EyePhones Will Replace iPhones

Remember MS-DOS commands, and the WordStar keystroke combinations we had to memorize? Then the first Macintosh featured a mouse-driven GUI that was game-changing because it removed a layer of friction for both the data going in and coming out. When we tried that first model, we knew we could never go back to a C prompt.

And yet the impact of graphical computing was minor compared to how facial computing will change our lives, and how we all relate to The Collective. Think of it as a man-in-the-middle attack on our senses, intercepting all the signals we see and hear, and enhancing them before they reach our brains.

This is not science fiction, and based on prototypes I’ve seen, it’s a good bet that design teams in Google, Apple, Samsung and various military contractors are building eyewear computers that will render smartphones as obsolete as the first generation of mobile computer. I’m not talking about Google Glass, with its cute little screen in the corner. I mean an immersive experience that processes what we see, and then overlays graphical objects onto our field of view for true Terminator vision. The U.S. military has this capability today, so that troops can see pointers to their platoon members and markers of known IED locations. So now it’s just a question of making the hardware small, cheap and available in four adorable colors.

Not only will our favorite apps on eyewear computers be more immediate and engaging, but we’ll experience new computing capabilities so compelling that we’ll find them indispensible. For example, eyewear computers can record our lives and enable us to summon any relevant conversation or incident from our past. With eyewear computers, we can truly share experiences in real time, transporting ourselves to the perspective of someone on a ski slope, or in a night club, Wimbledon match or the International Space Station.

Just as Terminator did in the movie, we will air-click on actual things we see to interact with, investigate or purchase. We’ll integrate facial recognition and CRM for background data on everyone we meet. When we travel abroad, signs will appear to us in English, and when someone is speaking to us, we can simply turn on English subtitles.

A new generation of games will be more immersive and engaging than ever before.

Five years from today, when smartphone sales are in decline, we will ask ourselves: Remember when we used to spend our days looking down at those little screens?

Cyber Warfare Becomes Okay

Ever since Hollywood gave us “War Games,” the fear of cyber apocalypse has gripped America. We’ve outlawed hacking to such an extent that if you’re shut down by a cyber attack, or your data has been stolen, it’s a federal crime to even probe the attacking computers, let alone disable them. Rather than educate and activate our best and brightest hackers, we prosecute and imprison them.

Businesses haven’t complained, because they’ve never wanted to fight back. You can’t prosecute the attackers even if you find them, and admitting a breach may spook customers and even invite more attacks. So, instead of fighting, we’ve just quietly taken the punches, and wished it all away. But wishing it away is like trying to reduce teen pregnancy by preaching abstinence.

Two years ago I watched a TED audience cheer Ralph Langner for exposing the Stuxnet worm which our government developed to retard Iran’s nuclear weapons program. It was as though the U.S. and Israel invented malware. Somehow, it was evil for us to use cyberspace to stop the most vitriolic, warmongering fundamentalist on our planet from making nuclear bombs. Because cyber is “unconventional,” we somehow consider it to be just as taboo to use as nuclear and chemical weapons.

Meanwhile, the New York Times reported this morning that “Hackers Find China is a Land of Opportunity.” Not only has China allegedly hacked Google and Evernote to spy on its citizens, but it has funded massive efforts to steal information valuable to economies and national security. Attacks on our banks, utilities and defense contractors can be traced back to units in the Chinese military. We even know what building they’re in.

As cyber war rages on around us, I predict that Americans will come to appreciate that cyber operations can achieve our military and intelligence objectives far better than bullets and bombs. Cyber weapons are faster, more effective, safer, and orders of magnitude cheaper than kinetic weapons. Stuxnet penetrated where missiles cannot.

Indeed, the stigma associated with offensive cyber activity is breaking down, now that cyber attacks have exploded in frequency and scale. The banks are now asking the Feds to join the fight, so DHS, FBI and NSA are trying to figure out how to collaborate, without going to jail themselves for hacking or disclosing classified data.

This sea change presents great opportunities for startups to build a new ecosystem of cyber capabilities that defend our nation and support our military and intelligence objectives. We’ve got the best security experts in the world. New startups are enabling the exchange of threat data, using honeypots to collect counter intelligence on foreign hackers, and deploying Hadoop clusters to track botnets. They even develop exploits around newly discovered vulnerabilities to deliver offensive payloads.

Over the next five years, our nation will embrace the capabilities of American hackers to fight back in cyberspace, securing our economy and our lives. Our Defense Department will need fewer bombers, missiles and destroyers, leading to a Cyber Dividend that will fund health care, education and debt reduction.

David Cowan is a partner in Bessemer’s Menlo Park, Calif., office. He invests mostly in network technology, infrastructure SaaS, consumer Internet and cyber security.

Airware, a startup that is creating a software platform for commercial drones, said it had raised $10.7 million in a Series A funding round led by Andreessen Horowitz. Google Ventures also participated. As part of the deal, Andreessen Horowitz partner Chris Dixon will join Airware’s board.

The Newport Beach, Calif., company said it would use the money to expand staff for its universal development platform as the market for non-military drones expands.

Airware founder and CEO Jonathan Downey said that uses of drones will be increasing for a wide range of purposes, from checking infrastructure to monitoring mining operations to preventing poaching.

In an interview, Downey said that he expects to compete with a range of ex-military efforts, but that the most successful companies will be those that provide a platform to allow for the widest range of innovations.

“This is going to be about a lot more than we know or can guess,” he said. “The industry is at its very beginnings.”

Dixon agrees. “Hardware is the new software,” he said about the investment in Airware, which he said he discovered after attending conferences about the fast-moving drones business, noting that the overall field of robotics has “overpromised and underdelivered.”

Airware came out of both the Lemnos Labs and Y Combinator incubators and had raised seed financing from First Round Capital, Firelake Capital, RRE Ventures, Shasta Ventures, Promus Ventures and several Y Combinator partners.

The scary thing about the Petraeus affair: The CIA director and a Phd in counterterrorism are too incompetent to secure their own email.

– Greg Koenig, via Twitter

The renewed emphasis on building up cyberwarfare capabilities comes even as other defense programs have been trimmed. Along with unmanned aircraft and special operations, cyberwarfare is among the newer, more high-tech and often more secretive capabilities favored by the Pentagon’s current leadership.

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Ahead of the dinner, Anderson stopped by my office to let me have a peek at his 10 predictions, and we talked them over a bit. All 10 are below, along with some comments from Anderson that emerged from our conversation.

Before diving into the predictions, Anderson tells me there is a grand theme that unifies them all: “Integrating everything.”

What does that mean? “It means a whole lot of stuff that needs to be integrated. We don’t need anything new at all. There’s so much work that needs to be done with the existing tool sets. Steve Jobs didn’t really invent anything at all. But he was great at integrating things into a product. There’s a lot more of that work to do. We have to do it in the phone world and the TV world and the health care world. We have lots of devices and lots of chips and lots of operating systems and lots of content. The bigger question is, how do human beings use it all efficiently?”

