Alaska Airlines, Flying Above an Industry’s Troubles

Damon Winter/The New York Times

For decades, flights over spectacular Alaskan landscapes could end with devilishly difficult landings. More Photos »

FLYING over Alaska in the wintertime is a spectacular experience. At 35,000 feet, the state’s rugged beauty unfolds, a succession of white mountain peaks against steel-blue skies, icy lakes and frozen rivers that snake as far as the eye can see. It’s an awesome sight, wild and pristine, that glows in a thousand hues of red, orange and pink when the sun sets against the horizon.

Damon Winter/The New York Times

The pilots Dan Kaplin and Tom Peebles complete a safety check before a short flight from Wrangell, about 200 miles southeast of Juneau, to Petersburg. More Photos »

But then, you have to land.

Juneau’s airport is surrounded by mountains, the approach often buffeted by treacherous wind shear. Sitka’s one small runway is on a narrow strip of land surrounded by water. And in Kodiak, the landing strip ends abruptly at a mountainside. The airport approach is so tricky that first officers are not allowed to land there; only captains are trusted to do so.

Doug Wahto knows these airports well. He grew up in Juneau, worked as a commercial fisherman and builder and started flying with Alaska Airlines in 1970. As a pilot, he honed the art of reading wind conditions by looking at how snow blew over mountain ridges.

Mr. Wahto retired six years ago, but not before seeing the transformation of flying in Alaska and of the airline where he spent his career. Alaska Airlines is puny compared to the major carriers: it has 124 planes, while United Airlines has more than 700 and four times as many passengers. But because of the state’s topography and extreme weather, it was the first to develop satellite guidance, a navigation technique that has transformed landing at Alaska’s tricky airports. The technique is now at the heart of the Federal Aviation Administration’s plan to modernize the nation’s air traffic system, a project that is expected to cost tens of billions of dollars over the coming decades.

“It doesn’t take a rocket scientist,” Mr. Wahto says, “or a crusty old dog like me to fly these approaches anymore.”

Largely because of that technology, flying in Alaska is now remarkably reliable — even in the dead of winter, when it is snowing, when there are just two hours of daylight, when runways are made slippery by ice or sleet, when winds blow at more than 50 miles an hour and pilots can barely see out the windshield. When, in other words, no one in his right mind would want to land a Boeing 737 with 140 passengers on a 6,000-foot runway.

Alaska Airlines, in fact, had the industry’s best on-time performance for the third consecutive year in 2012, with 87 percent of flights landing on time, according to FlightStats, a data provider.

That reliability means a lot in a state where air travel is often the only option, and where Alaska is the only commercial jet carrier with in-state routes. The airline flies to 16 towns accessible only by plane or boat, and, in doing so, ferries food and medical supplies, takes thousands of oil workers above the Arctic Circle and operates as the biggest air shipper for the state’s fisheries.

This role as primary transport for in the state is still a healthy business, but Alaska Airlines has prospered by expanding its services. From its Seattle base, it now has a bigger presence than other airlines along much of the West Coast. In 2007, it moved into Hawaii; its flights to the state now account for 20 percent of its available seat miles, an industry standard for measuring capacity. That is more than the 17 percent in Alaska itself.

Megamergers, most recently of US Airways and American Airlines, have redrawn the boundaries of domestic carriers, concentrating the business as never before. Alaska Airlines, for its part, has cultivated staunch independence. Unlike carriers that have faced bankruptcy or acquisition, Alaska has turned a profit for 33 of the last 39 years. In 2012, it had a record $316 million in net income, up 29 percent from 2011.

Although it started in a sparsely populated, meteorologically unwelcoming, financially challenging corner of the country, Alaska has built a successful franchise that is the envy of many rivals.

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Bits Blog: Judge Slashes Jury Award in Apple-Samsung Case

8:45 p.m. | Updated

A federal judge on Friday weakened the blow from Apple’s legal victory in a patent case against Samsung, lopping more than 40 percent off the damages a jury awarded Apple last year.

The ruling did not shift the case — one of the most closely watched in the high-tech industry — in Samsung’s favor. While Apple has lost other skirmishes against Samsung in courts around the world, the jury award in this case has been the biggest victory for either side so far.

Even at a reduced level, these would be among the highest damages in a patent dispute.

The judge ordered a new trial to recalculate a portion of those damages, leaving open the possibility that some of them could be restored.

She also indicated that Apple was entitled to additional damages for sales of Samsung products that have occurred since the jury’s decision last summer, which could further swell the amount Apple is owed by Samsung.

Tech companies around the world are waging legal battles over patents as they compete for supremacy in the lucrative smartphone market. Apple and Samsung are the most prominent combatants in that war; the two companies divide most of the profits in the surging mobile phone market.

Samsung has soared to the No. 1 spot in the smartphone business in recent years, but Apple says that it is, in part, because the company has swiped many of Apple’s ideas.

In her review of the jury’s decisions, which originally awarded Apple more than $1 billion for patent violations by Samsung in its mobile products, Judge Lucy H. Koh of the United States District Court in San Jose, Calif., knocked those damages down by $450 million, to $599 million. The new trial will determine how much of the $450 million, if any, should be restored.

“It will be years before the parties exhaust all of their litigation avenues and options,” said Alan M. Fisch, an intellectual property lawyer with Fisch Hoffman Sigler in Washington, who is not involved in the case. “Still, some form of patent cross-license between the two would not be an unsurprising final result.”

None of Judge Koh’s opinion changed the jury’s finding that Samsung violated a series of Apple patents in its smartphone and tablet products. But the judge took issue with how the jury calculated the damages Apple was entitled to from the Samsung devices named in the case, more than two dozen of them in all.

In her 27-page opinion, Judge Koh said that the jury failed to follow her instructions in calculating damages for a certain class of patents, known as utility patents.

She also decided in Samsung’s favor in a dispute between the two parties over when Apple notified Samsung that it was infringing Apple’s intellectual property. Evidence of such notice dates are important because they help determine how hefty the damages are in a court case, once the party being notified is found guilty of infringement.

Judge Koh chided Apple for using an expert in the case who used an “aggressive notice date” — meaning, an early one — to calculate damages.

“The need for a new trial could have been avoided had Apple chosen a more circumspect strategy or provided more evidence to allow the jury or the court to determine the appropriate award for a shorter notice period,” she said in her ruling.

Steve Dowling, a spokesman for Apple, declined to comment.

In a statement, Adam Yates, a Samsung spokesman, said that the company was pleased with the judge’s decision and that it intended to seek further review of the remaining award.

Apple and Samsung, meanwhile, continue to fight ferociously in the smartphone market, where Samsung has steadily worked its way to the No. 1 position over the last few years. In the fourth quarter, Samsung accounted for 29 percent of global smartphone shipments, while Apple accounted for 21.8 percent, according to IDC.

Mark A. Lemley, a professor at Stanford Law School, called the judge’s decision “an extremely careful and thorough opinion on a very difficult and interrelated set of issues.”

Mr. Lemley predicted that Samsung would eventually win some reduction in the original $1 billion award, but “almost certainly” less than the $450 million that Judge Koh reduced it by on Friday.

“We’ll need a new trial to figure that out,” said Mr. Lemley, who has done legal work in the past for Google, maker of the Android operating system involved in the Samsung case and others. “Judge Koh has encouraged both sides to appeal first. That may clarify some questions, but it is unlikely to prevent a new trial, just delay it some.”

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Bits Blog: Senator John D. Rockefeller IV Introduces 'Do Not Track' Bill

Before his planned retirement from Congress at the end of next year, Senator John D. Rockefeller IV, the West Virginia Democrat, intends to give American consumers more meaningful control over personal data collected about them online.

