After five days, the government relented and Egypt came back online. The authorities then sought to use the Internet to control the protests by ordering mobile companies to send out pro-government text messages, and by arresting bloggers and those who organized the protests online. But 18 days after the protests began, the government failed and the president resigned.

What happened in Egypt and what happened in Iran, which this week is once again using violence against protestors seeking basic freedoms, was about a great deal more than the internet. In each case, people protested because of deep frustrations with the political and economic conditions of their lives. They stood and marched and chanted and the authorities tracked and blocked and arrested them. The Internet did not do any of those things; people did. In both of these countries, the ways that citizens and the authorities used the Internet reflected the power of connection technologies on the one hand as an accelerant of political, social, and economic change, and on the other hand as a means to stifle or extinguish that change.

There is a debate currently underway in some circles about whether the Internet is a force for liberation or repression. But I think that debate is largely beside the point. Egypt isn’t inspiring people because they communicated using Twitter. It is inspiring because people came together and persisted in demanding a better future. Iran isn’t awful because the authorities used Facebook to shadow and capture members of the opposition. Iran is awful because it is a government that routinely violates the rights of its people.

So it is our values that cause these actions to inspire or outrage us, our sense of human dignity, the rights that flow from it, and the principles that ground it. And it is these values that ought to drive us to think about the road ahead. Two billion people are now online, nearly a third of humankind. We hail from every corner of the world, live under every form of government, and subscribe to every system of beliefs. And increasingly, we are turning to the Internet to conduct important aspects of our lives.

The Internet has become the public space of the 21st century–the world’s town square, classroom, marketplace, coffeehouse, and nightclub. We all shape and are shaped by what happens there, all 2 billion of us and counting. And that presents a challenge. To maintain an Internet that delivers the greatest possible benefits to the world, we need to have a serious conversation about the principles that will guide us, what rules exist and should not exist and why, what behaviors should be encouraged or discouraged and how.

The goal is not to tell people how to use the Internet any more than we ought to tell people how to use any public square, whether it’s Tahrir Square or Times Square. The value of these spaces derives from the variety of activities people can pursue in them, from holding a rally to selling their vegetables, to having a private conversation. These spaces provide an open platform, and so does the Internet. It does not serve any particular agenda, and it never should. But if people around the world are going come together every day online and have a safe and productive experience, we need a shared vision to guide us.

One year ago, I offered a starting point for that vision by calling for a global commitment to Internet freedom, to protect human rights online as we do offline. The rights of individuals to express their views freely, petition their leaders, worship according to their beliefs–these rights are universal, whether they are exercised in a public square or on an individual blog. The freedoms to assemble and associate also apply in cyberspace. In our time, people are as likely to come together to pursue common interests online as in a church or a labor hall.

Together, the freedoms of expression, assembly, and association online comprise what I’ve called the freedom to connect. The United States supports this freedom for people everywhere, and we have called on other nations to do the same. Because we want people to have the chance to exercise this freedom. We also support expanding the number of people who have access to the Internet. And because the Internet must work evenly and reliably for it to have value, we support the multi-stakeholder system that governs the internet today, which has consistently kept it up and running through all manner of interruptions across networks, borders, and regions.

In the year since my speech, people worldwide have continued to use the Internet to solve shared problems and expose public corruption, from the people in Russia who tracked wildfires online and organized a volunteer firefighting squad, to the children in Syria who used Facebook to reveal abuse by their teachers, to the Internet campaign in China that helps parents find their missing children.

At the same time, the Internet continues to be restrained in a myriad of ways. In China, the government censors content and redirects search requests to error pages. In Burma, independent news sites have been taken down with distributed denial of service attacks. In Cuba, the government is trying to create a national intranet, while not allowing their citizens to access the global internet. In Vietnam, bloggers who criticize the government are arrested and abused. In Iran, the authorities block opposition and media websites, target social media, and steal identifying information about their own people in order to hunt them down.