As an example, he cites the collaboration between Nuance, the speech software company, and IBM, bringing the Watson computer of “Jeopardy” fame into the area of health care. “For the first time, the idea of evidence-based medicine won’t just be in a magazine article,” Anderson says. “A doctor will be able to pick up his phone and describe four symptoms, and find out what the likely diagnosis is, what the indications are. It’s fantastic.”

So here are those 10 predictions, with additional comments from Anderson:

1. TV becomes the new center of gravity in the tech universe. All the other devices find their niches in the TV galaxy. Microsoft’s attempt to integrate Kinect into TV is a strong if qualified success. Smart phone-TV integration software becomes a new category. Pad-TV integration becomes common.

“Apple will hustle to launch the next version of Apple TV, and it will be a roaring success and be seen as Tim Cook’s first great product success. But what it really will be is Steve’s last product.”

2. 2012 will see tectonic shifts in phone markets. “Nokia will fail to come back, which is pretty clear to everyone except the people in Finland.” Samsung, Anderson says, will retain its spot as the new global leader in mobile phones by volume, and will keep this crown despite the debut of Microsoft’s Windows Phone 7.

Meanwhile, Anderson says, Google will lose control over the Android operating system, mainly because unlicensed versions of Android will multiply in type and in installed base, especially in Asian countries. “It’s already a balkanized environment. Now Google loses control of the technology entirely. China is already running an unlicensed version of Android, and I think there will be more of that.”

Finally, the smartphone will finally emerge as the dominant category of wireless phone. “Why would you have anything else? And why would sellers of content and services want you to?” he says. “It doesn’t matter if you’re in a rich country or a poor country. This stuff is cheap.”

3. Clouds are for consumers, and for start-ups. Even as a large number of big companies move pilot projects onto external clouds, it will become clear that the real trend is for enterprise to stay away from clouds in all key areas, for reasons of both security and reliability.

“The cloud guys hate this because they want to sell to enterprises,” Anderson says. “But the security issues are becoming really intense. If you’re a CIO, it’s a terrible environment, and you’re a target, for sure, especially if you’re a company with a lot of intellectual property. I’m not implying that things like SAAS (software as a service) aren’t a big trend. But no one is going to put their valuable IP on the cloud.”

4. Security splits the tech world in two, finally getting attention from CEOs. Companies with real IP start to realize they have to “go big or go home” with their security response, and their spending on protecting their “crown jewels” rises dramatically.

5. Siri stuns the world. Siri, on Apple’s iPhone 4S, has sounded the arrival of Internet personal assistants, and the world will spend this year marveling at what Siri and its rivals can and cannot do — and what they can learn to do.

“I think we’ll see a bunch of these things,” Anderson says. “Siri will get much better. It will learn how you learn. We’ve never seen people have long-term relationships with machines before, but it will be a long-term relationship, and she will remember everything, but make good use of it. She will know you learn better by seeing than hearing, or that it takes three times to tell you something. All those things that you have to program today should be learnable. None of that has been done yet. That creates a real friendship. And I think we’re going to start seeing personal assistants not just for everyday life, but for professions like medicine or car repair. Instead of just having Siri be everything, there will be many Siris for different contexts.”

6. We enter the amazing world of Dave and HAL, as voice recognition comes of age. From hospital to car, mobile to home, Kinect to Siri, exercise to play, work to entertainment, remote control to direct action, from Microsoft to Apple, from Tellme to Nuance — the time has come for computers and humans to talk to each other. With lots of funny stories, big bloopers and amazing breakthroughs, humanity at the end of 2012 will be talking to machines in a normal voice, and it will not seem unusual, nor be the cause of unending frustration.

“The voice-recognition part is almost trivial,” Anderson says. “The important part is context-sensitive understanding. It used to be that all the researchers at Carnegie Mellon used to think that all you needed was more computing horsepower to do better at voice. It turned out that was wrong. It was right for a little while, but the real problem is context. And so, if you can build up that database where you can search it contextually for what to expect, that is where you get all the mileage.”

7. E-readers prosper, but pads continue to dominate what Anderson calls the “carry-along” market. Pads and tablets will come down in price and get closer to prices of e-readers. Meanwhile, Anderson says, Amazon’s Fire will move upmarket and evolve into a full-fledged tablet.

“If you look at the specs on the Fire, it’s a tablet, but it’s hobbled,” Anderson says. “So I think that this is part of the whole strategy: Come in and sell at a low price, and then later unveil a more complete tablet. Apple will stay ahead, though. A lot of people are asking me if Amazon will catch Apple, and the answer is no. The way it’s configured right now, there’s no way the Fire will catch up with the iPad.”

8. The consumption world explodes. Get ready for new devices, new content, new bundles, new connection techniques, new distribution channels, new aggregators, new tablets, new phones, new players, new self-published authors, new garage bands, new consumption models riding on social networks. There is nothing but high energy in the content consumer market. People are now ready to spend subscription money, and the publisher response will be huge. “It’s going to be a huge melee of stuff,” Anderson says. “We’ll invent more stuff to consume, and it will be very hard to figure out who the players are from week to week, and how they’re doing. They may not even know themselves.”

9. Governments and corporations focus on intellectual property as though it were their most prized asset. It is. This new global understanding leads to a reevaluation regarding giving critical IP away for nothing versus protecting it. The age of what Anderson calls “IP naïveté” is over, and the question of proper IP valuation is here.

What is IP naïveté? “When Jeff Immelt stood on the steps of the White House the day after he was named jobs czar, and handed the plans for GE’s most important jet-engine project to Hu Jintao in order to get the permission to be allowed to bid on maybe selling engines to China — that’s IP naïveté,” Anderson says. “Thinking that’s not going to come back and show up for sale in Houston from some Chinese company in about six months is IP naïveté.”

During 2012, he says, companies and countries will start valuing their intellectual property not for its replacement value, but for figures that are magnitudes larger. State-sponsored IP theft will shift from being considered a nuisance and more along the lines of an act of aggression.

10. Amazon gets it all. Between outdoing Wal-Mart online, to beating the booksellers and delivering groceries, and making new inroads in video streaming, Amazon will prove that one company can indeed have it all. Strong Kindle and Fire sales will only be icing on the cake.

Stephanie A. McCloskey of Clearwater, Fla., pleaded guilty last November to a federal charge of conspiracy to traffic in counterfeit goods and to commit mail fraud, and ultimately cooperated with authorities. She was charged alongside Shannon L. Wren, now deceased, and together, they were accused of running a company called VisionTech Components LLC that between 2006 and 2010 advertised name-brand, trademark-protected chips on the Web. The chips were imported from China and Hong Kong and were improperly labeled as “military grade.”

The DOJ says that on more than 35 separate occasions, they sold some 59,540 chips worth about $425,000. When customers who bought them complained that the chips were fakes — they didn’t work — McCloskey and Wren took no action.

Fake chips aren’t trivial. The thrust of the problem is that depending on the chip, lives can be at risk. If the fake chip in question is used inside a system that’s supposed to, say, deploy an airbag during a car accident or warn a fighter pilot that a missile has just been fired at his plane, people die.