To that end, Mr. Rockefeller on Thursday introduced a bill called the “Do-Not-Track Online Act of 2013.”

The bill would require the Federal Trade Commission to establish standardized mechanisms for people to use their Internet browsers to tell Web sites, advertising networks, data brokers and other online entities whether or not they were willing to submit to data-mining.

The bill would also require the F.T.C. to develop rules to prohibit online services from amassing personal details about users who had opted out of such tracking.

Mr. Rockefeller proposed the same bill two years ago. But he did not push it in the Senate at the time because industry groups had pledged to voluntarily develop systems to honor the browser-based don’t-track-me flags. Last year, however, negotiations between industry groups and consumer advocates over how to execute these mechanisms essentially broke down and have since made little progress.

The new Rockefeller bill indicates that the senator believes the industry has not acted in good faith.

“The privacy of Americans is increasingly under assault as more and more of their daily lives are conducted online,” Mr. Rockefeller, the chairman of the Senate Committee on Commerce, Science and Transportation, wrote on Thursday in an e-mail sent to a reporter. “Industry made a public pledge to develop do-not-track standards that will truly protect consumer privacy — and it has failed to live up to that commitment. They have dragged their feet long enough.”

Industry representatives said that legislation was unnecessary because advertising networks and data brokers several years ago voluntarily introduced their own opt-out program for consumers, called Your AdChoices. Unlike the Do Not Track signals which would allow users to make a one-time decision about all online tracking from their own browsers, the industry program requires people to go to a site and individually select the companies, among several hundred, from whom they prefer not to receive marketing offers based on data-mining.

Stuart Ingis, a lawyer for the Digital Advertising Alliance, an industry consortium, said the program, which involves consumers installing individual cookies on their browsers, demonstrates that users already have choices about data collection.

“It’s a lot easier to use a system that is already built and works,” Mr. Ingis said.

Over the last few years, the number of companies that collect information about the reading habits, health concerns, financial capacity, search queries, purchasing patterns and other activities of online consumers has skyrocketed. Industry representatives argue that this benefits people because it enables companies to show them relevant ads, and that the ads themselves finance online sites and services that are free to consumers. Moreover, they say, the data collection is “anonymous” because online services typically use numerical customer codes, not real names or e-mail addresses, to track the behavior of individuals.

But consumer advocates warn that such profiling systems, which can collect thousands of details on nearly every adult in the United States, can be used to segment some people for preferential offers while relegating others to inferior treatment. Despite industry claims that online tracking is anonymous, a few computer scientists have reported that sites often leak information that can identify individuals, including names, addresses and other details, to third parties.

“Nowadays, there is an incredible proliferation of tracking,” said Dan Auerbach, a staff technologist at the Electronic Frontier Foundation, a digital rights group in San Francisco. “Data brokers, companies that you never heard of, are collecting massive dossiers about you as you browse around the Web and, right now, there are no limitations on the collection or use of those dossiers.”

To give people greater control over their own surveillance online, the Federal Trade Commission in a report on consumer privacy last March urged industry groups to adopt Do Not Track mechanisms by the end of 2012. In fact, the major browsers — Firefox from Mozilla, Google’s Chrome, and the more recent iterations of Internet Explorer — already offer the don’t-track-me buttons. When these options are turned on, they send out signals to sites, and third parties like ad networks operating on those sites, that certain users do not want to have their information collected.

But industry groups and consumer advocates have been at odds for more than a year over how “Do Not Track” mechanisms should be presented to users and how online services should respond to the signals. In the absence of legislation or industry consensus, companies are free to ignore those user preferences.

Some browsers have responded to this standstill by taking matters into their own hands and blocking third-party tracking cookies, as my colleague Somini Sengupta reported this week.

But Mr. Rockefeller’s bill indicates that legislative action could pre-empt voluntary industry measures.

“This is a signal that Senator Rockefeller is serious about getting Do Not Track done,” said David C. Vladeck, a professor at Georgetown Law. Until last month, Mr. Vladeck served as director of the bureau of consumer protection at the F.T.C. “I think industry writ large – browser companies, advertising networks, data brokers – are going to understand that he is serious about getting across the finish line.”

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Groupon Shares Fall 25% in Late Trading

CHICAGO (AP) — Groupon, the online deals company, posted a larger-than-expected fourth-quarter loss on Wednesday and a weaker-than-expected revenue outlook, sending its shares down more than 25 percent in after-hours trading.

The forecast fed investor worry that people were tiring of the many online restaurant, spa and Botox deals that Groupon built its business on, and that the company’s efforts to broaden into an e-commerce powerhouse had not been paying off.

Groupon, based in Chicago, booked a loss of $81.1 million, or 12 cents a share, in the October to December period. That compares with a loss of $65.4 million, also 12 cents a share, in the fourth quarter a year earlier, when it had fewer shares outstanding.

Analysts expected a loss of 2 cents a share, according to FactSet.

Revenue rose 30 percent to $638.3 million from $492.2 million. Wall Street expected revenue of $639.8 million.

For the current quarter, Groupon expects revenue of $560 million to $610 million, which translates to a range of flat to 9 percent higher than in the year-earlier period. Analysts expected revenue of $646.8 million.

Gross billings, a closely watched figure that shows the total amount customers spent on Groupon’s deals, increased 24 percent in the quarter to $1.52 billion from $1.23 billion a year earlier.

“Record billings growth this quarter is a clear signal that customers love Groupon,” said Andrew Mason, the company’s chief executive, in a statement. “We will continue to invest in growth through 2013 as we see new opportunities to give our customers what they want.”

Groupon’s stock fell as much as $1.56 to $4.41 in after-hours trading. Earlier, the stock closed up 43 cents at $5.98 before the release of the earnings report.

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Gadgetwise Blog: App Smart Extra: More Slide Show Apps

Last week in App Smart I talked about the many apps that promise to turn photos from your smartphone or tablet’s digital photo album into an attractive photo slide show. These apps make looking at digital photos of a vacation, or perhaps an event like a wedding, into the modern equivalent of flipping through a photo album.

On iOS, one powerful app for creating dynamic photo slide shows is ProShow (free on iTunes). The interface is easy to use, and the app tries to do much of the fiddly stuff involved in creating a new slide show by offering you themes. These themes automatically adjust settings like special effects between slides and background images. You can manually change these settings later if you prefer. The app can even include video clips. The app does require that you sign up for the company’s services, free, but this minor inconvenience gives you access to its Web site. There you can edit your slide shows and also view them online — a great option for sharing your slide show efforts with friends.

One neat option for Android is the $1 app Slideshow 5000. This app creates an unusual kind of slide show: the photos look as if they are being tossed onto a table while a camera pans above the table’s surface. Each photo is animated as if it were really falling, and even casts a shadow. You can adjust the background image and turn each of your images into a faux Polaroid snap, and it’s easy to select the photos you want. You can even turn the photo slide show into your device’s live Android wallpaper. But the show it produces is more for casual fun; it’s not really ideal for sharing treasured memories.

A simpler option for Android is the free app Slideshow Bob. This app is limited to showing photos from folders on your device, and you can’t organize them inside the app because you’re limited to sorting the photos by parameters like date or title. It does, however, have some transition options, and when it’s displaying the slide shows, it does so elegantly.

Many apps for smartphones and tablets can create photo slide shows, but their quality varies widely. I found it hard to find sophisticated apps that offer a lot of slide show control on Android devices. Luckily, many have a free or “lite” edition, meaning you could try out several before you buy.

Quick call: Lego Galaxy Squad Bug Battle is a new free game for iOS devices. It’s a 2-D scrolling space shooter that combines all the gaming fun of this genre with Lego’s cute imagery. The mission is to save humans by squashing the alien bugs. It will keep you amused when you have the odd five minutes to spare.