These actions reflect a landscape that is complex and combustible, and sure to become more so in the coming years as billions of more people connect to the Internet. The choices we make today will determine what the Internet looks like in the future. Businesses have to choose whether and how to enter markets where internet freedom is limited. People have to choose how to act online, what information to share and with whom, which ideas to voice and how to voice them. Governments have to choose to live up to their commitments to protect free expression, assembly, and association.

For the United States, the choice is clear. On the spectrum of Internet freedom, we place ourselves on the side of openness. Now, we recognize that an open Internet comes with challenges. It calls for ground rules to protect against wrongdoing and harm. And Internet freedom raises tensions, like all freedoms do. But we believe the benefits far exceed the costs.

And today, I’d like to discuss several of the challenges we must confront as we seek to protect and defend a free and open Internet. Now, I’m the first to say that neither I nor the United States Government has all the answers. We’re not sure we have all the questions. But we are committed to asking the questions, to helping lead a conversation, and to defending not just universal principles but the interests of our people and our partners.

The first challenge is achieving both liberty and security. Liberty and security are often presented as equal and opposite; the more you have of one, the less you have of the other. In fact, I believe they make it each other possible. Without security, liberty is fragile. Without liberty, security is oppressive. The challenge is finding the proper measure: enough security to enable our freedoms, but not so much or so little as to endanger them.

Finding this proper measure for the Internet is critical because the qualities that make the internet a force for unprecedented progress–its openness, its leveling effect, its reach and speed–also enable wrongdoing on an unprecedented scale. Terrorists and extremist groups use the Internet to recruit members, and plot and carry out attacks. Human traffickers use the Internet to find and lure new victims into modern-day slavery. Child pornographers use the Internet to exploit children. Hackers break into financial institutions, cell phone networks, and personal email accounts.

So we need successful strategies for combating these threats and more without constricting the openness that is the Internet’s greatest attribute. The United States is aggressively tracking and deterring criminals and terrorists online. We are investing in our nation’s cyber-security, both to prevent cyber-incidents and to lessen their impact. We are cooperating with other countries to fight transnational crime in cyberspace. The United States Government invests in helping other nations build their own law enforcement capacity. We have also ratified the Budapest Cybercrime Convention, which sets out the steps countries must take to ensure that the internet is not misused by criminals and terrorists while still protecting the liberties of our own citizens.

In our vigorous effort to prevent attacks or apprehend criminals, we retain a commitment to human rights and fundamental freedoms. The United States is determined to stop terrorism and criminal activity online and offline, and in both spheres we are committed to pursuing these goals in accordance with our laws and values.

Now, others have taken a different approach. Security is often invoked as a justification for harsh crackdowns on freedom. Now, this tactic is not new to the digital age, but it has new resonance as the internet has given governments new capacities for tracking and punishing human rights advocates and political dissidents. Governments that arrest bloggers, pry into the peaceful activities of their citizens, and limit their access to the Internet may claim to be seeking security. In fact, they may even mean it as they define it. But they are taking the wrong path. Those who clamp down on Internet freedom may be able to hold back the full expression of their people’s yearnings for a while, but not forever.

The second challenge is protecting both transparency and confidentiality. The Internet’s strong culture of transparency derives from its power to make information of all kinds available instantly. But in addition to being a public space, the Internet is also a channel for private communications. And for that to continue, there must be protection for confidential communication online. Think of all the ways in which people and organizations rely on confidential communications to do their jobs. Businesses hold confidential conversations when they’re developing new products to stay ahead of their competitors. Journalists keep the details of some sources confidential to protect them from exposure or retribution. And governments also rely on confidential communication online as well as offline. The existence of connection technologies may make it harder to maintain confidentiality, but it does not alter the need for it.