The charges rang a bell and reminded me of a BusinessWeek story on the subject from 2008. The story, Dangerous Fakes, traces chips that had been taken out of discarded motherboards in China and relabeled and ultimately sold to the defense contractor BAE systems. Some of the companies selling the chips were operated out of residential addresses, which you’d think would have triggered alarm bells somewhere within the Defense Department’s procurement apparatus.

Meanwhile, the DOJ thanked the Semiconductor Industry Association and a bunch of chip companies for helping out with the investigation: STMicroelectronics, Texas Instruments, Analog Devices, Intel, National Semiconductor, ON Semiconductor, Freescale Semiconductor, BAE Systems and Raytheon.

(Art via the Museum of Counterfeiting in Paris, which exists.)

That’s not easy. Given what it does — develop software that essentially helps government intelligence agencies root out and track terrorists and other criminals with sophisticated data analysis technology — it’s generally known for keeping its mouth shut. Its name is taken from the mystical seeing stones in the “Lord of the Rings” novels.

The company takes huge reams of data and subjects it to analysis to find connections between people and entities, and to find patterns that aren’t obvious. It has been used to track suicide bombers in Iraq and to sniff out abuse of government stimulus money in the U.S., and naturally most of its business is with the government, though banks, always on the lookout for fraud, are also said to be enthusiastic customers.

Yesterday, Palantir reported in a filing with the U.S. Securities and Exchange Commission that it had just raised $68 million in funding, though, as is usually the case with Form D, the filing doesn’t say who it came from. This, of course, would come on top of $50 million that TechCrunch reported it had raised in May, and another $90 million it raised in June.

The idea for what became Palantir emerged out of antifraud work at PayPal, but then grew into something bigger. PayPal alum and Facebook investor Peter Thiel talked Alex Karp (pictured) into the idea of building it into something that could root out terrorists. Thiel and his Founder’s Fund led a $12 million funding round in 2006, some of which came from the CIA’s In-Q-Tel. Thiel led another round in 2008.

I’ve got a call in to Palantir and hope to find out more behind the details in this filing, and will update the post if I hear from them. Until then you can watch Karp’s interview on “Charlie Rose” from 2009, and a Peter Thiel interview with The Wall Street Journal from last month.

After surviving numerous devastating wars throughout history, humanity is well acquainted with war in the physical realm.

But we’re still unfamiliar with the concept of cyberwar. In 1998, John Arquilla, professor at the Naval Postgraduate School, tried to envision it in a piece for Wired Magazine, The Great Cyberwar of 2002, in which a loose coalition of rogue states, terrorist groups and drug cartels team up to prod the United States into a war with China and Russia by knocking out power grids, blowing up chemical plants and causing airliners to collide in midair.

It was fiction, but the scariest fiction is always based in part on plausible fact.

So what exactly would cyberwar look like in the real world?

It’s an important question to answer now, after the U.S. Department of Defense announced last week that it now considers “cyberspace” — an obviously dated word referring to the Internet and networking computer environments, but which has recently regained currency in government circles — a theater of warfare similar to land, sea, air and space.

In a speech this week at the National Defense University in Norfolk, Va., Deputy Secretary of Defense William Lynn announced that the United States now considers attacks on certain computer networks and systems by foreign powers and terrorists as the equivalent of a traditional attack with guns and bombs. It thus reserves the right to retaliate, both in the cyber-realm or with traditional force.

(You can see Lynn’s speech, which runs about 45 minutes, in the video below, courtesy The Pentagon Channel. And below that I’ve embedded the 19-page policy document.)

The striking declaration raises some fundamental questions about warfare, including: What would war in cyberspace look like? How would it be fought? Would those not directly involved in the fighting even know it’s going on or which side is winning? Would we even know who the enemy is?

We have some hints. At its basest level, we know that unknown parties are probing U.S. government and private networks, stealing what they can and leaving the doors unlocked for future visits.

U.S. officials have complained in private and in public about alleged attacks against government networks and those belonging to defense contractors.

Privately and in diplomatic cables, they most frequently blame China, which has always denied any involvement. An April 21 Reuters story citing U.S. State Department diplomatic cables obtained by WikiLeaks showed officials estimating that hackers working for China’s People’s Liberation Army had stolen terabytes worth of information, and that efforts to put down the attacks, dubbed “Operation Byzantine Hades,” were ongoing.

Overall, the Government Accountability Office says that intrusions on government computer networks have climbed from 5,503 incidents in 2006 to 41,776 in 2010.

The examples are numerous.

In March, the SecurID system made by RSA, a unit of storage giant EMC, came under attack. A subsequent attack was launched against defense contractor Lockheed Martin. The same RSA tokens are widely used at government agencies and at innumerable corporations.

In June, Google disclosed that its Gmail email service had come under attack from someone in China, a claim which that country’s government denied.

And just this month several U.S. Department of Energy facilities — including the Pacific Northwest National Laboratory in Richland, Wash. — severed their connections to the Internet following a series of attacks using “Zero Day” vulnerabilities, which exploit previously unknown weaknesses.

All of these incidents seem to scream out the need for a more active defense, which the new policy is intended to create. To date there’s never been a penalty for attacking U.S. government and private networks, in part because it’s hard to hit back when you don’t know precisely who’s hitting you in the first place.

This is known as the attribution problem.

If you’re able to solve that issue, there are some hints about what a retaliation might look like. Consider Stuxnet: A powerful piece of carefully-targeted malware, supposedly designed by Israel, it burrowed deep via Microsoft Windows into the industrial control computers running Iran’s nuclear centrifuges.

With its target located — it was designed to seek out a specific installation — Stuxnet made those centrifuges, which are used to enrich uranium, spin faster than they were supposed to. The resulting damage set the Iranian nuclear program back by two years or more.

That’s not a bad outcome, perhaps, but Stuxnet opened a Pandora’s box. And while experts who have analyzed it closely have said it would have taken a team of highly skilled programmers several million dollars and several months to design it, you can bet that cyberwarriors in every nation on Earth are combing through the Stuxnet code hoping to build their own version of it. All these could conceivably be used against our own power grids and factories and more.

And in an odd way that’s an encouraging thought. Where we might end up is with the digital equivalent of mutually assured destruction.

If we reach a point where we can destroy and disrupt the networks and infrastructure upon which our potential enemies rely and they can do the same thing to us with relative parity, the fear of a devastating reprisal becomes a deterrent to the temptation to launch an attack.

Similar assumptions about nuclear war prevented the Cold War between the U.S. and the Soviet Union from turning hot, and made nuclear war ultimately unthinkable for both sides.

Without electrical power and thus the ability to communicate or conduct commerce, any society breaks down quickly. Consider the thought of six weeks without a working cellphone network, without the ability to access funds in your bank account or without power.

If that scares you — and it should — it should scare our potential enemies just as much, and thus give them pause. That’s the hope, anyway.

d20110714cyber

The Pentagon’s new strategy for threats from computer hackers primarily deals with enhancing the defense of its computer systems and those of its military contractors. But Marine Gen. James Cartwright, vice chairman of the Joint Chiefs of Staff, said that policy is just a start. He said that over the next decade the military would move beyond building better firewalls and make clear to adversaries that they will pay a price for serious cyberattacks.