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HTC Settles F.T.C. Charges Over Security Flaws in Devices

WASHINGTON — More than 18 million smartphones and other mobile devices made by HTC, a Taiwanese company that is one of the largest sellers of smartphones in the United States, had security flaws that could allow location tracking of users against their will and the theft of personal information stored on their phones, federal officials said Friday.

The Federal Trade Commission charged HTC with customizing the software on its Android- and Windows-based phones in ways that let third-party applications install software that could steal personal information, surreptitiously send text messages or enable the device’s microphone to record the user’s phone calls.

The action is the first attempt by the commission to police a manufacturer of mobile devices. As smartphones and tablets become a common way for consumers to shop, bank and chat online, personal information and privacy will need to be guarded.

HTC America, based in Bellevue, Wash., agreed to settle the civil suit with the commission by issuing software patches that close the security holes, and by creating a security program that will be monitored by an independent party for the next 20 years. The F.T.C. does not have the authority to assess fines in consumer protection cases.

“The company didn’t design its products with security in mind,” Lesley Fair, a senior lawyer in the commission’s Bureau of Consumer Protection, wrote in a blog post. “HTC didn’t test the software on its mobile devices for potential security vulnerabilities, didn’t follow commonly accepted secure coding practices and didn’t even respond when warned about the flaws in its devices.”

An HTC official said Friday that the company had already started to update its software and distribute it to users of some, but not all, of the affected phones.

“Working with our carrier partners, we have addressed the identified security vulnerabilities on the majority of devices in the U.S. released after December 2010,” Sally Julien, an HTC spokeswoman, said in a statement. “We’re working to roll out the remaining software updates now and recommend customers download them once available.”

“Privacy and security are important,” the statement added, “and we are committed to improving practices that help safeguard our customers’ devices and data.”

The trade commission charged that the security flaws resulted from HTC’s modifying the operating system software used on most of the affected phones. In the case of Android, created by Google, the system is designed to protect sensitive information and phone functions through what is known as a permission-based security model.

That requires a user, when installing an application that is not a standard part of the operating system, to be notified and to agree that the application could gain access to certain information or functions.

HTC, however, preinstalled certain apps on its phones in a way that, in addition to preventing consumers from removing them, disabled the permission-based model and allowed newly installed apps to have immediate access to personal data.

“The analogy isn’t exact,” wrote Ms. Fair of the F.T.C., “but it’s like giving a friend the combination to a safe only to find out he’s handing it over to anyone who asks.”

That security hole could, for example, let the rogue software secretly record users’ phone conversations or track their location.

Flaws in the security system could also give third-party apps access to phone numbers, contents of text messages, browsing history and information like credit card numbers and banking transactions. Those flaws also affected HTC phones that used Windows-based operating systems.

While HTC’s actions introduced numerous security vulnerabilities to its phones, a commission official said it was not clear how many users experienced illegal incursions into their phones and personal information.

The flaw in the company’s phones has been known since at least 2011. HTC acknowledged the problems at that time and developed software patches for at least some of the deficiencies that year.

But the problems were far from minor. The F.T.C. said that text-message toll fraud, in which a hacker causes a phone to send text messages to a number that charges the user for delivery of the message, “is one of the most common types of Android malware,” or malicious software.

HTC’s user manuals either said or implied that a user was protected against malware because of the permission-based security, the commission said.

The commission will collect public comments on the proposed remedies for 30 days, after which it will decide whether to formally carry out the order. If HTC subsequently violates the order’s restrictions and requirements, it faces civil penalties of up to $16,000 a violation.

This article has been revised to reflect the following correction:

Correction: February 25, 2013

A picture with an earlier version of this article was published in error. The settlement between HTC and the F.T.C. involves phones running Windows Mobile; it did not involve the later operating system Windows 8, which the phone in the picture was running.

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French Tax Proposal Tackles Data Harvest by Google and Facebook

PARIS — Only a few weeks after the French Constitutional Council rejected one new tax idea — a 75 percent levy on annual incomes of more than 1 million euros ($1.3 million) — another began percolating through the halls of the finance ministry here: a proposal to tax the collection of personal data on the Internet.

Google and Facebook know that John Doe “likes” wine, is shopping for a Volkswagen and often e-mails Jane Doe. The new idea would require the companies to pay for gathering that information.

Nicolas Colin, one of the authors of a report in which the idea of taxing data collection was floated in January, said the immediate goal would be to promote sound practices for data collection and protection.

While the report does not specify how much revenue the tax would yield, Mr. Colin said it would probably be minimal.

“It’s meant to incentivize everyone to operate at a higher level, not to raise a lot of money,” he said. “You can’t go from zero to collecting hundreds of millions overnight.”

Like other European countries, France has been frustrated by its inability to raise significant tax revenue from the billions of dollars in sales and profits that Internet companies, many of them American, generate in Europe every year.

And despite so-called austerity measures, budget deficits remain large.

“Every government needs revenues,” Mr. Colin, a government auditor and technology entrepreneur, said in an interview. “If they can’t get them from the most profitable companies, then they have to get them from the rest of us — individual taxpayers and smaller, struggling companies.”

Internet companies like Amazon.com, Facebook and Google stay largely out of reach of tax collectors in large European countries like Britain, France and Germany by routing their sales through smaller countries, like Ireland and Luxembourg, where corporate tax rates are lower. The companies insist that such practices are permitted under European Union law and international taxation treaties.

France and other countries have begun talks to change those conventions, so Internet companies could be taxed in the country where a sale takes place, rather than in the location where the transaction is recorded. But that could take many years, with no guarantee of any change.

On the other hand, France could impose a tax on data collection unilaterally and quickly, Mr. Colin said.

The prospects for his proposal are unclear. While the report was commissioned by the government, it is not an official policy document, and the finance ministry has yet to take a position on the idea.

On other issues involving the digital economy, the administration of President François Hollande has sent mixed signals. After threatening Google with a law that would have let publishers charge the search engine for links to their Web sites, for example, the government backed down and accepted a negotiated deal that maintains Google’s existing business model, under which links are free.

The French data protection agency, which is known by the initials C.N.I.L. and is independent of the government, has been more forthcoming about the taxation proposal.

“Personal data are the fuel of the digital economy,” Edouard Geffray, the agency’s secretary general, told the French version of the online magazine Slate. “Given that, it would seem like a natural idea to envision taxing the use of them.”

While business plans built on mining consumers’ personal information from the Internet are proliferating, so are concerns about the use of the data.

Last week, the data protection authorities of the 27 European Union countries threatened Google with punitive action over a privacy policy that the company put in effect last year, under which it harvests data from a range of services. The agencies, led by C.N.I.L., gave Google four months to make changes or face legal action. Google insists its policy complies with European Union law.

A recent study by Ovum, a research firm in London, showed that 81 percent of Internet users in France would use a “do not track” feature on Web sites if it were readily available. That was the highest percentage in any of the 11 countries surveyed.

“The privacy market is heating up,” said Mark Little, an analyst at Ovum. “There is a move away from what I would call data fracking to consumers’ creating their own contracts governing data use, and corporations’ having to abide by those.”

Mr. Colin said the main goal of his tax plan would be to reward companies for providing their customers with useful information, while penalizing those that did not do so.

Internet companies, for example, could be taxed if they collected “cookies” — digital markers of the Web sites that Internet users visit — without enabling consumers to see how the information was used. Companies that did provide that information readily would be exempt.

Analysts call such a practice “smart disclosure” because it can help consumers make informed decisions. Utilities that provide consumers with more detailed information on, for example, their patterns of electricity or natural gas consumption could help them reduce their bills.

