TechCrunch first reported the acquisition, which was posted on the FeeFighters’ blog.

“Our goals have always been to help small businesses run more efficiently, and by teaming up with Groupon, a pioneer in local e-commerce, we are able to execute on that goal even better than we were as an independent company,” writes FeeFighters’ co-founder and CEO Sean Harper.

Terms of the deal were not disclosed.

Harper said that most of FeeFighters’ employees will be joining Groupon, and that it does not have any major changes planned for its product line.

The company is known for providing businesses with a way to compare fees for various payment methods, based on volume and average transaction sizes. It also has built an online payment gateway, called Samurai.

It’s not immediately obvious why Groupon would be interested in FeeFighters, but over the past few months, it has been working hard to establish itself as a company that provides many services to small business, including lead-generators like daily deals.

For instance, earlier this week, it rolled out Groupon Scheduler, which allows spas and salons to book appointments with customers online.

To accomplish this goal, Groupon has acquired a number of tech companies.

As many others have proven (Google, Amazon, LivingSocial, etc.), that business is easy to replicate. Instead, the Chicago-based company wants to be known as a technology company for local merchants.

To that end, it has rolled out Groupon Scheduler, an online calendar that enables small businesses, like spas and salons, to book appointments online.

The service is based on technology Groupon acquired from OpenCal, a Vancouver, Canada-based company, in September. After pilots in Sacramento and Miami, the company is rolling out the tool in the U.S. and Canada today. Other products are in the works, as well.

The calendar operates a lot like other online services, such as Google Calendar, except that it is tailored for businesses. Customers can view available time slots online and easily sign up for particular services, like a massage or a haircut, without ever having to make a phone call or send an email.

Today, many small businesses are still logging appointments over the phone and writing them into a paper calendar, or paying fees for equivalent online services.

Groupon Scheduler is free for a three-month beta period ending on June 19 to any merchant, not just companies that have run deals with Groupon in the past. In June, the company will evaluate whether it should charge for the service.

For now, Groupon is using the calendar and other forms of technology to build and maintain alliances between current Groupon merchants, but also other potential small business customers. Additionally, by layering on more services, Groupon may be able to continue to justify taking a huge share of the revenue each time a deal runs on its site, rather than letting margins erode over time.

In the company’s last earnings call, CEO Andrew Mason pledged that the Groupon of five years from now will require making investments in technology and innovations to create a bigger barrier to entry.

As part of that, it has been on an acquisition spree and has built a technology headquarters in Palo Alto, Calif., which I toured last month.

Even the smallest of businesses are considering tablets, though only 54 percent of those with fewer than 50 employees are planning on buying a tablet, compared with 73 percent of all businesses with fewer than 1,000 workers. That last figure is up five percentage points from a quarter earlier, NPD said.

On average, the small businesses surveyed plan to spend around $21,000 on tablets in the coming year, though that amount varies greatly based on the size of the firm.

“Businesses of all sizes appear to be determined to capitalize on the tablet phenomenon,” NPD analyst Stephen Baker said in a statement. “The iPad, just as it is in the consumer market, is synonymous for ‘tablet’ in the business market.”

Well, Mr. and Ms. Entrepreneur, your friends at IBM are thinking of you today. Big Blue will today announce the availability of $1 billion in new financing options specifically aimed at small and medium businesses to pay for purchases of new tech hardware, software and services.

Now before you roll your eyes, harrumph, and restrain yourself from saying “Who cares about small and medium businesses anyway?” allow me to answer: You do. In the U.S., small businesses account for a huge swath of the economy, accounting for about two-thirds of new jobs created over the last 15 years, and they hired 40 percent of high-tech workers. They also employ roughly 90 percent of the workforce of the entire world.

And get this: According to IBM, the total amount spent on technology each year by small and medium businesses — IBM defines them as having fewer than 1,000 employees — amounts to a quarter of a trillion dollars.

Compared to that, well, a billion is a little slice. But when credit is hard to get from ever-more-cautious banks in a tough economy, CIOs will see it as a welcome move. Half of small businesses crash and burn within five years because they can’t get access to capital.

Not only is IBM making the cash available but it is making it easy to get. Most of IBM’s small and medium business customers interact with Big Blue not directly, but through business partners — third parties like CDW and Ingram Micro — who sell IBM gear and do the heavy lifting associated with getting different bits of hardware and software working right. They also tend not to have huge IT departments as larger companies do, says Andy Monshaw, the general manager of IBM Midmarket Business. “It’s a really fragmented market with literally thousands of local players,” he says. “It’s a market based on long-term local relationships.”

Entrepreneurs are running up against expectations of the so-called “consumerization of IT.” They have easy-to-use technology at home, but the stuff at the office is older and not cutting it. One big thing these companies are looking at is cloud computing. An IBM survey found that 60 percent of them are shopping around for cloud services. That got the attention of IBM’s Global Financing unit, which helps customers pay for new gear and services in much the same way that car dealers help people buy cars — by providing attractive financing packages.

On top of that, IBM has come up with a long list of products and services that are priced in ways that make sense to smaller companies — stuff that gets charged on a per-user or consumption basis. IBM has hacked together a list of products and services to fit with the effort, including cloud services, analytics and security, as well as products from recent acquisitions like Netezza, Cognos and Cast Iron.

Certainly there’s a lot of hand-wringing going on, especially in the U.S., about what it will take to get the economy creating jobs again. In fact, the president of the United States is going to talk about that very subject in an address to Congress and the nation tonight. And a survey done by Pepperdine University and Dun & Bradstreet found that 35 percent of small business owners say their biggest impediment to hiring more workers is access to capital.

The campaign will kick off Wednesday night with the first set of television ads, which will appear on CBS’ “Undercover Boss” and NBC’s “America’s Got Talent,” before expanding to print and online later this year. The ads stress AT&T’s services, including mobile phones, apps and broadband, as a way for small shops to sell more stuff. In the TV spot, AT&T is shown helping a crab fisherman, a junkyard operator and a baker.

“I want to crush more cars,” says the junkyard operator, as vehicles are smashed in the background. AT&T said that the ads feature real customers, but declined to give out the names of the businesses or the individuals that appear in the ads.

AT&T didn’t put a figure on spending for the campaign, but characterized it as the biggest effort aimed at small businesses since SBC and AT&T combined in 2005 to form the present company.