“There is no penalty to attacking us now. We have to figure out a way to change that,” Gen. Cartwright said.

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Yesterday, Booz Allen confirmed that its network had been attacked. On Monday, the hacker group Anonymous announced that it had penetrated Booz Allen’s network and posted to the file-sharing site The Pirate Bay a file containing some 90,000 email addresses of military personnel, plus “password hashes.” A hash is generally an encrypted version of a password, one that can’t be easily reversed to obtain the actual password.

AnonymousIRC is the new name of the gang formerly known as LulzSec. By working under the flag of Anonymous, the LulzSec hackers, who gained notoriety for repeated attacks against Sony, are associating themselves with the amorphous group that has harassed such targets as the Church of Scientology, PayPal and credit card companies. The group is promising at least two more data dumps this week.

Booz Allen downplayed the incident, saying in a statement, “at this time, we do not believe that the attack extended beyond data pertaining to a learning management system for a government agency.” A learning management system (LMS) is used to track the training of workers on the job, and it’s something Booz Allen helps the federal government with regularly. For instance, it works with the Office of Personnel Management to help federal agencies with on-the-job training.

As computer security breaches go, this one probably rates fairly low on the severity scale. It’s not clear from Booz Allen’s statement what the system was used for, or whether it was connected to any sensitive government work.

The larger concern is that military personnel whose addresses have been published in the file will next be targeted for attack via “spear phishing,” in which legitimate-looking email messages are sent to the target, containing attachments that look routine but are really malware that can capture a password. If they know what’s good for them, the folks whose addresses were leaked have changed their passwords and will carefully scrutinize email messages that contain attachments.

There is, however, a pretty good chance that many of the addresses publicized are out of date. Mililtary personnel move around a lot, and their email addresses often change when they move from one facility to another. By chance, I saw this message on Twitter from Phillip Stewart, who’s serving in the U.S. Air Force:

Ha! I just noticed my old Schriever.af.mil email is in the list, but I left Schriever a year ago. @egulley316 @AnonymousIRC #AntiSec

July 12, 2011 11:53 am via webReplyRetweetFavorite

@pmsyyz

Phillip Stewart

Booz Allen shares dipped a bit on the news, falling to $18.95 Monday from its Friday closing price of $19.39, but the shares recovered Tuesday to $19.54. Booz Allen listed its shares on the NYSE last year but is majority-owned by the Carlyle Group.

This isn’t the first time — nor will it be the last — that Booz Allen has been targeted for a cyber attack. A 2008 Businessweek cover story detailed how a legitimate-seeming email, appearing to have come from someone at the Pentagon and addressed to a Booz Allen executive, contained in an attachment malware called “Poison Ivy” that was designed to give the attacker remote control over the target’s PC. The email was traced to a sender in China. It’s incidents like this — which we rarely hear about — that are far more worrying than the ones we do hear about, day in and day out, from the likes of Anonymous.

That didn’t happen. In 2001, at what was very nearly the last minute, a group of private investors nabbed the assets of the old Motorola-backed concern for fractions of a penny on the dollar, and kept the satellite phone service running. The timing was right. The 9/11 terrorist attacks, which led to wars in Afghanistan and Iraq, ensured that the U.S. Department of Defense would remain the system’s biggest customer, and it still is today. And though no one will tell me with any certainty, it’s even possible that Seal Team Six used an Iridium-based communication system when they slipped into Pakistan and killed Osama bin Laden. Just sayin’.

The big mistake of the original Iridium was that it aimed to be “the phone” that globe-hopping executives would carry with them everywhere. In what could only be described as a monumentally bad judgement call on the the state of the wireless market, common cellphones started working pretty much anywhere a mainstream user might happen to be, obviating the need for a single wireless phone that worked anywhere in the world.

Take out the word “mainstream,” and the business case for Iridium was and is strong. It finished its March quarter with 447,000 subscribers around the world — a 25 percent increase over the previous year — of which more than 315,000 are voice customers. They’re people whose jobs take them to the remotest corners of the globe — oil platforms at sea, drilling rigs in the desert, mines in mountainous terrain, you get the idea — and for whom being without a working phone is simply not an option. As big as the conventional wireless phone networks are, they still cover less than 10 percent of the globe. Government voice users — about 37,000 at last count — are the heaviest users, averaging about $140 in revenue each month, while commercial voice users — 279,000 at last count — average about $47 a month.

But the fastest-growing bit of Iridium’s business is in data. If you have a piece of equipment or an asset whose status or movement you have to track, even in a remote desert, across the ocean or at the South Pole, the chances are pretty good you can put an Iridium modem on it and follow its status in short regular bursts of data. This “machine to machine” or M2M business is small but growing fast. As of the last quarter, the business had 122,000 customers — nearly double the number from the year-ago quarter — and brought in $6.4 million, accounting for about 10 percent of sales.

And here’s where you find another key difference of the new Iridium versus the old. Rather than anticipate every kind of use for the Iridium network, the company provides both the satellite data service and a modem module that third-party companies build into scores of applications as varied as tracking trucks across Brazil to buoys in the ocean watching for tsunami waves. There are some 150 third-party outfits putting the Iridium network to use today.

In 2009, the company went public. (I wrote about it for Businessweek at the time.) It raised $200 million to help finance a new $1.8 billion constellation of 81 satellites (66 plus 15 spares, some of which will remain on the ground) that are due to start launching on SpaceX rockets in 2015. And unlike its money-losing predecessor, this Iridium is profitable, having finished 2010 with $22.7 million on sales of $349 million.

Last week I caught up with Iridium CEO Matt Desch while he was on a swing through New York. We talked about what’s next for the Iridium satellite system more than a decade after most people had written it off as a failure. Today it’s anything but.

Matt, Iridium came public about two years ago, well ahead of all these other tech IPOs that have been going on in recent weeks. How’s business been since then?

Desch: Our initial plan was to do a more traditional private-equity to IPO process, but the world cratered in that time. And so going public was still important. We needed financing to pay for our next-generation satellite system, so we went public and then probably thought we’d do some high-yield debt offerings. But frankly we took advantage of the troubles in the world economy, and against that backdrop, export credit agencies really wanted to support their governments. We had a competition going on to build our new satellite system between the U.S. and France. The winner turned out to be France. Their policy to support their industry was a little faster-moving and had more depth than what the U.S. was able to do at the time. The French banks gave us $1.8 billion in financing at less than five percent interest over five years. And then we closed other financing last summer. So now we have a fully financed plan to obtain all the cash we need to fund our operations and build our next fleet of satellites. We continued to grow at an average of 25 percent over the last five years. We even grew through the recession.

Who’s building the new satellites and when will you start launching them?

We’re about four years into a five-year program. Thales Alenia Space is the prime contractor building them, but its a $2.3 billion multinational contract. SpaceX will launch them starting in 2016. We’re Elon Musk’s largest commercial launch contract. He’s still working on the platform, but we don’t need him for four years, so that’s going to be perfect timing. Lockheed is on the team. Even though they competed to build the satellites, they’re still going to write some of the flight software. Boeing is on the team and ViaSat is on the team and there are others. All told it will be 81 satellites, of which 72 will be launched, 66 will be operating with six orbiting spares, and then nine more spares on the ground.