Mr. Colin said there was no intention to stop Internet companies from collecting data.

“That would be bad for business, and it would hurt French companies too,” he said.

While Internet companies are not alone in collecting vast amounts of data, Mr. Colin made it clear that the proposal was aimed at the likes of Google and Facebook, which are making inroads in more and more areas.

“I’m convinced the telecoms, even car manufacturers, will be disrupted by these companies,” Mr. Colin said. “We’d better learn to tax them before they eat the whole economy.”

A secondary purpose of the proposal, Mr. Colin said, would be to provide leverage in negotiations for a change in international conventions on corporate taxes. If those were altered so that France could tax foreign Internet companies on their profits, then the data tax could be dropped, he said.

“In France, we are seen as a nation of tax lovers, which isn’t always good for the French image, and isn’t always true, either,” he said. “But it is true that we are leaders in this area. Maybe the French government has the opportunity to make the case for accelerated negotiations.”

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Major Banks Aid in Payday Loans Banned by States

Major banks have quickly become behind-the-scenes allies of Internet-based payday lenders that offer short-term loans with interest rates sometimes exceeding 500 percent.

With 15 states banning payday loans, a growing number of the lenders have set up online operations in more hospitable states or far-flung locales like Belize, Malta and the West Indies to more easily evade statewide caps on interest rates.

While the banks, which include giants like JPMorgan Chase, Bank of America and Wells Fargo, do not make the loans, they are a critical link for the lenders, enabling the lenders to withdraw payments automatically from borrowers’ bank accounts, even in states where the loans are banned entirely. In some cases, the banks allow lenders to tap checking accounts even after the customers have begged them to stop the withdrawals.

“Without the assistance of the banks in processing and sending electronic funds, these lenders simply couldn’t operate,” said Josh Zinner, co-director of the Neighborhood Economic Development Advocacy Project, which works with community groups in New York.

The banking industry says it is simply serving customers who have authorized the lenders to withdraw money from their accounts. “The industry is not in a position to monitor customer accounts to see where their payments are going,” said Virginia O’Neill, senior counsel with the American Bankers Association.

But state and federal officials are taking aim at the banks’ role at a time when authorities are increasing their efforts to clamp down on payday lending and its practice of providing quick money to borrowers who need cash.

The Federal Deposit Insurance Corporation and the Consumer Financial Protection Bureau are examining banks’ roles in the online loans, according to several people with direct knowledge of the matter. Benjamin M. Lawsky, who heads New York State’s Department of Financial Services, is investigating how banks enable the online lenders to skirt New York law and make loans to residents of the state, where interest rates are capped at 25 percent.

For the banks, it can be a lucrative partnership. At first blush, processing automatic withdrawals hardly seems like a source of profit. But many customers are already on shaky financial footing. The withdrawals often set off a cascade of fees from problems like overdrafts. Roughly 27 percent of payday loan borrowers say that the loans caused them to overdraw their accounts, according to a report released this month by the Pew Charitable Trusts. That fee income is coveted, given that financial regulations limiting fees on debit and credit cards have cost banks billions of dollars.

Some state and federal authorities say the banks’ role in enabling the lenders has frustrated government efforts to shield people from predatory loans — an issue that gained urgency after reckless mortgage lending helped precipitate the 2008 financial crisis.

Lawmakers, led by Senator Jeff Merkley, Democrat of Oregon, introduced a bill in July aimed at reining in the lenders, in part, by forcing them to abide by the laws of the state where the borrower lives, rather than where the lender is. The legislation, pending in Congress, would also allow borrowers to cancel automatic withdrawals more easily. “Technology has taken a lot of these scams online, and it’s time to crack down,” Mr. Merkley said in a statement when the bill was introduced.

While the loans are simple to obtain — some online lenders promise approval in minutes with no credit check — they are tough to get rid of. Customers who want to repay their loan in full typically must contact the online lender at least three days before the next withdrawal. Otherwise, the lender automatically renews the loans at least monthly and withdraws only the interest owed. Under federal law, customers are allowed to stop authorized withdrawals from their account. Still, some borrowers say their banks do not heed requests to stop the loans.

Ivy Brodsky, 37, thought she had figured out a way to stop six payday lenders from taking money from her account when she visited her Chase branch in Brighton Beach in Brooklyn in March to close it. But Chase kept the account open and between April and May, the six Internet lenders tried to withdraw money from Ms. Brodsky’s account 55 times, according to bank records reviewed by The New York Times. Chase charged her $1,523 in fees — a combination of 44 insufficient fund fees, extended overdraft fees and service fees.

For Subrina Baptiste, 33, an educational assistant in Brooklyn, the overdraft fees levied by Chase cannibalized her child support income. She said she applied for a $400 loan from Loanshoponline.com and a $700 loan from Advancemetoday.com in 2011. The loans, with annual interest rates of 730 percent and 584 percent respectively, skirt New York law.

Ms. Baptiste said she asked Chase to revoke the automatic withdrawals in October 2011, but was told that she had to ask the lenders instead. In one month, her bank records show, the lenders tried to take money from her account at least six times. Chase charged her $812 in fees and deducted over $600 from her child-support payments to cover them.

“I don’t understand why my own bank just wouldn’t listen to me,” Ms. Baptiste said, adding that Chase ultimately closed her account last January, three months after she asked.

A spokeswoman for Bank of America said the bank always honored requests to stop automatic withdrawals. Wells Fargo declined to comment. Kristin Lemkau, a spokeswoman for Chase, said: “We are working with the customers to resolve these cases.” Online lenders say they work to abide by state laws.

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HTC Settles F.T.C. Charges Over Security Flaws in Devices

WASHINGTON — More than 18 million smartphones and other mobile devices made by HTC, a Taiwanese company that is one of the largest sellers of smartphones in the United States, had security flaws that could allow location tracking of users against their will and the theft of personal information stored on their phones, federal officials said Friday.

The Federal Trade Commission charged HTC with customizing the software on its Android- and Windows-based phones in ways that let third-party applications install software that could steal personal information, surreptitiously send text messages or enable the device’s microphone to record the user’s phone calls.

The action is the first attempt by the commission to police a manufacturer of mobile devices. As smartphones and tablets become a common way for consumers to shop, bank and chat online, personal information and privacy will need to be guarded.

HTC America, based in Bellevue, Wash., agreed to settle the civil suit with the commission by issuing software patches that close the security holes, and by creating a security program that will be monitored by an independent party for the next 20 years. The F.T.C. does not have the authority to assess fines in consumer protection cases.

“The company didn’t design its products with security in mind,” Lesley Fair, a senior lawyer in the commission’s Bureau of Consumer Protection, wrote in a blog post. “HTC didn’t test the software on its mobile devices for potential security vulnerabilities, didn’t follow commonly accepted secure coding practices and didn’t even respond when warned about the flaws in its devices.”

An HTC official said Friday that the company had already started to update its software and distribute it to users of some, but not all, of the affected phones.

“Working with our carrier partners, we have addressed the identified security vulnerabilities on the majority of devices in the U.S. released after December 2010,” Sally Julien, an HTC spokeswoman, said in a statement. “We’re working to roll out the remaining software updates now and recommend customers download them once available.”

“Privacy and security are important,” the statement added, “and we are committed to improving practices that help safeguard our customers’ devices and data.”

The trade commission charged that the security flaws resulted from HTC’s modifying the operating system software used on most of the affected phones. In the case of Android, created by Google, the system is designed to protect sensitive information and phone functions through what is known as a permission-based security model.

That requires a user, when installing an application that is not a standard part of the operating system, to be notified and to agree that the application could gain access to certain information or functions.