Now, I know that government confidentiality has been a topic of debate during the past few months because of WikiLeaks, but it’s been a false debate in many ways. Fundamentally, the WikiLeaks incident began with an act of theft. Government documents were stolen, just the same as if they had been smuggled out in a briefcase. Some have suggested that this theft was justified because governments have a responsibility to conduct all of our work out in the open in the full view of our citizens. I respectfully disagree. The United States could neither provide for our citizens’ security nor promote the cause of human rights and democracy around the world if we had to make public every step of our efforts. Confidential communication gives our government the opportunity to do work that could not be done otherwise.

Consider our work with former Soviet states to secure loose nuclear material. By keeping the details confidential, we make it less likely that terrorists or criminals will find the nuclear material and steal it for their own purposes. Or consider the content of the documents that WikiLeaks made public. Without commenting on the authenticity of any particular documents, we can observe that many of the cables released by WikiLeaks relate to human rights work carried on around the world. Our diplomats closely collaborate with activists, journalists, and citizens to challenge the misdeeds of oppressive governments. It is dangerous work. By publishing diplomatic cables, WikiLeaks exposed people to even greater risk.

For operations like these, confidentiality is essential, especially in the Internet age when dangerous information can be sent around the world with the click of a keystroke. But of course, governments also have a duty to be transparent. We govern with the consent of the people, and that consent must be informed to be meaningful. So we must be judicious about when we close off our work to the public, and we must review our standards frequently to make sure they are rigorous. In the United States, we have laws designed to ensure that the government makes its work open to the people, and the Obama Administration has also launched an unprecedented initiative to put government data online, to encourage citizen participation, and to generally increase the openness of government.

The U.S. Government’s ability to protect America, to secure the liberties of our people, and to support the rights and freedoms of others around the world depends on maintaining a balance between what’s public and what should and must remain out of the public domain. The scale should and will always be tipped in favor of openness, but tipping the scale over completely serves no one’s interests. Let me be clear. I said that the WikiLeaks incident began with a theft, just as if it had been executed by smuggling papers in a briefcase. The fact that WikiLeaks used the Internet is not the reason we criticized its actions. WikiLeaks does not challenge our commitment to Internet freedom.

And one final word on this matter: There were reports in the days following these leaks that the United States Government intervened to coerce private companies to deny service to WikiLeaks. That is not the case. Now, some politicians and pundits publicly called for companies to disassociate from WikiLeaks, while others criticized them for doing so. Public officials are part of our country’s public debates, but there is a line between expressing views and coercing conduct. Business decisions that private companies may have taken to enforce their own values or policies regarding WikiLeaks were not at the direction of the Obama Administration.

A third challenge is protecting free expression while fostering tolerance and civility. I don’t need to tell this audience that the Internet is home to every kind of speech–false, offensive, incendiary, innovative, truthful, and beautiful.

The multitude of opinions and ideas that crowd the Internet is both a result of its openness and a reflection of our human diversity. Online, everyone has a voice. And the Universal Declaration of Human Rights protects the freedom of expression for all. But what we say has consequences. Hateful or defamatory words can inflame hostilities, deepen divisions, and provoke violence. On the Internet, this power is heightened. Intolerant speech is often amplified and impossible to retract. Of course, the Internet also provides a unique space for people to bridge their differences and build trust and understanding.

Some take the view that, to encourage tolerance, some hateful ideas must be silenced by governments. We believe that efforts to curb the content of speech rarely succeed and often become an excuse to violate freedom of expression. Instead, as it has historically been proven time and time again, the better answer to offensive speech is more speech. People can and should speak out against intolerance and hatred. By exposing ideas to debate, those with merit tend to be strengthened, while weak and false ideas tend to fade away; perhaps not instantly, but eventually.

Now, this approach does not immediately discredit every hateful idea or convince every bigot to reverse his thinking. But we have determined as a society that it is far more effective than any other alternative approach. Deleting writing, blocking content, arresting speakers–these actions suppress words, but they do not touch the underlying ideas. They simply drive people with those ideas to the fringes, where their convictions can deepen, unchallenged.