Your traditional satellite phone business accounts for how much of your revenue, versus data and other things?

Phones account for about 50 percent, but the data business is growing the fastest. Everyone thinks that our business is limited to just satellite phones that provide voice services, and they worry that that business is going to get more competitive. Inmarsat introduced a new phone last year, and Globalstar is going to come back. But I’ve been saying for the last few years that its more complex than that. We’re going to change the rules around the personal device environment. We’re moving away from satellite phones to enabling people to work on the move a lot better. This will include using your smartphone in ways that you can’t use your smartphone today. Using devices like iPads and other things. Our business is more about working with partners who enable unique solutions that put our service to work rather than the old ‘I have a phone, do you want to buy it?’ model.

And what about data?

It’s our fastest-growing business. A couple of big things have happened in the last few years. Our network has always had some distinct advantages — it has the lowest latency and covers the entire planet. We’ve come out with some devices that are both really cheap and really small, we have more than 200 partners, and at least 250 of them put our modems into things that they don’t even tell us about. It may be aviation or shipping or fishing.

Back to the data business: Part of it is what’s called machine-to-machine communications. What is that, and why is it a big opportunity for you?

It’s still in early days, but it has expanded dramatically. That industry started on the terrestrial side. Other companies would put a cellular modem in devices like the handheld pad the FedEx delivery guys use, or for tracking the truck or a shipping container, or a train or a bus. Those applications are great, but they only have so much room. They’re limited by the coverage of the cellular networks. If you want to track a truck as it moves across Brazil and not just when it’s close to major cities, we end up getting built into those products. Satellite still only accounts for about one percent of that business, but it’s growing really fast for us. We’re talking like 50 to 60 percent a quarter, so its really exploding. Once you track something on the ocean, or in the desert or in the sky, we’re the best option. People say, well, 99 percent of the populated areas are covered, but there’s a lot of reasons why you might want to track something when it’s not in that populated area. It’s really enabling things that weren’t possible before. We end up solving a lot of high-value problems that governments and companies are willing to pay a few extra dollars for. It used to be that these things cost hundreds of dollars for the airtime; now it’s in the tens of dollars, so the cost is no longer an issue.

So government is your biggest customer? And I presume a lot of that is the military? Was Seal Team Six using Iridium when they killed bin Laden?

(Laughs.) Sorry, I can’t say. But yes, government accounts for about 25 percent of our business, and growing rapidly. We do things like Blue Force tracking — that is tracking so the good guys can see where everyone is, all the vehicles and people. Special operations guys do tend to use our system, and I’ll tell you why. The military has their own systems and their own satellites that they can pre-position when they have enough time to get ready. But special forces tend to work anytime, anywhere and on short notice. When the Navy was called in to help in Japan after the earthquake, they didn’t have anything they could use beyond the immediate area of the ship, so they used our system. When they go into a new place, sometimes we’re the only thing that will work for them, and their own systems are too expensive to set up. So, yes, the Department of Defense is a big customer, but commercial customers are growing much faster. A lot of the companies that use our system are smaller, and you won’t hear about them because they supply niche products to specific industries. There’s one in Salt Lake City that builds a product that’s built into trucks that monitors the driver to see if he’s riding the brakes or going too fast. In Australia they use our system to track trains in real time. At chemical and oil companies we’re used in “man down” products, where if the systems detects you as motionless for several minutes, you have to hit a button to say you’re okay, because if you don’t you’re probably lying flat on the ground because you’re incapacitated or injured, and someone will come and rescue you. The list gets so long that we don’t even know about them all.

Will you build an add-on for my iPhone that will let me make a call from some remote place where Verizon or AT&T’s network doesn’t reach?

We won’t, but one of our partners might. My view is that you shouldn’t make a satellite phone to compete with the iPhone, because it will never be as cool as the iPhone or Android phones. What you really need to do is let them talk to our network so you can make calls on it and send messages and pictures. It probably won’t be any good for watching Hulu videos, but you will certainly be able to communicate and send pictures back and forth.

Barack Obama, June 4, 2009, Cairo, Egypt

In past 8 days at least 12 #Egyptians set themselves on fire out of desperation: unemployment, poverty, corruption. #Jan25 #Egyptprotest
@monaeltahawy, January 25, 2010, Cairo, Egypt

I will keep on saying this. Youth Entrepreneurship is key in creating a long lasting impact in the Arab world! #Jan25 #Lebanon #Sidibouzid
@habibh, January 25, 2010, Beirut, Lebanon

As we left Cairo ten days ago to travel home to the U.S. after taking part in the first delegation of the State Department’s Global Entrepreneurship Program, we saw Egyptians huddled around TVs in the airport watching video of the Tunisian uprising on Al Jazeera. We had no idea then that a single “slap to a man’s pride” in Sidi Bouzid, Tunisia could lead days later to fierce protests in Cairo and the defacement of posters of Mubarak. While there is a good chance that the protests will settle down in the coming days in the face of a growing military presence, it’s clear that Egypt is at a tipping point–politically, socially and economically.

The pent-up frustration that Egyptians feel about the current regime is felt in different ways across the population. Our focus in Egypt was on a growing class of educated, tech-savvy entrepreneurs. While the frustration they feel may not be as intense as that of a fruit vendor subsisting on two dollars a day, there are a number of economic and cultural impediments that have historically limited their chances for success. Based on what we found, the promises of Egypt’s start-up scene lie in stark contrast to the desperation of its poor. The next few weeks and months will tell us a lot as to whether there is enough stability in the country to make external investors comfortable with its prospects.

Amr Ramadan is the kind of entrepreneur investors look for: he started his company Vimov with only $1,060 and begins his investor pitch by openly admitting the failure of his first product. His next product was a simulator for iPad developers that sold thousands of downloads at $32 each. His third product was the most popular paid weather app on the iPad, with over 350,000 users paying $.99 each. The next product in his pipeline, an ingenious take on personalized news, sounds even more promising. In Silicon Valley he would have a few hundred thousand dollars of angel money in the bank, and a couple of Series A term sheets from VCs in his pocket. But Amr is not in California, or even the United States. He is in Alexandria, Egypt, and he’s just one of a new class of young, educated and Internet-enabled entrepreneurs in the region.

We watched this narrative unfold firsthand in Egypt, which was selected as the pilot country of theU.S. State Department Global Entrepreneurship Program. The GEP is the government’s effort to promote and spur entrepreneurship around the world, led by passionate advocate (and successful entrepreneur) Steven Koltai. We met with a series of senior government officials, including Prime Minister Ahmed Nazif, who are committed to building a startup-friendly business environment. The Egyptian government recognizes that a nucleus of successful entrepreneurs is critical to catalyzing a sustainable middle class. While no single company is going to cure unemployment or increase the poverty line, an inspiring story of upward mobility could be an important populist spark.

Over the course of four days, we reviewed 32 presentations–culled from over 100 applications–from a variety of Web, mobile and hardware startups. Our delegation included the former CEO of CarMax; an investment banker, an MIT management scientist and a Silicon Valley VC. After two rounds of interviews, we awarded $20,000 to two companies: semantic search engine kngine and hardware accelerator SilMinds.