HTC, however, preinstalled certain apps on its phones in a way that, in addition to preventing consumers from removing them, disabled the permission-based model and allowed newly installed apps to have immediate access to personal data.

“The analogy isn’t exact,” wrote Ms. Fair of the F.T.C., “but it’s like giving a friend the combination to a safe only to find out he’s handing it over to anyone who asks.”

That security hole could, for example, let the rogue software secretly record users’ phone conversations or track their location.

Flaws in the security system could also give third-party apps access to phone numbers, contents of text messages, browsing history and information like credit card numbers and banking transactions. Those flaws also affected HTC phones that used Windows-based operating systems.

While HTC’s actions introduced numerous security vulnerabilities to its phones, a commission official said it was not clear how many users experienced illegal incursions into their phones and personal information.

The flaw in the company’s phones has been known since at least 2011. HTC acknowledged the problems at that time and developed software patches for at least some of the deficiencies that year.

But the problems were far from minor. The F.T.C. said that text-message toll fraud, in which a hacker causes a phone to send text messages to a number that charges the user for delivery of the message, “is one of the most common types of Android malware,” or malicious software.

HTC’s user manuals either said or implied that a user was protected against malware because of the permission-based security, the commission said.

The commission will collect public comments on the proposed remedies for 30 days, after which it will decide whether to formally carry out the order. If HTC subsequently violates the order’s restrictions and requirements, it faces civil penalties of up to $16,000 a violation.

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H.P. Reports Decline in First-Quarter Revenue and Profit

SAN FRANCISCO — Hewlett-Packard may have gained running room, but it remains unclear if it can leap successfully to technology’s new post-PC world.

The world’s largest maker of personal computers, printers, and computer servers has struggled for growth in a world increasingly full of smartphones, tablets and cloud computing services. Anchored in the traditional hardware, H.P. is challenged by new devices, which it does not make, and cutthroat competition in its old low-margin businesses, which is pressing margins.

On Thursday, H.P. reported lower first-quarter revenue, profit and profit margins. Sales were down in all five of H.P.’s major businesses, which also include software and services.

Meg Whitman, the chief executive, declared in an interview after release of the results that “the patient showed improvement.” She said that H.P. is building a number of consumer and business products, including new kinds of laptops and low-energy servers for cloud computing, that will renew the company.

Positive sustained growth, however, is still a year away, Ms. Whitman said. “2013 is ‘fix and rebuild,’ ” she said. “All of the pipe we laid in 2012, and will lay in 2013, will show up in 2014.” Of smartphones, perhaps the biggest missing piece of H.P.’s portfolio, she would say only: “We’re still working on it.”

Bill Kreher, an analyst with Edward Jones, said: “H.P. is trying to cut fat while restructuring. Cutting costs and investing at the same time is tough. It’s a three- to five-year turnaround, probably, but the world isn’t stopping for them.”

H.P. said net income fell 16 percent, to $1.23 billion, or 63 cents a share, from $1.47 billion, or 73 cents in the period a year earlier. Revenue fell 6 percent, to $28.36 billion.

The results exceeded Wall Street expectations. Using the accounting methods preferred by analysts, H.P. reported net income of 82 cents a share, above the 71 cents a share predictions. Analysts also expected revenue of $27.8 billion, according to a survey by Thomson Reuters.

H.P.’s shares were up 5.85 percent in after-hours trading after the announcement. The stock had closed at $17.10, up 2.4 percent, in regular trading.

For H.P. and others in high technology, many traditional categories no longer fit the realities of how people use their gear. Smartphones have not been considered part of the computer business, for example, but are commonly used not just to cruise around the Internet, but also to access personal and corporate data in the cloud.

Servers were considered part of corporate computing, but ordinary people use them with every Google search and Facebook update. Tablets are used for gaming and watching videos streamed from the cloud, but also for dissecting corporate spreadsheets, often at the same time.

On Thursday, the research group IDC acknowledged this new reality by releasing data on a “smart connected device” market, as opposed to a market of PCs and laptops. When smartphones and tablets were included along with PCs and laptops, IDC said, H.P. went from market leadership to fourth place, behind Samsung, Apple and Lenovo.

Ms. Whitman acknowledged the changes, and said her company was responding. “The model is changing more rapidly than anyone thought,” she said. “We’re in a personal systems business. PCs and laptops are an important part, but so are tablets and smartphones.”

Last year, Ms. Whitman announced H.P. would lay off 29,000 employees over three years. About 15,300 of them are already gone, she said. She ascribed the company’s better-than-expected performance to “operational efficiencies” that contributed to cash flow of $2.6 billion, a 115 percent improvement over a year earlier.

Much of that cash, she said, is going into research and development for products, like data storage that works faster and cheaper by managing workloads across several machines, and printers that can scan and search the contents of documents.

On Tuesday, Dell, H.P.’s main American rival, said its first-quarter revenue fell 11 percent, to $14.3 billion, while net income was off 31 percent, to $530 million, or 30 cents a share.

Michael Dell, Dell’s founder, has proposed taking his company private, for about $24.4 billion, to focus on reorganizing Dell away from the eyes of Wall Street.

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F.C.C. Moves to Ease Wireless Congestion

WASHINGTON — The Federal Communications Commission took a step on Wednesday to relieve growing congestion on Wi-Fi networks in hotels, airports and homes, where Americans increasingly use multiple data-hungry tablets, smartphones and other devices for wireless communications.

The commission proposed making a large portion of high-frequency airwaves, or spectrum, available for unlicensed use by devices like the Wi-Fi routers that many Americans use in their homes. The new rules, after they receive final approval, would allow for transmission speeds of up to 1 gigabit per second — more than 100 times as fast as the Internet connection in the average American home.

The agency’s five commissioners also expressed hopes that the new unlicensed airwaves would unleash further innovations, just as unlicensed spectrum in the past has made possible such devices as cordless phones, garage door openers and television remote controls. Most of the public airwaves, like those used for television and radio broadcasting, or for cellphone signals and satellite transmissions, are licensed to specific companies, which then control that band of the electromagnetic spectrum.

Unlicensed airwaves, however, can be used by anyone, and they are increasingly used by wireless phone carriers like Verizon and AT&T, which divert nearly half of the data traffic off their systems and onto Wi-Fi networks to eliminate congestion caused by video downloads and similar bandwidth-hungry uses.

After a public comment period, the commissioners will try to devise final rules and regulations, a process that could take a year or more. But all of the commissioners expressed hope on Wednesday that the new airwaves could be put to use without unnecessary delay.

“These airwaves can be a colossal catalyst for new innovation,” said Jessica Rosenworcel, an F.C.C. commissioner. “It features enough continuous spectrum to unlock the full potential of a new Wi-Fi standard,” known as 802.11ac. “Undoubtedly,” she added, “cool new ways of connecting await.”

Possible roadblocks do exist, however, mainly because some of the airwaves proposed for the new applications are already in use by private organizations and government agencies, including the United States military.

Congress has mandated that the F.C.C. undertake the expansion of unlicensed spectrum, and the Obama administration has urged the freeing up or sharing of airwaves currently allocated to the federal government. Under the proposal, up to 195 megahertz of spectrum will be made available, the F.C.C. said, increasing by as much as 35 percent the total amount of airwaves available for unlicensed use in the 5-gigahertz spectrum band. But various government agencies, including a division of the Commerce Department, have warned against allowing consumer uses to interfere with current government applications.

Lawrence E. Strickling, assistant commerce secretary for communications and information, said in a letter delivered late Tuesday to the commission that the Pentagon, the Department of Homeland Security and NASA each used parts of the same airwaves for communication between aircraft and ground stations. Those communications enable activities like drug interdiction, combat search and rescue, and border surveillance, Mr. Strickling said.