Last summer, Hannah Rosenthal, the U.S. Special Envoy to Monitor and Combat Anti-Semitism, made a trip to Dachau and Auschwitz with a delegation of American imams and Muslim leaders. Many of them had previously denied the Holocaust, and none of them had ever denounced Holocaust denial. But by visiting the concentration camps, they displayed a willingness to consider a different view. And the trip had a real impact. They prayed together, and they signed messages of peace, and many of those messages in the visitors books were written in Arabic. At the end of the trip, they read a statement that they wrote and signed together condemning without reservation Holocaust denial and all other forms of anti-Semitism.

The marketplace of ideas worked. Now, these leaders had not been arrested for their previous stance or ordered to remain silent. Their mosques were not shut down. The state did not compel them with force. Others appealed to them with facts. And their speech was dealt with through the speech of others.

The United States does restrict certain kinds of speech in accordance with the rule of law and our international obligations. We have rules about libel and slander, defamation, and speech that incites imminent violence. But we enforce these rules transparently, and citizens have the right to appeal how they are applied. And we don’t restrict speech even if the majority of people find it offensive. History, after all, is full of examples of ideas that were banned for reasons that we now see as wrong. People were punished for denying the divine right of kings, or suggesting that people should be treated equally regardless of race, gender, or religion. These restrictions might have reflected the dominant view at the time, and variations on these restrictions are still in force in places around the world.

But when it comes to online speech, the United States has chosen not to depart from our time-tested principles. We urge our people to speak with civility, to recognize the power and reach that their words can have online. We’ve seen in our own country tragic examples of how online bullying can have terrible consequences. Those of us in government should lead by example, in the tone we set and the ideas we champion. But leadership also means empowering people to make their own choices, rather than intervening and taking those choices away. We protect free speech with the force of law, and we appeal to the force of reason to win out over hate.

Now, these three large principles are not always easy to advance at once. They raise tensions, and they pose challenges. But we do not have to choose among them. Liberty and security, transparency and confidentiality, freedom of expression and tolerance–these all make up the foundation of a free, open, and secure society as well as a free, open, and secure internet where universal human rights are respected, and which provides a space for greater progress and prosperity over the long run.

Now, some countries are trying a different approach, abridging rights online and working to erect permanent walls between different activities–economic exchanges, political discussions, religious expressions, and social interactions. They want to keep what they like and suppress what they don’t. But this is no easy task. Search engines connect businesses to new customers, and they also attract users because they deliver and organize news and information. Social networking sites aren’t only places where friends share photos; they also share political views and build support for social causes or reach out to professional contacts to collaborate on new business opportunities.

Walls that divide the Internet, that block political content, or ban broad categories of expression, or allow certain forms of peaceful assembly but prohibit others, or intimidate people from expressing their ideas are far easier to erect than to maintain. Not just because people using human ingenuity find ways around them and through them but because there isn’t an economic Internet and a social Internet and a political Internet; there’s just the Internet. And maintaining barriers that attempt to change this reality entails a variety of costs–moral, political, and economic. Countries may be able to absorb these costs for a time, but we believe they are unsustainable in the long run. There are opportunity costs for trying to be open for business but closed for free expression–costs to a nation’s education system, its political stability, its social mobility, and its economic potential.

When countries curtail Internet freedom, they place limits on their economic future. Their young people don’t have full access to the conversations and debates happening in the world or exposure to the kind of free inquiry that spurs people to question old ways of doing and invent new ones. And barring criticism of officials makes governments more susceptible to corruption, which create economic distortions with long-term effects. Freedom of thought and the level playing field made possible by the rule of law are part of what fuels innovation economies.

So it;s not surprising that the European-American Business Council, a group of more than 70 companies, made a strong public support statement last week for Internet freedom. If you invest in countries with aggressive censorship and surveillance policies, your website could be shut down without warning, your servers hacked by the government, your designs stolen, or your staff threatened with arrest or expulsion for failing to comply with a politically motivated order. The risks to your bottom line and to your integrity will at some point outweigh the potential rewards, especially if there are market opportunities elsewhere.