The new ads are a follow-on to an effort targeted at large businesses that began in February. In conjunction with the new ads, AT&T is also training its in-store sales reps on small business matters and has doubled the number of small business consultants in an effort to position itself as Main Street friendly.

“Small and midsize businesses generate so many jobs in the U.S. and that is a source of growth,” AT&T Small Business Solutions Executive Vice President Cathy Martine said in a telephone interview. “We want to position AT&T as a company and partner of choice.”

Of course, it doesn’t hurt to pitch AT&T as friendly to Mom and Pop as the company seeks regulatory approval for its planned $39 billion takeover of T-Mobile USA. Earlier this week, AT&T lined up backing from a number of tech industry companies ranging from Facebook and Microsoft to several prominent venture capital firms.

Small businesses have a hard time getting loans because the banks that make loans look primarily at an owner’s personal credit information and not at the day-to-day financial data related to the business itself.

The recession hasn’t made it any easier. Data from the Federal Financial Institutions Examination Council show that in 2009, banks originated $73 billion in loans to small businesses, representing a decline of 47 percent since 2007. And the overall number of loans fell by 69 percent to 1.6 million loans, from 3.6 million loans during the same period.

Raising capital doesn’t seem to be a problem for On Deck Capital. The New York-based start-up announced today that it has landed a $15-million C Round led by SAP Ventures, the venture capital arm of the German software company SAP. Its previous investments include stakes in LinkedIn, WebEx, MySQL and Red Hat Software.

On Deck is something of a right-time, right-place story, emerging as it has during a period when small businesses are struggling for needed capital. Launched in 2006, its software gathers live digital data from a business’s operations in order to help evaluate the business’s health. The point is to give banks and potential investors a tool to realistically evaluate the risk of making a loan that goes beyond the simple credit rating of the business owner. On Deck has been used to make $100 million in loans over four years.

Even in 2006, when credit was plentiful, most small businesses were able to secure loans because the banks treated them as consumers, not as businesses, says On Deck CEO Mitch Jacobs. For banks, it’s also a question of time and attention “Banks simply can’t afford to spend 80 hours to underwrite a flower shop that needs $30,000 for a relatively short period of time. It just doesn’t make economic sense.”

But at the same time, small businesses started embracing digital tools to run the shop. They started doing their banking online, and using QuickBooks to handle invoices and payroll. They started taking credit cards more often, and selling their goods and services on the Web. All of these are streams of useful data that can be captured to help paint an accurate picture of the business’s financial health, Jacobs says.

Combine that with technology that makes the repayment process both simple for the business owner and reliable for the lender, plus real-time monitoring of financial data from companies that get loans, and it’s not hard to see why On Deck is growing: Revenues tripled in 2010.

Not just any company can apply for an On Deck loan. The typical borrower company has been in business for at least a year and has at least $3,000 in credit card transactions per month. Loans range in size from $5,000 to $100,000 but average about $30,000, Jacobs said. Payments on the loan are made daily using an automated direct debit system. The small daily payments help prevent that moment that causes headaches for lenders when unexpected expenses crop up and the monthly loan payment ends up at the bottom of the priority list.

On Deck also announced that David Hartwig, managing director at SAP Capital, has joined its board of directors. Other investors include Contour Venture Partners in New York, First Round Capital, Khosla Ventures, RRE Ventures and Village Ventures.

In Bates, a 15-year Cisco (CSCO) veteran, Skype and its new ownership get an experienced executive to guide the company as it heads toward an IPO. The unit he was leading has $20 billion in annual revenues and about 12,500 employees, and Cisco called it “the heart” of its business. While Bates’s departure is a blow, Cisco was not caught flat-footed, with the well-regarded Warrior ready to pick up the slack.

UPDATE: Bates’s appointment is now official. Here’s the release from Skype:

Skype Appoints Cisco Senior Executive Tony Bates as New CEO

Head of Cisco’s Enterprise Business to Run Leading Global Internet Communications Company

LUXEMBOURG, 4 October 2010 — The Board of Directors of Skype S.A., a global technology leader that enables real-time communications over the Internet, today announced that it has named Tony Bates, Senior Vice President of Cisco, as Chief Executive Officer and a member of the Board of Directors.

Mr. Bates has over 20 years of leadership experience in the communications and Internet industries, most recently as General Manager of Cisco’s Enterprise, Commercial and Small Business Division. Mr. Bates was responsible for over $20 billion of annual revenue and managed over 12,500 employees worldwide. He was the driving force behind Cisco’s three key Enterprise architectures known as Borderless Networks, DataCenter and Collaboration. Reporting to Cisco Chairman and CEO John Chambers, Mr. Bates was a member of the senior staff responsible for charting the company’s global strategy and served on the Cisco Development Council, the Video Council, and the Enterprise Business Council.

Mr. Bates, in addition to running Cisco’s Enterprise Division, has also served as General Manager of Cisco’s Service Provider Group, responsible for annual revenue of $10 billion. An expert on Internet technologies, Mr. Bates holds nine patents and has served on the boards of a range of technology companies including YouTube, the video sharing website; TokBox, a provider of online video conference services; BubbleMotion, a voice-based messaging and blogging service; and LoveFilm, an online video streaming and rental service

“Skype is not only a powerful global brand but also a global technology leader in Internet communications,” said Mr. Bates. “There are extraordinary opportunities ahead for Skype and I am eager to lead the company through this exciting juncture in its continuing transformation. I look forward to working with Skype’s management team and talented employees to engineer the next wave of game-changing products and services for our users.”

“We are thrilled to bring on Tony Bates as Skype’s new CEO,” said Miles Flint, Chairman of the company’s Board of Directors. “His record of achievement and significant operational and management expertise, cultivated over a distinguished tenure at one of the world’s preeminent technology companies, presents a unique opportunity for Skype that we are enthusiastic to embrace.”

Egon Durban, Managing Director of Silver Lake, one of the company’s investors, said “Josh Silverman, our outgoing CEO, has been instrumental in maintaining Skype’s momentum and growth. Since 2007, Skype has more than doubled its connected user base and billing minutes, introduced key new products for desktop and mobile platforms, and initiated successful partnerships with companies ranging from Avaya to Verizon. Looking ahead, we are very pleased to appoint Tony Bates as Skype’s new CEO. He has tremendous management experience at a global public company and technology leader and is uniquely qualified to lead the company in its next phase of growth.”