Private groups also voiced concern. The Intelligent Transportation Society of America, a trade group representing automakers, design companies and transportation lobbying organizations, warned that its current tests of “connected driving” technology used part of the spectrum that the F.C.C. was considering opening to unlicensed use. Connected driving systems, which are being tested by the Transportation Department, allow cars to communicate with one another by radio signal, warning drivers of potential collisions and other hazardous road conditions.

If unlicensed devices are also using the same airwaves, the group said, the potential for interference could adversely affect the driving systems.

Julius Genachowski, the F.C.C. chairman, said he was confident that the commission’s engineers would be able to work with the affected government and private entities to solve interference problems.

“It’s very important for the country that we all lean into this in a problem-solving way,” Mr. Genachowski said. “This is not a new challenge for the commission to address.”

While the effort “will require significant consultation with stakeholders” to solve the interference problem, he added, “consultation can’t be an excuse for inaction or delay.”

The commission also voted unanimously to approve a regulation allowing consumers and companies to use approved and licensed signal boosters to amplify signals between wireless devices, like cellphones and the wireless networks on which they operate.

Those boosters, millions of which are currently used in ungoverned applications, help consumers and businesses improve coverage where cell signals are weak. Boosters are also used by public safety departments to extend wireless access in tunnels, subways and garages.

The order, which takes effect March 1, 2014, creates two classes of signal boosters, for use by consumers and businesses, each with distinct requirements to minimize interference with wireless networks.

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Disruptions: Disruptions: 3-D Printing Is on the Fast Track

Will the future be printed in 3-D?

At first glance, looking at past predictions about the future of technology, prognosticators got a whole lot wrong. The Web is a garbage dump of inaccurate guesses about the year 2000, 2010 and beyond. Flying cars, robotic maids and jet packs still are nowhere near a reality.

Yet the prediction that 3-D printers will become a part of our daily lives is happening much sooner than anyone anticipated. These printers can produce objects, even rather intricate ones, by printing thin layer after layer of plastic, metal, ceramics or other materials. And the products they make can be highly customized.

Last week, President Obama cited this nascent technology during his State of the Union address — as if everyone already knew what the technology was.

He expressed hope that it was a way to rejuvenate American manufacturing. “A once-shuttered warehouse is now a state-of-the art lab where new workers are mastering the 3-D printing that has the potential to revolutionize the way we make almost everything,” Mr. Obama said. He has pushed new technologies before, like solar and wind power, as remedies for our nation’s problems, and those attempts have only revived the debate about the limitations of government industrial policy.

But this one shows more promise. The question is, can the United States get a foothold in manufacturing one 3-D printer at a time?

Hod Lipson, an associate professor and the director of the Creative Machines Lab at Cornell, said “3-D printing is worming its way into almost every industry, from entertainment, to food, to bio- and medical-applications.”

It won’t necessarily directly create manufacturing jobs, except perhaps for the printers themselves. Dr. Lipson, the co-author of “Fabricated: The New World of 3D Printing,” said that the technology “is not going to simply replace existing manufacturing anytime soon.” But he said he believed that it would give rise to new businesses. “The bigger opportunity in the U.S. is that it opens and creates new business models that are based on this idea of customization.”

In addition to the lab that the president mentioned, a federally financed manufacturing innovation institute in Youngstown, Ohio, schools are embracing the technology. The University of Virginia has been working to introduce 3-D printers into some programs from kindergarten through 12th grade in Charlottesville to prepare students for a new future in manufacturing.

“We have 3-D printers in classrooms, and in one example, we’re teaching kids how to design and print catapults that they then analyze for efficiency,” said Glen L. Bull, professor and co-director of the Center for Technology and Teacher Education. “We believe that every school in America could have a 3-D printer in the classroom in the next few years.”

The education system may want to speed things up. The time between predictions for 3-D printers and the reality of what they can accomplish is compressing rapidly.

For example, in 2010, researchers at the University of Southern California said that another decade would pass before we could build a home using a 3-D printer. Yet last week, Softkill Design, a London architecture collective, announced that it planned to make the first such home — which it will assemble in a single day — later this year. The home isn’t that pretty, and will look more like a calcified spider web than a cozy house, but it will show it can be done. The price of 3-D printers has also dropped sharply over the last two years, with machines that once cost $20,000, now at $1,000 or less. That’s partly because Chinese companies are driving down prices. Yes, China sees the opportunity in these things, even though the technology may undermine some of its manufacturing advantages.

“When it costs you the same amount of manufacturing effort to make advanced robotic parts as it does to manufacture a paperweight, that really changes things in a profound way,” Dr. Lipson said.

This leaves us with one more question about the future: When will these 3-D printers be able to make us flying cars, robotic maids and jet packs?

E-mail: bilton@nytimes.com

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Rise of Drones in U.S. Spurs Efforts to Limit Uses

Colin Diltz/The Seattle Times, via Associated Press

A Seattle police officer, Jim Britt, with a drone in October. Seattle later banned use of the devices.

They can record video images and produce heat maps. They can be used to track fleeing criminals, stranded hikers — or just as easily, political protesters. And for strapped police departments, they are more affordable than helicopters.

Drones are becoming a darling of law enforcement authorities across the country. But they have given rise to fears of government surveillance, in many cases even before they take to the skies. And that has prompted local and state lawmakers from Seattle to Tallahassee to outline how they can be used by police or to ground them altogether.

Although surveillance technologies have become ubiquitous in American life, like license plate readers or cameras for catching speeders, drones have evoked unusual discomfort in the public consciousness.

“To me, it’s Big Brother in the sky,” said Dave Norris, a city councilman in Charlottesville, Va., which this month became the first city in the country to restrict the use of drones. “I don’t mean to sound conspiratorial about it, but these drones are coming, and we need to put some safeguards in place so they are not abused.”

In Charlottesville, police officers are prohibited from using in criminal cases any evidence obtained by drones, also known as unmanned aerial vehicles. Never mind that the city police department does not have a drone, nor has it suggested buying one. The police are not barred from using drones for other efforts, like search and rescue.

Mr. Norris said the advent of new policing technologies poses new policy dilemmas for his city.

Charlottesville permits the police to install cameras temporarily in areas known for drug dealing, but it has rebuffed a police request to install cameras along its downtown shopping corridor. It has also chosen not to install cameras at traffic lights to intercept speeding cars, as is common elsewhere.

“Drones are capable of taking surveillance to a whole new level,” Mr. Norris said.

Last week, the Seattle Police Department agreed to return its two still-unused drones to the manufacturer after Mayor Michael McGinn answered public protests by banning their use. On Thursday, the Alameda County Board of Supervisors in Oakland, Calif., listened to the county sheriff’s proposal to use federal money to buy a four-pound drone to help his officers track suspected criminals — and then listened to raucous opposition from the antidrone lobby, including a group that uses the Twitter handle @N.O.M.B.Y., short for Not Over My Back Yard.

This week, members of Congress introduced a bill that would prohibit drones from conducting what it called “targeted surveillance” of individuals and property without a warrant.

A federal law enacted last year paved the way for drones to be used commercially and made it easier for government agencies to obtain them. The Department of Homeland Security offered grants to help local law enforcement buy them. Drone manufacturers began to market small, lightweight devices specifically for policing. Drones are already used to monitor movement on the United States’ borders and by a handful of police departments, and emergency services agencies around the country are just beginning to explore their uses.

The Federal Aviation Administration has received about 80 requests, including some from police and other government agencies, for clearance to fly drones, according to a Freedom of Information Act request filed by the Electronic Frontier Foundation, which seeks to limit their use for police surveillance.