Now, some have pointed to a few countries, particularly China, that appears to stand out as an exception, a place where Internet censorship is high and economic growth is strong. Clearly, many businesses are willing to endure restrictive internet policies to gain access to those markets, and in the short term, even perhaps in the medium term, those governments may succeed in maintaining a segmented internet. But those restrictions will have long-term costs that threaten one day to become a noose that restrains growth and development.

There are political costs as well. Consider Tunisia, where online economic activity was an important part of the country’s ties with Europe while online censorship was on par with China and Iran, the effort to divide the economic internet from the “everything else” Internet in Tunisia could not be sustained. People, especially young people, found ways to use connection technologies to organize and share grievances, which, as we know, helped fuel a movement that led to revolutionary change. In Syria, too, the government is trying to negotiate a non-negotiable contradiction. Just last week, it lifted a ban on Facebook and YouTube for the first time in three years, and yesterday they convicted a teenage girl of espionage and sentenced her to five years in prison for the political opinions she expressed on her blog.

This, too, is unsustainable. The demand for access to platforms of expression cannot be satisfied when using them lands you in prison. We believe that governments who have erected barriers to Internet freedom, whether they’re technical filters or censorship regimes or attacks on those who exercise their rights to expression and assembly online, will eventually find themselves boxed in. They will face a dictator’s dilemma and will have to choose between letting the walls fall or paying the price to keep them standing, which means both doubling down on a losing hand by resorting to greater oppression and enduring the escalating opportunity cost of missing out on the ideas that have been blocked and people who have been disappeared.

I urge countries everywhere instead to join us in the bet we have made, a bet that an open internet will lead to stronger, more prosperous countries. At its core, it’s an extension of the bet that the United States has been making for more than 200 years, that open societies give rise to the most lasting progress, that the rule of law is the firmest foundation for justice and peace, and that innovation thrives where ideas of all kinds are aired and explored. This is not a bet on computers or mobile phones. It’s a bet on people. We’re confident that together with those partners in government and people around the world who are making the same bet by hewing to universal rights that underpin open societies, we’ll preserve the internet as an open space for all. And that will pay long-term gains for our shared progress and prosperity. The United States will continue to promote an Internet where people’s rights are protected and that it is open to innovation, interoperable all over the world, secure enough to hold people’s trust, and reliable enough to support their work.

In the past year, we have welcomed the emergence of a global coalition of countries, businesses, civil society groups, and digital activists seeking to advance these goals. We have found strong partners in several governments worldwide, and we’ve been encouraged by the work of the Global Network Initiative, which brings together companies, academics, and NGOs to work together to solve the challenges we are facing, like how to handle government requests for censorship or how to decide whether to sell technologies that could be used to violate rights or how to handle privacy issues in the context of cloud computing. We need strong corporate partners that have made principled, meaningful commitments to internet freedom as we work together to advance this common cause.

We realize that in order to be meaningful, online freedoms must carry over into real-world activism. That’s why we are working through our Civil Society 2.0 initiative to connect NGOs and advocates with technology and training that will magnify their impact. We are also committed to continuing our conversation with people everywhere around the world. Last week, you may have heard, we launched Twitter feeds in Arabic and Farsi, adding to the ones we already have in French and Spanish. We’ll start similar ones in Chinese, Russian, and Hindi. This is enabling us to have real-time, two-way conversations with people wherever there is a connection that governments do not block.

Our commitment to internet freedom is a commitment to the rights of people, and we are matching that with our actions. Monitoring and responding to threats to internet freedom has become part of the daily work of our diplomats and development experts. They are working to advance internet freedom on the ground at our embassies and missions around the world. The United States continues to help people in oppressive internet environments get around filters, stay one step ahead of the censors, the hackers, and the thugs who beat them up or imprison them for what they say online.

While the rights we seek to protect and support are clear, the various ways that these rights are violated are increasingly complex. I know some have criticized us for not pouring funding into a single technology, but we believe there is no silver bullet in the struggle against internet repression. There’s no app for that. Start working, those of you out there. And accordingly, we are taking a comprehensive and innovative approach, one that matches our diplomacy with technology, secure distribution networks for tools, and direct support for those on the front lines.