“I am proud to have led Skype’s growth during this critical transition period,” said Mr. Silverman. “The company today has over 560 million registered users in nearly every country and continues to develop products and services our customers love to use. With a world-class communications industry veteran like Tony, Skype is well positioned to become the communications platform of choice for consumers and businesses around the world. I look forward to supporting Tony and the team in ensuring a smooth transition.”

Adrian Dillon, Skype’s Chief Financial and Administrative Officer, will serve as interim CEO until Mr. Bates joins the company at the end of October.

Google announced plans to buy DoubleClick for $3 billion three years ago and finally closed on the deal a year later. Now the search giant has finally overhauled the display advertising company to its liking. Get ready for big stuff.

That’s the translation behind Google’s announcement this morning that it has upgraded its ad-serving platforms for publishers, by combining two related businesses: Its home-grown Google Ad Manager and Doubleclick’s Dart system.

Google’s statement (full text below) doesn’t have a lot of details, and those that are there won’t mean much if you’re not in the ad tech world.

If you are, the news that Google has fully integrated DoubleClick with its infrastructure will be meaningful because you can expect innovations and features to start rolling out in future weeks and months. Neal Mohan, Google’s VP of product management, says his team has already invested “thousands and thousands of engineering hours” in the upgrade.

In the near term, Google’s announcement also has a direct impact on start-ups like Rubicon and PubMatic, whose core business is built on helping publishers sell their inventory to multiple ad networks.

Google (GOOG) has more or less ignored that business for some time, but now the company is boasting that it can handle those duties in addition to a suite of other services. Translation: That’s a cute business you guys have built over there. We’ll be taking it now.

Perhaps it’s not a coincidence, then, that Rubicon made an oblique announcement last week that was more or less an attack on Google.

Here’s the full text of Google’s announcement:

Google releases its next-generation ad serving platform for publishers

Key points

• Google announces upgraded ad serving platform, DoubleClick for Publishers (DFP)
• Part of a full suite of products to help publishers maximize online advertising revenues
• New DoubleClick logo unveiled

Today, as part of its efforts to help online publishers maximize advertising revenues from their website content, Google announced its upgraded ad serving platform for publishers–DoubleClick for Publishers (DFP).

DFP is a single platform that upgrades and will replace Google’s existing ad serving products: DoubleClick’s DART for Publishers and Google Ad Manager. The upgraded DFP combines Google’s technology and infrastructure with DoubleClick’s display advertising and ad serving experience.

For larger online publishers, managing, delivering and measuring the performance of ads can be a hugely complicated process. Major online publishers (including social networks, entertainment sites, portals and news sites) use ad serving to manage the complex process of how and when the ads they have sold appear on their websites.

Neal Mohan, Vice President of Product Management at Google, said:

“Google wants to help online publishers make the most money possible from their content. The upgraded DFP is part of our suite of products that are designed to help online publishers maximize their advertising revenues. Ad serving is the machinery that powers the online advertising world, so improving that technology can put a lot of money in publishers’ pockets. This upgraded platform is another major milestone in our continuing investment in the display advertising ecosystem.”

The upgraded DFP is part of Google’s suite of products–also including AdSense and the DoubleClick Ad Exchange–to help online publishers maximize their advertising revenues across all their ad space, whatever their size and however they choose to sell their ad space.

It includes a wide variety of key features that will help enable publishers to get the most value out of their online content:

• A new interface that has been completely redesigned to save time and reduce errors.
• Far more detailed reporting and forecasting data to help publishers understand  where their revenue is coming from and what ads are most valuable.
• Sophisticated algorithms that automatically improve ad performance and delivery.
• A new, open, public API which enables publishers to build and integrate their own apps with DFP, or integrate apps created for DFP by a growing third-party developer community (apps under development today include sales, order management and workflow tools).
• Integration with the new DoubleClick Ad Exchange’s “dynamic allocation” feature, which maximizes revenue by enabling publishers to open up their ad space to bids from multiple ad networks. Dynamic allocation is described in this document [pdf].

DFP comes in two flavors, tailored for different publishers’ needs:

• DFP–for larger online publishers, to which current DART for Publishers customers will be upgraded over the next year.
• DFP Small Business–a simple, free version designed for growing online publishers, to which we will be migrating Google Ad Manager customers.

To reflect Google’s continued investment in DoubleClick’s products and the central role of DoubleClick’s technology products within Google’s display advertising business, Google is also today unveiling some changes to the DoubleClick logos–including typset changes, incorporating a new “by Google” theme, and retiring the “DART” brand.

As BoomTown previously reported, VMware officially confirmed today that it is buying Yahoo’s Zimbra open-source email unit.

Financial terms were not disclosed, but sources said the price was well below the $350 million Yahoo (YHOO) paid for the start-up in late 2007.

Sources also said there is a large employee-retention element to the sale to encourage Zimbra’s 110 employees to make the move to VMware (VMW).

Under terms of the deal, which has been brewing between the two Silicon Valley companies for some weeks, VMware said it will “purchase all Zimbra technology and intellectual property. Yahoo! will have the right to continue to utilize the Zimbra technology in its communications services, including Yahoo! Mail and Yahoo! Calendar.”

“We’ve been simplifying the data center,” said Brian Byun, vice president and general manager, cloud services, at VMware, in an interview with me this afternoon. “With this move, we are expanding to another area…which is part of a larger strategy.”

Said Jim Morrisroe, who has been running Zimbra for Yahoo: “This is another step in a mission we’ve been on at Zimbra and we are very excited about what’s next at VMware.”

A week ago, BoomTown reported that the sale of Zimbra was likely.

BoomTown had reported in late September that Zimbra was for sale by Yahoo, which has been targeting for “de-acquisition” assets that are not central to the strategies of the company’s new management.

Zimbra and Yahoo’s small business and jobs sites have been on the block.

One source I spoke to last week noted that the reason VMware was interested in nabbing Zimbra is that its execs want to expand “up the stack” from the software company’s position in virtualization.

And Yahoo is no longer interested in running Zimbra’s white-label, open-source email commercial product, which serves the university and ISP markets. There, its main rival has been Google (GOOG).

VMware said the acquisition is expected to close in the first calendar quarter of 2010.

VMware to Acquire Zimbra

Company Expands vCloud Portfolio with Next Generation Email and Collaboration Software

PALO ALTO, Calif., January 12, 2010–VMware, Inc. (NYSE: VMW), the global leader in virtualization solutions from the desktop through the datacenter and to the cloud, today announced that it has entered into a definitive agreement to acquire Zimbra, a leading vendor of email and collaboration software, from Yahoo! Inc.