Law enforcement authorities say drones can be a cost-effective technology to help with a host of policing efforts, like locating bombs, finding lost children, monitoring weather and wildlife or assisting rescue workers in natural disasters.

“In this time of austerity, we are always looking for sensible and cost-effective methods to improve public safety,” said Capt. Tom Madigan of the Alameda County Sheriff’s Department. “We are not looking at military-grade Predator drones. They are not armed.”

For now, drones for civilian use run on relatively small batteries and fly short distances. In principle, various sensors, including cameras, can be attached to them. But there is no consensus in law on how the data collected can be used, shared or stored.

This article has been revised to reflect the following correction:

Correction: February 18, 2013

An earlier version of this article rendered incorrectly part of the name of the federal department that offered grants to local law enforcement agencies to purchase drones. It is the Department of Homeland Security, not Services.

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Tech Industry Sets Its Sights on Gambling

Jim Wilson/The New York Times

Cesar Miranda, left, and his brother, Edgar, working on their claw crane game in San Jose, Calif.

SAN FRANCISCO — Look out Las Vegas, here comes FarmVille.

Silicon Valley is betting that online gambling is its next billion-dollar business, with developers across the industry turning casual games into occasions for adults to wager.

At the moment these games are aimed overseas, where attitudes toward gambling are more relaxed and online betting is generally legal, and extremely lucrative. But game companies, from small teams to Facebook and Zynga, have their eye on the ultimate prize: the rich American market, where most types of real-money online wagers have been cleared by the Justice Department.

Two states, Nevada and Delaware, are already laying the groundwork for virtual gambling. Within months they will most likely be joined by New Jersey.

Bills have also been introduced in Mississippi, Iowa, California and other states, driven by the realization that online gambling could bring in streams of tax revenue. In Iowa alone, online gambling proponents estimated that 150,000 residents were playing poker illegally.

Legislative progress, though, is slow. Opponents include an influential casino industry wary of competition and the traditional antigambling factions.

Silicon Valley is hardly discouraged. Companies here believe that online gambling will soon become as simple as buying an e-book or streaming a movie, and that the convenience of being able to bet from your couch, surrounded by virtual friends, will offset the lack of glittering ambience found in a real-world casino. Think you can get a field of corn in FarmVille, the popular Facebook game, to grow faster than your brother-in-law’s? Five bucks says you cannot.

“Gambling in the U.S. is controlled by a few land-based casinos and some powerful Indian casinos,” said Chris Griffin, chief executive of Betable, a London gambling start-up that helps companies negotiate licenses and handle the betting aspects of the business. “What potentially becomes an interesting counterweight is all of a sudden thousands of developers in Silicon Valley making money overseas and wanting to turn their efforts inward and make money in the U.S.”

Betable has set up shop in San Francisco, where 15 studios are now using its back-end platform. “This is the next evolution in games, and kind of ground zero for the developer community,” Mr. Griffin said.

Overseas, online betting is generating an estimated $32 billion in annual revenue — nearly the size of the United States casino market. Juniper Research estimates that betting on mobile devices alone will be a $100 billion worldwide industry by 2017.

“Everyone is really anticipating this becoming a huge business,” said Chris DeWolfe, a co-founder of the pioneering social site Myspace, who is throwing his energies into a gaming studio with a gambling component backed by, among others, the personal investment funds of Jeff Bezos, Amazon’s founder, and Eric E. Schmidt, Google’s executive chairman.

As companies eagerly wait for the American market to open up, they are introducing betting games in Britain, where Apple has tweaked the iPhone software to accommodate them. Facebook began allowing online gambling for British users last summer with Jackpotjoy, a bingo site; deals with other developers followed in December and this month.

Zynga, the company that developed FarmVille, Mafia Wars, Words With Friends and many other popular casual games, is advertising the imminent release of its first betting games in Britain. “All your favorite Zynga game characters will be there, except this time they’ll have real money prizes to offer you,” an ad says. “Play online casino games for pennies and live the dream!”

Mr. DeWolfe’s studio, SGN, is also on the verge of starting its first real-money games in Britain. “Those companies that have a critical mass of users that are interested in playing real-money games are going to be incredibly valuable,” he said.

Mark Pincus, the chief executive of Zynga, said the company was just following the market. “There is no question there is great interest from all kinds of people in games of chance, whether it is for real money or virtual rewards,” he said. Zynga, which has missed revenue expectations in the last year, is making gambling a centerpiece of its new strategy. It has just applied to Nevada for a gambling license.

Casual gaming first blossomed on Facebook’s Web site, where players could readily corral friends into their games. It is now being rethought for mobile devices, so people can play in brief snippets as they wait for a bus or a sandwich.

Some games mimic the slots and poker found in casinos; others emphasize considerably more creativity. The vast majority of casual game players play at no charge. A small number buy virtual objects in the game to speed their play or increase their status.

Tech executives expect an equally small number to play for real money but believe they will bet heavily, making them much more valuable to the gaming companies. By Betable’s estimate, the lifetime value of a casual player is $2 versus $1,800 for a real-money player.

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Slipstream: If You’re Collecting Our Data, You Ought to Protect It

LAST summer, employees at the National Aeronautics and Space Administration received an in-house newsletter illustrated with mock front pages of USA Today and The Washington Post and seemingly hyperbolic headlines like: “NASA Laptop Stolen, Potential Compromise of 10,000 Employees’ Private Information!”

The catastrophizing turned out to be prescient.

On Halloween, just a few months after the newsletter went out, a laptop used by an employee at NASA headquarters in Washington was stolen from a parked car. Subsequently, NASA sent letters to about 10,000 current and former employees and contractors, warning them that the laptop had not been encrypted. The letter explained that confidential details — like employees’ names, birth dates, Social Security numbers and, in some cases, personal information from background checks — may have been compromised.

When Robert M. Nelson, a solar systems scientist who recently retired after 34 years at the Jet Propulsion Laboratory, part of NASA, received the letter, he felt vindicated. Several years earlier, he and 27 other civilian scientists at the lab sued the agency to try to stop it from conducting open-ended background checks of researchers like them who worked on nonmilitary space projects.

“You’d think an agent of NASA would be a little more careful,” Dr. Nelson says. “Why does NASA need personal data unrelated to our work and then treat it in such a cavalier way that it is stolen from a car unencrypted?”

NASA has since notified an additional 30,000 people whose personal information may have been on the stolen laptop, says Robert Jacobs, a NASA spokesman. He declined to provide the job title of the person who left the laptop in the car. But he said that there had been no indication of identity theft and that the agency has encrypted practically all of its 38,000 laptops.

By now, reports of lost or stolen business devices are so common that many people open data-breach notices from their banks, insurers, medical institutions, schools and state agencies with something like resignation. In fact, negligence by employees and contractors has been a more common cause of corporate data breaches in the United States than malicious attacks, according to a study of 2011 done by the Ponemon Institute, a research center on data security, and financed by Symantec, a data security company. Institutions, companies and government agencies often devote more resources to collecting information about employees and consumers than to protecting it, security specialists say.

“This is an unfortunate but perfectly cautionary tale of not only how we should look more carefully at protecting data after it is collected,” says Lee Tien, a senior staff lawyer at the Electronic Frontier Foundation, a digital rights group in San Francisco, “but also how the data is to be safeguarded before we collect it to make sure it isn’t used improperly or disclosed accidentally.”

Dr. Nelson and his colleagues at the Jet Propulsion Lab, which is operated for NASA by the California Institute of Technology in Pasadena, didn’t set out to become crusaders for workplace data privacy and security. Initially, they wanted only to challenge NASA’s background checks, arguing that civilian scientists had a right to keep their romantic, psychiatric and other intimate information private from the government. Besides, they contended, the space agency would not be able to safeguard the information.