In the last three years, we have awarded more than $20 million in competitive grants through an open process, including interagency evaluation by technical and policy experts to support a burgeoning group of technologists and activists working at the cutting edge of the fight against internet repression. This year, we will award more than $25 million in additional funding. We are taking a venture capital-style approach, supporting a portfolio of technologies, tools, and training, and adapting as more users shift to mobile devices. We have our ear to the ground, talking to digital activists about where they need help, and our diversified approach means we’re able to adapt the range of threats that they face. We support multiple tools, so if repressive governments figure out how to target one, others are available. And we invest in the cutting edge because we know that repressive governments are constantly innovating their methods of oppression and we intend to stay ahead of them.

Likewise, we are leading the push to strengthen cyber security and online innovation, building capacity in developing countries, championing open and interoperable standards and enhancing international cooperation to respond to cyber threats. Deputy Secretary of Defense Lynn gave a speech on this issue just yesterday. All these efforts build on a decade of work to sustain an Internet that is open, secure, and reliable. And in the coming year, the Administration will complete an international strategy for cyberspace, charting the course to continue this work into the future.

This is a foreign policy priority for us, one that will only increase in importance in the coming years. That’s why I’ve created the Office of the Coordinator for Cyber Issues, to enhance our work on cyber security and other issues and facilitate cooperation across the State Department and with other government agencies. I’ve named Christopher Painter, formerly senior director for cyber security at the National Security Council and a leader in the field for 20 years, to head this new office.

The dramatic increase in internet users during the past 10 years has been remarkable to witness. But that was just the opening act. In the next 20 years, nearly 5 billion people will join the network. It is those users who will decide the future.

So we are playing for the long game. Unlike much of what happens online, progress on this front will be measured in years, not seconds. The course we chart today will determine whether those who follow us will get the chance to experience the freedom, security, and prosperity of an open Internet.

As we look ahead, let us remember that Internet freedom isn’t about any one particular activity online. It’s about ensuring that the Internet remains a space where activities of all kinds can take place, from grand, ground-breaking, historic campaigns to the small, ordinary acts that people engage in every day.

We want to keep the Iternet open for the protestor using social media to organize a march in Egypt; the college student emailing her family photos of her semester abroad; the lawyer in Vietnam blogging to expose corruption; the teenager in the United States who is bullied and finds words of support online; for the small business owner in Kenya using mobile banking to manage her profits; the philosopher in China reading academic journals for her dissertation; the scientist in Brazil sharing data in real time with colleagues overseas; and the billions and billions of interactions with the Internet every single day as people communicate with loved ones, follow the news, do their jobs, and participate in the debates shaping their world.

Internet freedom is about defending the space in which all these things occur so that it remains not just for the students here today, but your successors and all who come after you. This is one of the grand challenges of our time. We are engaged in a vigorous effort against those who we have always stood against, who wish to stifle and repress, to come forward with their version of reality and to accept none other. We enlist your help on behalf of this struggle. It’s a struggle for human rights, it’s a struggle for human freedom, and it’s a struggle for human dignity.

Thank you all very much.

Today the the CTIA, the wireless industry trade organization, got behind the president’s plan in a big way, and suggested that the proposed spectrum auctions could bring in billions of dollars more than the president said. Using data from 13 prior spectrum auctions as a model, the organization today released the findings of a study conducted in partnership with the Consumer Electronics Association saying that an auction of 120 MHz worth of spectrum could produce revenue in the range of $36 billion to $48 billion.

The study also found that only in the top 30 markets in the continental United States will TV stations actually have to exit certain spectrum ranges to clear up sufficient spectrum for wireless broadband. In most cases, TV broadcasters will probably be satisfied with incentive auctions that give them some portion of the proceeds raised from the auctions. In a few cases it will be trickier, and the study suggests a few options like channel-sharing and repacking. Broadcasters outside the top 30 markets should not have to give up any spectrum, the study says.