This acquisition will further VMware’s mission of taking complexity out of the datacenter, desktop, application development and core IT services, and delivering a fundamentally more efficient and new approach to IT.

Zimbra is a leading open source email and collaboration solution with over 55 million mailboxes. As an independent Yahoo! product division, Zimbra achieved 2009 mailbox growth of 86% overall and 165% among small and medium business customers.

Based on a modern, flexible architecture designed for virtualization and cloud-scale infrastructure, the Zimbra technology provides substantially lower total cost of ownership than traditional solutions. Zimbra products offer a full enterprise feature set, excellent interoperability with legacy email environments and have been deployed across small and large environments; as on-premise software at thousands of small and medium businesses, distributed enterprises, and as a hosted service at major service providers such as Comcast and NTT Communications.

“Over the coming years, we expect more organizations, especially small and medium size businesses, to increasingly buy core IT solutions that deliver cloud-like simplicity in end-user and operational experience,” said Brian Byun, Vice President and General Manager, Cloud Services, VMware. “Zimbra is a great example of the type of scalable ‘cloud era’ solutions that can span smaller, on-premise implementations to the cloud. It will be a building block in an expanding portfolio of solutions that can be offered as a virtual appliance or by a cloud service provider. We are excited to welcome the Zimbra team and community to the VMware family.”

VMware plans to support existing Zimbra products and open source efforts while further optimizing Zimbra products for vSphere-based cloud infrastructure, alongside Microsoft, IBM and other messaging and collaboration solutions.

Under the terms of the agreement, VMware will purchase all Zimbra technology and intellectual property. Yahoo! will have the right to continue to utilize the Zimbra technology in its communications services, including Yahoo! Mail and Yahoo! Calendar.

“The Zimbra technology has played and will continue to play an important role in our communications services products. The technology is core to Yahoo! Mail and Yahoo! Calendar and a key differentiator for these leading products,” said Bryan Lamkin, senior vice president, Yahoo! “The customers and partners of Zimbra’s industry-leading product and successful enterprise business will be well served with VMware.”

The acquisition is expected to close in the first calendar quarter of 2010. Financial details of the transaction were not disclosed.

Yahoo is set to announce the sale of its Zimbra open-source email unit to VMware tomorrow, said sources, for a figure north of $100 million but below the $350 million the company paid for the unit in late 2007.

A week ago, BoomTown reported that the sale of Zimbra was likely.

Sources said there is a large employee-retention element to the sale to encourage Zimbra’s talent to make the move to VMware, as well as full retention of intellectual property by Yahoo for technology used in its email products. There will be ongoing IP giveback to VMware (VMW) over a period of time.

In addition, other sources said that Yahoo (YHOO) is about to consider bids it has solicited for its small business unit, which the company has also been trying to sell for some months.

Sources added that Yahoo will not sell the unit if it can’t get a decent price for the division, which is estimated to be worth many hundreds of millions of dollars.

When queried about the sale of Zimbra, Yahoo released this statement:

“We do not comment on rumors or speculation. Zimbra plays an important role today in the company’s communications services. Zimbra technologies have played and will continue to be integral to our leading Yahoo! Mail and Calendar offerings and a key differentiator for the company.”

BoomTown reported in late September that Zimbra was for sale by Yahoo, which has been targeting for “de-acquisition” assets that are not central to the strategies of the company’s new management.

Late last year when announcing its new $100 million marketing campaign, Yahoo CEO Carol Bartz said at a media briefing, “Most of our assets are very core to the company. Those that aren’t, where it makes sense we will sell and where it makes sense we will shut down.”

Yahoo has done just that with several properties, such as its JumpCut video-editing service.

But Zimbra, as well as its small business and jobs sites, have been on the block.

One source noted that the reason VMware was interested in nabbing Zimbra is that its execs want to expand “up the stack” from the Silicon Valley software company’s position in virtualization.

And Yahoo is no longer interested in running Zimbra’s white-label, open-source email commercial product, which serves the university and ISP markets. There, its main rival has been Google (GOOG).

VMware has not replied to an email query.

“The Internet is an extraordinary platform for innovation, job creation, investment, and opportunity,” Genachowski said during an event at the Brookings Institute. “It has unleashed the potential of entrepreneurs and enabled the launch and growth of small businesses across America. It is vital that we safeguard the free and open Internet.”

To that end, Genachowski proposed that the FCC formalize its four principles of network openness. To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet, consumers are entitled:

• to access the lawful Internet content of their choice.
• to run applications and use services of their choice, subject to the needs of law enforcement.
• to connect their choice of legal devices that do not harm the network.
• to competition among network providers, application and service providers, and content providers.

To these, Genachowski proposed adding two more: The first would prevent Internet access providers from discriminating against particular Internet content or applications, while allowing for reasonable network management. The second would ensure that Internet access providers are transparent about the network management practices they implement.

Under Genachowski’s proposal, all six principles would apple to all platforms that access the Internet, something that will likely prove controversial with the likes of AT&T (T) and Verizon (VZ), whose wireless operations haven’t yet been subjected to the same kind of scrutiny as, say, Comcast (CMCSA), which ran afoul of the FCC last year when it was caught throttling Bit Torrent traffic.

These companies will no doubt argue that the FCC is overstepping its bounds in working to implement such principles. But Genachowski says that’s not the case. “This is not about government regulation of the Internet,” he said. “It’s about fair rules of the road for companies that control access to the Internet.”

Below, Genachowski’s speech in full:

Preserving a Free and Open Internet: A Platform for Innovation, Opportunity, and Prosperity
Prepared Remarks of Chairman Julius Genachowski Federal Communications Commission
The Brookings Institution
Washington, DC
September 21, 2009

I’d like to thank Brookings for hosting me and this discussion about the future of broadband and the Internet.

We’ve just finished a summer of big-ticket commemorations, celebrating the 40th anniversaries of the Apollo landing and of Woodstock; 1969 was also a good year to be a kid in New York, with Joe Namath calling the Super Bowl, and the Knicks’ season that ended with the legendary Willis Reed in Game 7. I grew up a long fly ball from Shea Stadium and soaked up every minute of the Miracle Mets’ season. Maybe that’s why I tend to believe in miracles.