Haytham AbdElFadeel, the creator of kngine, is a 20-something hacker. His older brother works for him managing servers, while his father works from home as a day trader. “Search engine” are two of the most halting words known to investors. As a prominent VC emailed us, “a direct assault on Google doesn’t strike me as the right approach,” but Haytham doesn’t know any better than to pursue his passion for creating a better Google. He is using the prize money to purchase more servers, since the two desktop computers at his home are limiting his ability to index more of the web.

Dr. Hossam Fahmy is the co-founder and CTO of SilMinds, which has created the only decimal hardware financial accelerator card available in the market. He is a Stanford PhD, a professor at Cairo University, and he helped formulate the IEEE standard for floating point arithmetic. By shifting number processing from general software to specialized hardware, SilMind’s card increases server performance for certain financial service applications as much as 5X.

As an emerging market, Egypt doesn’t suffer from the irrational behavior seeping into the U.S. Internet market (unproven ad technologies raising $30mm, local discount services selling $20 gift cards for $10, etc). Instead, the start-up community in Egypt reminds us of the U.S. Internet market circa 1995, when it was tough to raise capital and when there was less glamour in being a technology entrepreneur; as opposed to the U.S. where Facebook raised $1b at a $50b valuation and “The Social Network” is poised to win an Oscar.

Some investors, sensing that the U.S. Internet equity is “priced to perfection,” are turning their sights towards emerging markets like Egypt. Usually, they look for foreign applications of successful domestic business models, like who is the “Facebook of Africa” or the “Groupon of Indonesia”? Many entrepreneurs (including freshly minted MBA grads returning to their native lands) are quick to adopt this strategy. About half of the start-ups that we saw in Cairo were localized versions of successful U.S. models.

The impressionability of these emerging market startups raises important questions. Although there may be a clear opportunity for the “Zynga of the Middle East” to get acquired in the near term by its namesake, one cannot build a sustainable business based on somebody else’s vision. Will those entrepreneurs who define themselves based on our business models look back at us, years from now, as startup imperialists? If so, will they shut us out from participating in their own economic transformations, just as they begin to scale? One need not look any further than China or Russia for cautionary tales of markets closing down to foreign investors at the most inopportune times.

There are a variety of reasons why Egypt could fail in its attempt to become a start-up mecca: poverty, political instability, poor education, lack of rule of law, difficulty to raise capital and cultural norms that do not embrace risk. For example, it takes two days to form a new company in Egypt, but takes two years to dissolve one, which is problematic because without bankruptcy reform, it is impossible for entrepreneurs to “fail fast” and move on to their next venture.

Despite these risks, there are a number of advantages that Egypt has in its favor: innovation is real, valuations are reasonable, engineering talent is available, real estate is cheap, and the government is motivated to help foster entrepreneurial success stories as a means of inspiring its disaffected youth. Egypt represents a market of more than 80mm people, and is the gateway to the broader MENA market of 320mm people (larger than US, Brazil or Russia). The region’s growth rates of mobile penetration and Internet usage are among the highest in the world.

In recent months, a few venture funds have started to finance these early stage opportunities: Arif Naqvi, founder of Abraaj Capital, the largest private equity firm in the region, recently announced multi-hundred million dollar funds dedicated to early and mid-cap technology companies in the Middle East; Ahmed Alfi, after two decades of successful investing in the United States, returned home to Cairo to form Sawari Ventures, complete with a SoMa style incubator housed in a classic 1940s building on the Nile.

Is it time to invest in Egyptian startups, or will the current political and social instability inhibit exits and investment returns? Who knows if companies like kngine and SilMinds will ever exhibit the same power in Egypt that Google and Intel exhibit in the US–what matters now is that there are Egyptian entrepreneurs with the drive and skill sets necessary to compete in global technology markets. With the Egyptian government’s support, and the organic growth of the population and its technology adoption, we believe that a framework is now in place for Egypt and the broader MENA region to emerge as an important market for early stage investment.

Seth Goldstein @seth is a San Francisco based angel investor and start-up entrepreneur. Christopher M. Schroeder is a Washington, D.C.- and New York-based angel investor and CEO of the online health start-up healthcentral.com.

The U.S. military may soon add another item to the standard-issue field and garrison furnishings it issues to every soldier: The smartphone. Come 2011, the Army Capabilities Integration Center will begin field-testing phones, network equipment and applications as part of a combat team modernization program called Connecting Soldiers to Digital Applications. The first smartphones to be reviewed will be Apple’s iPhone and an Android device.

“What we’re doing is fundamentally changing how soldiers access knowledge, information, training content and operational data,” Mike McCarthy, director of the mission command complex of Future Force Integration Directorate at Fort Bliss, told the Army Times. “The day you sign on to be a soldier, you will be accessing information and knowledge in garrison and in an operational environment in a seamless manner. We’re using smartphone technologies to lead this.”

But in order to do that, those technologies need to be adjusted and modified for the Army’s purposes. That means “ruggedizing” the devices for combat and potentially adjusting the Army’s traditional purchasing model to allow soldiers to personalize their phones with the apps best suited to their duties. To that end, the CSDA is considering creating an iTunes-esque portal through which it can monitor app downloads and ensure that they are secure.

“The requirements that General Vane have are far different than Private Jones down in second squad of 1st Platoon,” McCarthy said. “We need to create an environment that lets them find the applications that are best suited for that individual, and that’s the approach we’re taking.”

This is my iPhone. There are many like it but this one is mine. My iPhone is my best friend. It is my life. I must master it as I must master my life.

Then there is John Young, who publishes documents about WikiLeaks.

From his apartment on New York City’s Upper West Side, the 70-something architect, computer buff and self-described “cypherpunk” runs a website, http://cryptome.org, that seeks to hold accountable the site that boasts of holding others to account.

Mr. Young said his scrutiny is meant not to undermine WikiLeaks, but to harden it for battle. “Doing what they’re doing,” he said in a telephone interview, “they have to be just as tough as nails. And they can’t get tough by having people praise them. They can only get tough by having people attack them.”

WikiLeaks has posted hundreds of thousands of classified U.S. military documents about the wars in Iraq and Afghanistan, with the most recent trove released last weekend. Among the posts on Mr. Young’s site—which covers a broad range of subjects—are internal WikiLeaks emails showing the group debating strategy for attracting funds and supporters. The Cryptome posts have provocative labels such as “wikileaks-fear,” “wikileaks-snitch” and “WL Hate.”

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The firm, Amerilink Telecom Corp., in recent months has recruited former congressional leader Richard Gephardt and former World Bank President James Wolfensohn as directors. It hopes the appointments will help overcome U.S. officials’ skepticism about Huawei, which has hired Amerilink as a consultant and distribution partner.

Huawei is one of the world’s top suppliers of telecom gear, but alleged ties to the Chinese military have stymied its ambitions in the U.S. market. It is currently trying to win part of a multibillion-dollar network upgrade at Sprint Nextel Corp (S).