The point of the study, CTIA president Steve Largent told me, is to help nudge Congress toward passing a law that will allow the Federal Communications Commission to hold incentive auctions that can help spur TV broadcasters who currently have the licenses for the spectrum. So far, broadcasters have signaled that they’re not yet entirely willing to go along with this plan. “We think this can be relatively painless for the broadcasters, but it’s still going to take a lot of work at Congress and at the FCC to get it done,” Largent said.

That the wireless industry would be getting behind Obama’s plan is no surprise given their exploding spectrum needs for data services, so there is a bit of a grain-of-salt element to the study’s findings. However it’s also a solid signal that the wireless carriers are willing to bring serious cash to bear for spectrum, which is, generally speaking, good news for all concerned.

Broadcasters are understandably taking a cautious line. In a statement issued last week in response to Obama’s speech in Michigan, Dennis Wharton, executive vice president of the National Association of Broadcasters said, “Let’s not forget that broadcasters returned more than a quarter of TV station spectrum to the government less than two years ago, and that much of that spectrum has not yet been deployed. NAB is not against the President’s plan. We will work to ensure that incentive auctions remain truly voluntary, and that broadcasters who don’t volunteer to return spectrum–and the millions of viewers that we serve–are held harmless.”

“If you want to liberate a society, just give them the Internet,” Ghonim said in an interview with CNN.

Ghonim gives credit to the young Egyptians who organized themselves on Facebook, dating back to last June when activist Khaled Said was killed. Ghonim commented on how a video posted on Facebook (where he is administrator of a page commemorating Said) would be quickly shared by 50,000 people, calling Facebook CEO Mark Zuckerberg a personal hero.

Ghonim said he plans to write a book on the topic called “Revolution 2.0.”

Mubarak’s government had shut down much of Egyptian Internet access and SMS service for nearly a week during the protests, then made concessions to not run for another term, but protests only intensified until he finally agreed to step down today.

Or wanted it–at least not the kind that Schmidt’s been offering recently, which was on display once again today in yet another PR gaffe.

Asked by the Sunday Telegraph about the European Commission inquiry into the company’s dominance in search, Schmidt spun the requests for information that Google received as part of that investigation as the beginnings of possible settlement discussions.

“I think it is in our interests and I would hope in their interests to do a quick analysis of concerns that have been raised by competitors, hopefully they are minor or they are not correct, and we’ll find out and make sure we are operating well within the law and the spirit of the law,” he said. “We understand we play a major role in Europe and we’re not denying that. We have a lot of meetings with appropriate government officials.”

We have a lot of meetings with appropriate government officials.

If that’s true, the officials to which Schmidt refers have nothing to do with the European inquiry into Google’s business practices. Because the European Commission today flat-out denied it is in antitrust resolution talks with the company. “There are no discussions,” commission spokeswoman Amelia Torres said in a statement. “The investigation is not finished.”

We have a lot of meetings with appropriate government officials. One more to add to Schmidt’s dubious canon.

(Click on the “CC” button in the embedded video to see English subtitles, and if that doesn’t work try going directly to the YouTube page.)

Ghonim, who leads marketing for Google in the Middle East and North Africa, said in a later interview that he was the administrator of the Facebook page “We are all Khaled Said” (named after the young man killed by Egyptian police officers last year) that helped organize Egyptian youth.

Ghonim said he was blindfolded throughout his imprisonment but was not tortured. The Egyptian government did not confirm its role in Ghonim’s disappearance until yesterday.

Ghonim told an interviewer from the Egyptian channel Dream TV, “I tricked my employer so I could attend the protests in Egypt,” according to a translation.

Nearly 300 people have been killed in the protests. Ghonim urged viewers, “Please everybody, this is not a time to settle scores, this is a time to build our country.”

A cellphone recording of the second interview, sans subtitles, is here:

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