But perhaps the most momentous birthday from that famous summer of 1969 went by just a couple of weeks ago with little mention. Just over forty years ago, a handful of engineers in a UCLA lab connected two computers with a 15-foot gray cable and transferred little pieces of data back and forth. It was the first successful test of the ARPANET, the U.S.-government-funded project that became the Internet–the most transformational communications breakthrough since the printing press.

Today, we can’t imagine what our lives would be like without the Internet–any more than we can imagine life without running water or the light bulb. Millions of us depend upon it every day: at home, at work, in school–and everywhere in between. The Internet has unleashed the creative genius of countless entrepreneurs and has enabled the creation of jobs–and the launch of small businesses and the expansion of large ones–all across America.

That’s why Congress and the President have charged the FCC with developing a National Broadband Plan to ensure that every American has access to open and robust broadband. The fact is that we face great challenges as a nation right now, including health care, education, energy, and public safety. While the Internet alone will not provide a complete solution to any of them, it can and must play a critical role in solving each one.

Why has the Internet proved to be such a powerful engine for creativity, innovation, and economic growth? A big part of the answer traces back to one key decision by the Internet’s original architects: to make the Internet an open system.

Historian John Naughton describes the Internet as an attempt to answer the following question: How do you design a network that is “future proof”–that can support the applications that today’s inventors have not yet dreamed of? The solution was to devise a network of networks that would not be biased in favor of any particular application. The Internet’s creators didn’t want the network architecture–or any single entity–to pick winners and losers. Because it might pick the wrong ones. Instead, the Internet’s open architecture pushes decision-making and intelligence to the edge of the network–to end users, to the cloud, to businesses of every size and in every sector of the economy, to creators and speakers across the country and around the globe. In the words of Tim Berners-Lee, the Internet is a “blank canvas”–allowing anyone to contribute and to innovate without permission.

It is easy to look at today’s Internet giants–and the tremendous benefits they have supplied to our economy and our culture–and forget that many were small businesses just a few years ago, founded on little more than a good idea and a no-frills connection to the Internet. Marc Andreessen was a graduate student when he created Mosaic, which led to Netscape, the first commercially successful Web browser. Mark Zuckerberg was a college student in 2004 when he started Facebook, which just announced that it added its 300 millionth member. Pierre Omidyar originally launched eBay on his own personal website. Today more than 600,000 Americans earn part of their living by operating small businesses on eBay’s auction platform, bringing jobs and opportunity to Danvers, Massachusetts, Durham, North Carolina and Lincoln, Nebraska, and many other communities in both rural and urban America. This is the power of the Internet: distributed innovation and ubiquitous entrepreneurship, the potential for jobs and opportunity everywhere there is broadband.

And let us not forget that the open Internet enables much more than commerce. It is also an unprecedented platform for speech, democratic engagement, and a culture that prizes creative new ways of approaching old problems. In 2000, Jimmy Wales started a project to create a free online encyclopedia. He originally commissioned experts to write the entries, but the project only succeeded after moving to volunteers to write them collaboratively. The result is Wikipedia, one of the top 10 most visited websites in the world and one of the most comprehensive aggregations of human knowledge in our history. The potential of collaboration and social media continues to grow. It is changing and accelerating innovation. And we’ve seen new media tools like Twitter and YouTube used by democratic movements around the globe.

Even now, the Internet is beginning to transform health care, education, and energy usage for the better. Health-related applications, distributed over a widely connected Internet, can help bring down health care costs and improve medical service. Four out of five Americans who are online have accessed medical information over the Internet, and most say this information affected their decision-making. Nearly four million college students took at least one online course in 2007, and the Internet can potentially connect kids anywhere to the best information and teachers everywhere. And the Internet is helping enable smart grid technologies, which promise to reduce carbon dioxide emissions by hundreds of millions of metric tons.

At the same time, we have also seen great strides in the center of the network. Most Americans’ early exposure to the Internet was through analog modems, which allowed a trickle of data through the phone lines to support early electronic bulletin boards and basic email. Over the last two decades, thanks to substantial investment and technological ingenuity, companies devised ways to retrofit networks initially designed for phones and one-way video to support two-way broadband data streams connecting homes and businesses across the country. And a revolution in wireless technologies–using licensed and unlicensed spectrum–and the creation of path-breaking devices like the Blackberry and iPhone have enabled millions of us to carry the Internet in our pockets and purses.

The lesson of each of these stories, and innumerable others like them, is that we cannot know what tomorrow holds on the Internet, except that it will be unexpected; that the genius of American innovators is unlimited; and that the fewer obstacles these innovators face in bringing their work to the world, the greater our opportunity as citizens and as a nation.

Notwithstanding its unparalleled record of success, today the free and open Internet faces emerging and substantial challenges. We’ve already seen some clear examples of deviations from the Internet’s historic openness. We have witnessed certain broadband providers unilaterally block access to VoIP applications (phone calls delivered over data networks) and implement technical measures that degrade the performance of peer-to-peer software distributing lawful content. We have even seen at least one service provider deny users access to political content. And as many members of the Internet community and key Congressional leaders have noted, there are compelling reasons to be concerned about the future of openness.

One reason has to do with limited competition among service providers. As American consumers make the shift from dial-up to broadband, their choice of providers has narrowed substantially. I don’t intend that remark as a policy conclusion or criticism–it is simply a fact about today’s marketplace that we must acknowledge and incorporate into our policymaking.

A second reason involves the economic incentives of broadband providers. The great majority of companies that operate our nation’s broadband pipes rely upon revenue from selling phone service, cable TV subscriptions, or both. These services increasingly compete with voice and video products provided over the Internet. The net result is that broadband providers’ rational bottom-line interests may diverge from the broad interests of consumers in competition and choice.

The third reason involves the explosion of traffic on the Internet. With the growing popularity of high-bandwidth applications, Internet traffic is roughly doubling every two years. Technologies for managing broadband networks have become more sophisticated and widely deployed. But these technologies are just tools. They cannot by themselves determine the right answers to difficult policy questions–and they raise their own set of new questions.

In acknowledging the existence of challenging competitive, economic, and technological realities for today’s Internet, I want to underscore that this debate, as I see it, isn’t about white hats or black hats among companies in and around the network. Rather, there are inevitable tensions built into our system; important and difficult questions that we have an obligation to ask and to answer correctly for our country.