Sprint says the bidding is entering the final stages and six vendors are submitting proposals. It declined to comment on Huawei or Amerilink, which have made a joint bid.

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Like the Hitler meme and others, the dancing soldiers of Afghanistan have set off a lot of military moves of the hip-swaying kind in online video.

Case in point, the latest one from a group of Israeli soldiers in the West Bank’s Hebron while on patrol with big and decidedly scary guns, using them as props in order to boogie to Ke$ha’s hit song “TiK ToK.”

There’s more controversy with this one, of course, given that it begins with a Muslim call to prayer in the background and those guns are part of the, well, fun. The incident is being investigated by the Israeli Defense Forces.

The holding hands move at the end was a nice touch though.

In any case, you apparently can’t stop the march of our armed forces.

Here’s the video, as well as the original video of the U.S. soldiers in Afghanistan, shaking their considerable booty to Lady Gaga’s “Telephone”:

Claims that two schools in China were the source of cyberattacks against Google (GOOG) and other U.S. companies have become the butt of a state-run media joke in the country. First came vehement denials from Shanghai Jiaotong University and Lanxiang Vocational School, which dismissed the stories as unfounded. “We were shocked and indignant to hear these baseless allegations which may harm the university’s reputation,” an SJTU representative told Xinhua News, the official press agency of the People’s Republic of China. He denied any ties between the school and China’s military, as did a rep for Lanxiang.

A relatively diplomatic condemnation of the claims at issue here, but it quickly devolved into outright disparagement and mockery. A subsequent news story, also published by Xinhua, bears the title “Chinese netizens make fun of Google hacking report.”

An excerpt:

A report claiming cyber attacks on Google and other firms originated from two Chinese educational institutions is being jeered at by Chinese netizens.

“The report is sheer nonsense. Is it April Fools’ Day?” netizen sdh13814021912 commented at the www.tianya.cn forum.

“The news is doomed to be a joke.” netizen Jinse Xueguang said.

“A vocational school being used as camouflage for military-sponsored hacker training camp. Am I reading a science fiction?” said another netizen azydn.

Is it April Fools’ Day? Am I reading a science fiction? Clearly Sino-American relations around this matter have sunk to a new low. Still, it’s no surprise that China’s digerati–or the Ministry of Industry and Information Technology officials impersonating them for state-run media–have reacted this way.

Confirming the schools’ involvement in the attacks or their alleged links to the Chinese military is impossible without Beijing’s cooperation. And Beijing is clearly not going to cooperate. Why would it? It has already denied culpability. And ensuring that it remains blameless is as simple as refusing to disclose traffic data from the schools’ data networks.

PREVIOUSLY:

• World War WAN: Google Hack Traced to Schools in China
• Nearly a Month After Debut, Google’s “New” Approach to China Still a Lot Like the Old One
• Google CEO: Ask Not What Google Can Do for China–Ask What China Can Do for Google
• China on “Google Farce”: Our Internet Is Open
• China to Google: No Worries, We Were Planning to Clone Those Android Phones Anyway
• U.S. State Department to Complain to China About Google Hack. Not That China’s Going to Listen.
• Microsoft: “Don’t Be Evil” Is Google’s Motto, Not Ours
• What’s the Chinese Word for Bing? Google Threatens to Leave China.

Anonymous sources close to the investigation into the attacks, which targeted dozens of American corporations, tell the New York Times they originated at Shanghai Jiaotong University and the Lanxiang Vocational School. The former boasts one of China’s top computer science programs; the latter has been known to train computer scientists for the Chinese military and reportedly has ties to Baidu, the dominant search engine in China.

While the implications of these findings seem obvious, insiders differ on what they really mean. Some suspect the schools are being used as a cover for Chinese government operations. Others speculate that they’re being used to hide intelligence operations run by a third country. Still others wonder if there’s no government involvement here at all, speculating that the attacks are criminal in origin and were intended to steal intellectual property from American tech firms.

Regardless of which scenario seems most plausible, it’s important to remember that just because the attacks have been linked to IP addresses at these schools’ networks doesn’t mean they necessarily began there.

Asked about the possibility the attacks originated at his school, a professor of Web security at Jiaotong’s School of Information Security Engineering said it was certainly possible.

“I’m not surprised,” the source told the Times. “Actually students hacking into foreign Web sites is quite normal. I believe there’s two kinds of situations. One is it’s a completely individual act of wrongdoing, done by one or two geek students in the school who are just keen on experimenting with their hacking skills learned from the school, since the sources in the school and network are so limited. Or it could be that one of the university’s I.P. addresses was hijacked by others, which frequently happens.”

PREVIOUSLY:

• Nearly a Month After Debut, Google’s “New” Approach to China Still a Lot Like the Old One
• Google CEO: Ask Not What Google Can Do for China–Ask What China Can Do for Google
• China on “Google Farce”: Our Internet Is Open
• China to Google: No Worries, We Were Planning to Clone Those Android Phones Anyway
• U.S. State Department to Complain to China About Google Hack. Not That China’s Going to Listen.
• Microsoft: “Don’t Be Evil” Is Google’s Motto, Not Ours
• What’s the Chinese Word for Bing? Google Threatens to Leave China.

[Image Credit: China Security Blog]

Earlier this week, the reliably erudite PBS public affairs program, “Frontline,” aired a documentary called “Digital Nation,” which I caught on television in one of the rare moments I find myself actually in front of one.

Produced by Rachel Dretzin, in collaboration with tech author and pundit Douglas Rushkoff, it’s the second in a series–the first, which aired in 2008, was titled “Growing Up Online”–about how the inevitable digital onslaught is affecting everyone.

As the site for the show describes itself, in part:

Over a single generation, the Web and digital media have remade nearly every aspect of modern culture, transforming the way we work, learn and connect in ways that we’re only beginning to understand…Dretzin and her team report from the front lines of digital culture–from love affairs blossoming in virtual worlds, to the thoroughly wired classrooms of the future, to military bases where the Air Force is fighting a new form of digital warfare. Along the way, they begin to map the critical ways that technology is transforming us–and what we may be learning about ourselves in the process.

And, indeed, Dretzin and her team race hither and yon interviewing a pile of smart folks–most of whom, thankfully, are not from Silicon Valley–to uncover what’s up with this Internet thing, which the kids seem to love.

There are ruminations on the out-of-focus students at the Massachusetts Institute of Technology and the evils of multitasking, fretting over how this digital submersion is affecting the brains of schoolchildren and more jaw-dropping over the creepily compelling oddness of virtual worlds and online relationships.

Dretzin even features and–natch!–clucks over her own computer-savvy children and what it all means to them. She plays the role of the less-plugged-in mother, complete with a furrowed brow about it all, although the kids are obviously sharp as tacks, digital French flashcards or not.

This egads-no-one-know-where-this-geekery-is-taking-us worrywartness is probably appropriate, and though nothing new, is well told.

Perhaps the best part is a visit to the spanking new gaming-heavy center the Army has built that sucks in teen boys like nobody’s business.

While the piece has aired, you still can watch the whole thing on the well done Digital Nation Web site, the best part of which is the contributions of regular people who added their own voices to the digital conversation.