When I worked in the private sector I was fortunate to work with some of the greatest innovators of our time. That taught me some lessons about the importance of innovation and investment. It also taught me the importance of developing clear goals and then being focused and practical in achieving them, making sure to have the best input and ideas from the broadest group possible.

I am convinced that there are few goals more essential in the communications landscape than preserving and maintaining an open and robust Internet. I also know that achieving this goal will take an approach that is smart about technology, smart about markets, smart about law and policy, and smart about the lessons of history.

The rise of serious challenges to the free and open Internet puts us at a crossroads. We could see the Internet’s doors shut to entrepreneurs, the spirit of innovation stifled, a full and free flow of information compromised. Or we could take steps to preserve Internet openness, helping ensure a future of opportunity, innovation, and a vibrant marketplace of ideas.
I understand the Internet is a dynamic network and that technology continues to grow and evolve. I recognize that if we were to create unduly detailed rules that attempted to address every possible assault on openness, such rules would become outdated quickly. But the fact that the Internet is evolving rapidly does not mean we can, or should, abandon the underlying values fostered by an open network, or the important goal of setting rules of the road to protect the free and open Internet.

Saying nothing–and doing nothing–would impose its own form of unacceptable cost. It would deprive innovators and investors of confidence that the free and open Internet we depend upon today will still be here tomorrow. It would deny the benefits of predictable rules of the road to all players in the Internet ecosystem. And it would be a dangerous retreat from the core principle of openness–the freedom to innovate without permission–that has been a hallmark of the Internet since its inception, and has made it so stunningly successful as a platform for innovation, opportunity, and prosperity.

In view of these challenges and opportunities, and because it is vital that the Internet continue to be an engine of innovation, economic growth, competition and democratic engagement, I believe the FCC must be a smart cop on the beat preserving a free and open Internet.

This is how I propose we move forward: To date, the Federal Communications Commission has addressed these issues by announcing four Internet principles that guide our case-by-case enforcement of the communications laws. These principles can be summarized as: Network operators cannot prevent users from accessing the lawful Internet content, applications, and services of their choice, nor can they prohibit users from attaching non-harmful devices to the network.

The principles were initially articulated by Chairman Michael Powell in 2004 as the “Four Freedoms,” and later endorsed in a unanimous 2005 policy statement issued by the Commission under Chairman Kevin Martin and with the forceful support of Commissioner Michael Copps, who of course remains on the Commission today. In the years since 2005, the Internet has continued to evolve and the FCC has issued a number of important decisions involving openness. Today, I propose that the FCC adopt the existing principles as Commission rules, along with two additional principles that reflect the evolution of the Internet and that are essential to ensuring its continued openness.

The fifth principle is one of non-discrimination–stating that broadband providers cannot discriminate against particular Internet content or applications. This means they cannot block or degrade lawful traffic over their networks, or pick winners by favoring some content or applications over others in the connection to subscribers’ homes. Nor can they disfavor an Internet service just because it competes with a similar service offered by that broadband provider. The Internet must continue to allow users to decide what content and applications succeed.

This principle will not prevent broadband providers from reasonably managing their networks. During periods of network congestion, for example, it may be appropriate for providers to ensure that very heavy users do not crowd out everyone else. And this principle will not constrain efforts to ensure a safe, secure, and spam-free Internet experience, or to enforce the law. It is vital that illegal conduct be curtailed on the Internet. As I said in my Senate confirmation hearing, open Internet principles apply only to lawful content, services and applications–not to activities like unlawful distribution of copyrighted works, which has serious economic consequences. The enforcement of copyright and other laws and the obligations of network openness can and must co-exist.

I also recognize that there may be benefits to innovation and investment of broadband providers offering managed services in limited circumstances. These services are different than traditional broadband Internet access, and some have argued they should be analyzed under a different framework. I believe such services can supplement–but must not supplant–free and open Internet access, and that we must ensure that ample bandwidth exists for all Internet users and innovators. In the rulemaking process I will discuss in a moment, we will carefully consider how to approach the question of managed services in a way that maximizes the innovation and investment necessary for a robust and thriving Internet.

I will propose that the FCC evaluate alleged violations of the non-discrimination principle as they arise, on a case-by-case basis, recognizing that the Internet is an extraordinarily complex and dynamic system. This approach, within the framework I am proposing today, will allow the Commission to make reasoned, fact-based determinations based on the Internet before it–not based on the Internet of years past or guesses about how the Internet will evolve.

The sixth principle is a transparency principle–stating that providers of broadband Internet access must be transparent about their network management practices. Why does the FCC need to adopt this principle? The Internet evolved through open standards. It was conceived as a tool whose user manual would be free and available to all. But new network management practices and technologies challenge this original understanding. Today, broadband providers have the technical ability to change how the Internet works for millions of users–with profound consequences for those users and content, application, and service providers around the world.

To take one example, last year the FCC ruled on the blocking of peer-to-peer transmissions by a cable broadband provider. The blocking was initially implemented with no notice to subscribers or the public. It was discovered only after an engineer and hobbyist living in Oregon realized that his attempts to share public domain recordings of old barbershop quartet songs over a home Internet connection were being frustrated. It was not until he brought the problem to the attention of the media and Internet community, which then brought it to the attention of the FCC, that the improper network management practice became known and was stopped.

We cannot afford to rely on happenstance for consumers, businesses, and policymakers to learn about changes to the basic functioning of the Internet. Greater transparency will give consumers the confidence of knowing that they’re getting the service they’ve paid for, enable innovators to make their offerings work effectively over the Internet, and allow policymakers to ensure that broadband providers are preserving the Internet as a level playing field. It will also help facilitate discussion among all the participants in the Internet ecosystem, which can reduce the need for government involvement in network management disagreements.

To be clear, the transparency principle will not require broadband providers to disclose personal information about subscribers or information that might compromise the security of the network, and there will be a mechanism to protect competitively sensitive data.

In considering the openness of the Internet, it is also important to recognize that our choice of technologies and devices for accessing the Internet continues to expand at a dizzying pace. New mobile and satellite broadband networks are getting faster every day, and extraordinary devices like smartphones and wireless data cards are making it easier to stay connected while on the go. And I note the beginnings of a trend towards openness among several participants in the mobile marketplace.

Even though each form of Internet access has unique technical characteristics, they are all are different roads to the same place. It is essential that the Internet itself remain open, however users reach it. The principles I’ve been speaking about apply to the Internet however accessed, and I will ask my fellow Commissioners to join me in confirming this.

Of course, how the principles apply may differ depending on the access platform or technology. The rulemaking process will enable the Commission to analyze fully the implications of the principles for mobile network architectures and practices–and how, as a practical matter, they can be fairly and appropriately implemented. As we tackle these complex questions involving different technologies used for Internet access, let me be clear that we will be focused on formulating policies that will maximize innovation and investment, consumer choice, and greater competition.

I’ve talked about what we need to do; now I’d like to talk about how we should do it. I will soon circulate to my fellow Commissioners proposed rules prepared by Commission staff embodying the principles I’ve discussed, and I will ask for their support in issuing a notice of proposed rulemaking. This notice will provide the public with a detailed explanation of what we propose to do and why.

Equally importantly, the notice will ask for input and feedback on the proposed rules and their application, such as how to determine whether network management practices are reasonable, and what information broadband providers should disclose about their network management practices and in what form. And–as I indicated earlier–it will pose a series of detailed questions on how the Internet openness principles should apply to mobile broadband.

While my goals are clear–to ensure the Internet remains a free and open platform that promotes innovation, investment, competition, and users’ interests — our path to implementing them is not pre-determined. I will ensure that the rulemaking process will be fair, transparent, fact-based, and data-driven. Anyone will be able to participate in this process, and I hope everyone will. We will hold a number of public workshops and, of course, use the Internet and other new media tools to facilitate participation. Today we’ve launched a new website, www.openinternet.gov, to kick off discussion of the issues I’ve been talking about. We encourage everyone to visit the site and contribute to the process.

Some have argued that the FCC should not take affirmative steps to protect the Internet’s openness. Let me be clear about what this is about, and what it isn’t.

The fundamental goal of what I’ve outlined today is preserving the openness and freedom of the Internet. We have an obligation to ensure that the Internet is an enduring engine for U.S. economic growth, and a foundation for democracy in the 21st century. We have an obligation to ensure that the Internet remains a vast landscape of innovation and opportunity.

This is not about government regulation of the Internet. It’s about fair rules of the road for companies that control access to the Internet. We will do as much as we need to do, and no more, to ensure that the Internet remains an unfettered platform for competition, creativity, and entrepreneurial activity.

This is not about protecting the Internet against imaginary dangers. We’re seeing the breaks and cracks emerge, and they threaten to change the Internet’s fundamental architecture of openness. This would shrink opportunities for innovators, content creators, and small businesses around the country, and limit the full and free expression the Internet promises. This is about preserving and maintaining something profoundly successful and ensuring that it’s not distorted or undermined. If we wait too long to preserve a free and open Internet, it will be too late.

Some will seek to invoke innovation and investment as reasons not to adopt open Internet rules. But history’s lesson is clear: Ensuring a robust and open Internet is the best thing we can do to promote investment and innovation. And while there are some who see every policy decision as either pro-business or pro-consumer, I reject that approach; it’s not the right way to see technology’s role in America.

An open Internet will benefit both consumers and businesses. The principles that will protect the open Internet are an essential step to maximize investment and innovation in the network and on the edge of it–by establishing rules of the road that incentivize competition, empower entrepreneurs, and grow the economic pie to the benefit of all.

I believe we share a common purpose–we want the Internet to continue flourishing as a platform for innovation and communication, with continued investment and increasing deployment of broadband to all Americans. I believe my fellow Commissioners share this purpose, and I look forward to working collaboratively with them in this endeavor.

In closing, we are here because 40 years ago, a bunch of researchers in a lab changed the way computers interact and, as a result, changed the world. We are here because those Internet pioneers had unique insights about the power of open networks to transform lives for the better, and they did something about it. Our work now is to preserve the brilliance of what they contributed to our country and the world. It’s to make sure that, in the 21st century, the garage, the basement, and the dorm room remain places where innovators can not only dream but bring their dreams to life. And no one should be neutral about that.

If that’s the kind of thing that makes you happy, then you would love today’s call, in which the exact same thing happened again. Twice! From my transcription/paraphrase this afternoon:

Q: What about getting into the low priced/netbook category?

Apple COO Tim Cook: “Our goal is not to build the most computers, it’s to build the best. Whatever price point we can build the best in, we will play there. At this point, we don’t see a way to build a great product at that price point, $399, $499.” We think many customers buying those find themselves “disenchanted” after buying cheapo/netbooks.

Q: Do you think there is an emerging market for a “truly mobile device” with a larger screen, a market big enough that you may want to participate?

Cook: “Never want to discount anything in the future,” and never want to answer specifically your question about new products. [Duh.] But boy, do we think netbooks are lousy, and we think customers agree.

Two things here:

1. Apple has a history of disparaging products and markets right before they unveil their own. So it’s not unreasonable for analysts to keep asking about the prospects for a supercheap Mac laptop. But Apple really is emphatic about its distaste for these machines.
2. Apple is not ruling some sort of device that’s more expensive than a netbook and less expensive than a $999 MacBook…and may have a big touchscreen…and is bigger than an iPhone, etc. Something, perhaps, like an $800 iTablet. We’ll see.

EARLIER:

Joining call late; analysis of Q3 results here.

Reading from prepared statement:

• Eight billion songs purchased and downloaded from iTunes store.
• Slight uptick at Mac retail stores. 50 percent of Macs sold at stores to customers who didn’t own Macs before. 258 stores. 27 store remodels.
• Gross-margin improvement: Component cost increase not as high as expected; weaker U.S. dollar helped.
• Cash pile: Will be invested in short-term investments. First week of Q4, made $500 million payment to Toshiba for future supply of NAND flash memory.