Which is remarkably robust, as far as I can tell, so perhaps we have not gone to hell in a cloud-computing handbasket quite yet.

Here are two of the more adorkable of those videos:

Here is the whole “Digital Nation” doc, in nine chapters:

Distracted by Everything

What’s It Doing to Their Brains

South Korea’s Gaming Craze

Teaching With Technology

The Dumbest Generation?

Relationships

Virtual Worlds

Can Virtual Experiences Change Us?

Where Are We Headed?

While Internet companies such as Google use baked goods as names for their key strategic initiatives–recent ones related to its Android mobile operating system were called Donut and Eclair, for example–aggressive media giant News Corp. is definitely not going for sweetness in its unusual selection of a code name for its high-profile digital content effort.

That would be Project Alesia, a moniker that comes from a vicious siege from ancient times widely considered to be one of the more decisive battles in history.

And that is apparently what top News Corp. (NWS) execs think is the best way to describe their plans for stopping the decimation of premium content in the digital age and transforming their business to take advantage of new means of distribution, according to numerous sources BoomTown spoke to this week about the unusual name.

“It takes a lot of determination to succeed in what is one of the biggest challenges newspaper and all media has ever faced,” explained one source. “So, the real path to success will require ingenuity and staying on course over time…which was critical to that military victory.”

Interestingly, said several sources, the Project Alesia name was picked by James Murdoch, chairman and CEO of Europe and Asia for News Corp.

Widely considered the heir apparent to his father, News Corp. Chairman and CEO Rupert Murdoch, James Murdoch is apparently a dedicated reader and student of Roman history.

But it has actually been the elder Murdoch who has been cast as the obvious general so far, conducting a recent series of public verbal attacks on Internet targets, especially Google (GOOG).

He has accused the search giant of “stealing” content, for example, while other News Corp. execs have echoed his gibes in various high-profile forums.

But James Murdoch has been a key player behind the scenes in the digital strategy, several sources said, an effort that also includes News Corp. Chief Digital Officer Jon Miller and Dow Jones CEO Les Hinton.

(Full disclosure: News Corp. unit Dow Jones owns this site.)

Of this top group, it is James Murdoch–who has slowly been emerging as a more high-profile player, especially internationally–who found inspiration in the past.

To understand why, you’ll first need a short and truncated history lesson, which I culled from a variety of sources online and off:

Taking place in September 52 BC in what is now France, the Siege of Alesia (also referred to as the Battle of Alesia) pitted Rome’s famed leader, Julius Caesar, against the Gallic tribes under the unified command of Vercingétorix of Averni.

More important–besides being cited as one of the best uses of siege warfare and “circumvallation” (see more about this below)–the battle of Alesia is considered a turning point in the bitter wars conducted by the Roman Republic to tame the Gauls, who had finally united as a single force in opposition to the Roman invasion.

The hard-fought win–in a battle where the Roman army was outnumbered five-to-one, outside a hilltop fort in Alesia–is often credited with reinvigorating Rome’s power over Gaul. After the loss, Gaul became a province of the Roman empire and was pretty much subdued for the next 500 years.

Alesia is often cited as one of Caesar’s greatest military victories and the fallout from it later led to his ascension to ultimate power in Rome (which was soon followed by his infamous assassination).

That’s not the ultimate end News Corp. is envisioning, of course, sticking with Alesia’s main themes of “perseverance” and innovation, said several people with knowledge of the digital content efforts.

And, no surprise, in the digital battles between traditional media and interlopers from the Web, guess who has been cast as noble Caesar and who plays the role of marauding heathens?

You know, the ones who even cast their women and children out of the fort into the middle of the siege when food started to run out? That would apparently be the Googlers of Silicon Valley, although if it were them, the food would be organic!

Not all comparisons are the same, said a source. For example, consider circumvallation, which is essentially the building of a series of encircling fortified walls around the enemy. Contravallation is also also part of the strategy, to protect from attacks by enemy reinforcements attacking from the outside.

One could easily imagine that this means creating pay walls around premium content or de-indexing it from search sites like Google, both of which News Corp. has publicly talked about doing.

Not so!

“Traditional media companies are interested in investing in innovation too, so the idea of just putting up walls around content is a red herring,” said the source. “The idea is to find new ways of distributing media that also makes money, because why should journalism in [digital] ones and zeros be any different?”

Of course, with new stats showing sites like Google News and Yahoo (YHOO) News as the place consumers are going to get more and more of their news, that is a big issue in a longer fight, which will grind on for a very long time and well before any side can ever declare victory.

And here is a clip from a 2001 movie, “Vercingétorix,” about the Siege of Alesia, not made by News Corp.’s 20th Century Fox Hollywood studio, starring that actor dude from “Highlander” (aka my fave movie of all time). It does not end well for Google, oops, the Gauls:

[The 1899 painting at the top is by Lionel-Noël Royer.]

In a sign that China’s Ministry of National Defense faces the same kind of Internet security challenges that militaries around the world have reported, its new Web site was attacked more than 2.3 million times within a month of its August launch. The state-run People’s Daily newspaper reported that revelation Wednesday in an interview with the editor-in-chief of the Chinese defense department’s site, Ji Guilin.

In the report, Ji said it battled down a variety of hackers and no harm was done to China’s national security. He said the site has boosted its network security.

He didn’t say where the hacker attacks originated.

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In an introductory announcement, the site says it aims to provide “authoritative information of China’s national defense and army building” and “display before the world the fine image of the PLA as a mighty, civilized and peaceful force.”

The site provides a variety of official information on the activities of the Chinese military, such as press briefings, and reports on military exercises, military exchanges and peacekeeping operations.

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Though Windows 7 is expected at market by the end of the year, the United States military has set that as a deadline for its migration from Windows XP to the “worthy, but largely unexciting” Windows Vista and from Office 2003 to Office 2007.

The Army has been testing Vista since 2006 and its decision to move forward with a migration of its 744,000 desktops–on both classified and unclassified networks–was apparently driven by the OS’s improved security. “First, they see real value in Windows Vista’s improved security architecture,” Microsoft senior director Gavriella Schuster said in a statement. “Second, it shows large organizations have unique needs and timetables for deployment. These things take time–they have been rigorously testing internally–and it makes sense that they have approached deployment in a measured and well-planned way, especially given the number of seats they are migrating to Windows Vista.”

A Dell laptop, believe it or not. The Latitude E6400 XFR is Dell’s (DELL) first true entrant into the so-called “rugged” laptop category, and its an impressive one. Targeted at the military and first-responder market, the machine is encased in a chassis made of ballistic armor–one Dell claims has twice the impact strength of magnesium alloy. It’s powered by Intel’s (INTC) Core 2 Duo processor, runs Windows Vista and supports Wi-Fi, 3G mobile broadband and GPS. Perfect for military contractors, and more importantly, for the state and local governments currently lining up for billions of dollars in stimulus money. Said Dell spokesman Patrick Burns, “With the stimulus package under way, we’re getting lots of interest.” I’ll bet you are, because at $4,299, you’ll need a stimulus package to afford it.