Q&A:

• Please talk about your relationship with wireless carriers (i.e., when will you dump AT&T (T) for Verizon (VZ). Tim Cook: “I think that most of the carriers we’re doing business with are thrilled with lower churn…and, of course, their customers are demanding the iPhone.” Do you see opportunity beyond the iPhone, like data plans for laptops with AT&T? “Nothing to be announced today.” How’s your relationship with AT&T? “I think it’s an excellent relationship and we’re very happy with it.”
• Discussion of education and professional market for Mac laptops/PCs–both affected by economy more than consumer market, i.e., schools and corporations are less likely to spring for shiny new Macs than Joe Sixpack.
• How is the $99 iPhone performing? As we made changes–launch of 3Gs and lower-priced iPhones–we saw acceleration of unit sales. But won’t break down mix. Supply of phones has been “constrained” and demand is robust. Opportunity for enterprise sale? Big opportunity. Doing well with small business, and with big corporations and agencies where employees can purchase for themselves.
• Guidance details? No change in thinking regarding guidance offerings. We usually see an increase in Mac units from June to September, but we think the sequential increase will be less than in previous years since we’ve refreshed our lines a while back. Also, education sales are “under pressure from budget shortfalls.” Same thing with the iPod: We think we’ll see a decline for regular players but an increase for the iPod touch. Seasonality makes projections a little funky this time around given timing of product launches.
• Channel inventory for iPhone lower is than we would like; there are 1.83 million phones in inventory.
• Given the $999 MacBook and price cuts for the Mac line, is the MacBook more or less elastic than anticipated? As we expected, some people are now buying up, because they can get the Macbook Pro for $1,199, down from $1,899. “We’re not thinking fundamentally different about the Mac business than we were before.” If we can build great Macs at lower prices, we will, but we won’t put the Mac brand on products that aren’t up to our standards.
• Update on Snow Leopard? Why such a low price point? Snow Leopard is priced aggressively so that all our users can upgrade to it, and we expect that they will. What commodity prices are you worried about, what should we think of the Toshiba prebuy? Are others coming? The market for DRAM and large-size LCDs has “shifted to constrained environment” and prices have moved accordingly. The NAND supply is getting better. We have a long-term supply agreement with Toshiba. We view flash as key component because we use it in so many products, and we’re a big consumer on a worldwide basis. We’re always open to similar deals. We’ve done one with LG on LCDs. We may do others, but we’re not working on one now.
• Please talk more about consumer demand for lower-priced laptops. No details forthcoming. But on macro level: Once price changes, people are upsold from $999 unit to $1,199 unit. [We just heard that.] Prior to change, we had seen people leaning toward the $999 product. What about pricing on iPhone side? Sounds like $99 3G iPhone helped drive traffic to the $199 3GS iPhone. Was that the plan? We’re focused on total iPhone units. So we’re psyched about 5.2M iPhones sold. Also, take note that the 3GS is in short supply and not available in all territories. Also, early in cycle, you have more upgraders, and upgraders are more likely to get higher priced phones. Still, too early to tell about product mix.
• Competitors are now finally coming out with rival app stores–Pre (barely), BlackBerry, etc.). What are you up to in answering back? Well, we just launched OS 3.0. That’s pretty great. It has an Installed base of 45 million (iPhones and iPod touch). We have a gazillion apps. According to the latest numbers from Nokia (NOK) and RIM (RIMM), they have a couple thousand each; Android has maybe 5,000. “We feel extremely good about our competitive position and continue to believe that we’re light years ahead of other people.”
• What about getting into the low-priced/netbook category? Tim Cook: “Our goal is not to build the most computers, it’s to build the best. Whatever price point we can build the best in, we will play there. At this point, we don’t see a way to build a great product at that price point, $399, $499.” We think many customers buying those find themselves “disenchanted” after buying cheapo/netbooks.
• Is the carrier network strong enough to handle all the apps and the more robust apps you’re coming out with every day? Non-answer. Do you think you guys will make investments on the side to take pressure of carrier-capacity issues? No plans. When we entered business, we looked at it, decided what we could do well was deliver the handset. I think there are other people that have more skills in the network area, and I think we have a lot of those partners.
• Back to netbooks and things like netbooks, but better, like the iTablet: Do you think there is an emerging market for a “truly mobile device” with a larger screen, a market big enough that you may want to participate? Cook: “Never want to discount anything in the future,” and never want to answer specifically your question about new products. [Duh.] But, boy, do we think netbooks are lousy and we think customers agree.
• Any info on iPhone sales split between new buyers and upgrades? Nope. Okay, how about the app store? It looks like prices are in a “race to the bottom”; there are lots of 99 cent apps. Are you worried about that? And can you help customers distinguish between good ones and “garbage”? Cook: “We realize there’s further opportunity for improvement” regarding promoting quality apps, etc. Regarding price: It’s up to the developers. As the installed base grows, it makes more sense to have lower prices, but that’s up to the developers.

Call finished.

That’s one takeaway you can draw from a new study commissioned by an Internet publishing trade group, which concludes, astonishingly, that Internet publishing is an important and vibrant industry.

The data are being served up via the Interactive Advertising Bureau, which tells us the advertising-supported Web industry “directly employs more than 1.2 million Americans with above-average wages in jobs that did not exist two decades ago, and another 1.9 million people work to support those with directly Internet-related jobs.”

Note the “advertising-supported” modifier in the above paragraph, because that’s the real thrust of the IAB’s study/press release: The trade group is trying to get Congress and Washington to let members like Google (GOOG), Yahoo (YHOO) and Time Warner’s (TWX) AOL regulate themselves when it comes to hot-button issues like behavioral targeting.

Hence this quote from IAB boss Randall Rothenberg: “By understanding the total contribution of the Internet to the U.S. economy, we can more accurately assess the impact of potential legislative changes on the Internet’s operations, particularly the consequences of any actions that would alter ad-supported business models.”

OK. Fine. But regulation is tomorrow’s problem. Today, let us celebrate the fact that some of us have jobs! And also, according to the IAB, we’re providing the following:

• Universal access to an almost unlimited source of information
• Increased productivity (output per unit of capital or labor, or increased consumer utility at a lower cost)
• Innovation in business practices, consumer behavior, commerce and media
• Empowerment of entrepreneurs to start small businesses, find customers and grow
• Environmental benefits derived from saving natural resources lowering pollution through the reduced use of petroleum-based fuels and paper

Cool, right? And all this time I thought I was just blogging. You’re welcome! And please keep reading.

[Image credit: respres]

Dell has been having a tough time lately. Once the widely admired leader among PC makers, it has lost its sales crown to Hewlett-Packard and has seen its once-legendary customer satisfaction plunge.

In an attempt to jazz up its image, the stodgy behemoth recently introduced a line of thin, sleek, colorful consumer notebooks, the XPS M1330 series, but has been unable to build the machines on schedule.

Now, Dell is making another interesting move to better address the market. It has introduced a new sub-brand of computers intended for perhaps the most poorly served segment of computer buyers: really small businesses with 25 employees or less that have no full-time IT departments.