The scientists took their case all the way to the Supreme Court, only to lose. In 2011, the justices unanimously ruled that NASA had legitimate reasons to look into personal issues, like whether an employee had received drug counseling. A federal law called the Privacy Act of 1974, which restricts how government agencies share a person’s data, the justices said, should protect the information obtained in background checks.

“They were clearly wrong,” says Marc Rotenberg, executive director of the Electronic Privacy Information Center, an advocacy group in Washington that filed a friend-of-the-court-brief in the case. “Exactly the problem people anticipated came to pass.”

Privacy advocates say that one obstacle to improving workplace information security is a lack of consequences for employees who compromise personal data. In 2009, for example, the Government Accountability Office issued a report, titled “NASA Needs to Remedy Vulnerabilities in Key Networks,” which urged the agency to institute whole-disk encryption for all of its laptops. Unlike simple computer login passwords — which can often be guessed or bypassed to get to readable files — disk encryption scrambles files so they can’t be read without the correct key.

NASA eventually required the Jet Propulsion Laboratory to encrypt its laptops. But at the time of the Halloween theft, not all laptops at agency headquarters itself had been encrypted. Susan Landau, a Guggenheim fellow in cyber security, privacy and public policy, says companies and agencies are unlikely to improve data security without the threat of penalty.

“What are the personal consequences for employees who allow data breaches to happen?” Ms. Landau asks. “Until people lose their jobs, nothing is going to change.”

Mr. Jacobs declined to comment about whether NASA had disciplined the employee who left the laptop in the car, saying the issue was “covered by privacy.”

DR. NELSON did not emerge from his data rights battle unscathed. Caltech issued disciplinary citations to five employees of the Jet Propulsion Laboratory, including Dr. Nelson, who had used their nasa.gov e-mail addresses to send messages to thousands of colleagues about the Supreme Court decision. An employee who commits a second offense after receiving such a warning could be fired, Dr. Nelson says.

Lawren B. Markle, a spokesman for Caltech, says the employees used government resources, paid for by taxpayers, “to spam thousands of individuals, government officials and agencies, other businesses, and colleges and universities” with their political views.

“As a federal contractor,” Mr. Markle wrote in an e-mail, “we cannot allow the government resources entrusted to us to be used in this manner and particularly not to lobby for political positions.”

He added that a second warning would not automatically lead to dismissal. “The outcome would depend on the severity of the conduct and the history of the employee’s service,” he said.

The five employees have filed cases with the National Labor Relations Board, saying that they were unfairly disciplined because the e-mails were work-related.

“In the short time since the Supreme Court decision, tens of thousands of people have had their data compromised,” Dr. Nelson says. “For warning about what would eventually become true, we received disciplinary citations.”

An administrative judge is to rule on the matter in the coming months, but a Los Angeles office of the labor relations agency found merit in the scientists’ cases, concluding that Caltech unlawfully issued disciplinary warnings for the e-mails, says Mori Rubin, the regional director of the office. Her office also concluded that Caltech had disciplined the scientists for practices that other employees routinely undertook without penalty.

Such are the risks of taking a public stance on privacy.

E-mail: slipstream@nytimes.com.

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Bits Blog: Facebook Says Hackers Breached Its Computers

Facebook admitted that it was breached by sophisticated hackers in recent weeks, two weeks after Twitter made a similar admission. Both Facebook and Twitter were breached through a well-publicized vulnerability in Oracle’s Java software.

In a blog post late Friday afternoon, Facebook said it was attacked when a handful of its employees visited a compromised site for mobile developers. Simply by visiting the site, their computers were infected with malware. The company said that as soon as it discovered the malware, it cleaned up the infected machines and tipped off law enforcement.

“We have found no evidence that Facebook user data was compromised,” Facebook said.

On Feb. 1, Twitter said hackers had breached its systems and potentially accessed the data of 250,000 Twitter users. The company suggested at that time that it was one of several companies and organizations to be have been similarly attacked.

Facebook has known about its own breach for at least a month, according to people close to the investigation, but it was unclear why the company waited this long to announce it. Fred Wolens, a Facebook spokesman, said the company wanted to fully investigate the source of the breach before disclosing it. Mr. Wolens said the company was still working closely with law enforcement to determine the source of the attacks.

Like Twitter, Facebook said it believed that it was one of several organizations that were targeted by the same group of attackers.

“Facebook was not alone in this attack,” the company said in its blog post. “It is clear that others were attacked and infiltrated recently as well.”

The attacks add to the mounting evidence that hackers were able to use the security hole in Oracle’s Java software to steal information from a broad range of companies. Java, a widely used programming language, is installed on more than three billion devices. It has long been hounded by security problems.

Last month, after a security researcher exposed a serious vulnerability in the software, the Department of Homeland Security issued a rare alert that warned users to disable Java on their computers. The vulnerability was particularly disconcerting because it let attackers download a malicious program onto its victims’ machines without any prompting. Users did not even have to click on a malicious link for their computers to be infected. The program simply downloaded itself.

After Oracle initially patched the security hole in January, the Department of Homeland Security said that the fix was not sufficient and recommended that, unless “absolutely necessary”, users should disable it on their computers completely. Oracle did not issue another fix until Feb. 1.

Social networks are a prime target for hackers, who look to use people’s personal data and social connections in what are known as “spearphishing” attacks. In this type of attack, a target is sent an e-mail, ostensibly from a connection, containing a malicious link or attachment. Once the link is clicked or attachment opened, attackers take control of a user’s computer. If the infected computer is inside a company’s system, the attackers are able to gain a foothold. In many cases, they then extract passwords and gain access to sensitive data.

Facebook said in its blog post that the updated patch addressed the vulnerability that allowed hackers to access its employees’ computers.

Hackers have been attacking organizations inside the United States at an alarming rate. The number of attacks reported by government agencies last year topped 48,500 — a ninefold jump from the 5,500 attacks reported in 2006, according to the Government Accountability Office.

In the last month alone, The New York Times, The Wall Street Journal and The Washington Post all confirmed that they were targets of sophisticated hackers. But security experts say that these attacks are just the tip of the iceberg.

A common saying among security experts is that there are now only two types of American companies: Those that have been hacked and those that don’t know they’ve been hacked.

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Media Decoder Blog: Indian Music Service, Taking Page From Spotify, Goes Pro

Western music fans have no shortage of digital music services to choose from, and that abundance is spreading around the world. Apple’s iTunes is now in 119 countries, and others are racing to plant their digital flags everywhere. This week, for example, Spotify opened in Italy, Poland and Portugal, bringing its reach to 23 countries.

But just as interesting, and in the long run perhaps as significant to competition, is the rise of services that serve regional markets intensely. One is Saavn, a Spotify-like streaming service that specializes in Indian music, and has garnered 10.5 million monthly users with advertising-supported free listening. This week it will announce that it has taken another page from Spotify’s book, by offering a premium version at $4 a month that eliminates the ads, lets users listen to songs offline and will eventually add other features like higher quality audio.

Saavn, which has offices in New York, India and Mountain View, Calif., has a catalog of 1.1 million songs in nine languages and is available in more than 200 countries, with about 70 percent of its consumption within India, said Rishi Malhotra, one of its founders. Like Spotify, iHeartRadio and other Western services, it is an official partner of Facebook. About 80 percent of its use is on mobile devices, Mr. Malhotra said, and when the premium service, Saavn Pro, is opened in March, it will at first be available only for Apple devices.

The pricing is significantly lower than Western services. “We wanted to make it globally acceptable,” said Mr. Malhotra, who is based in New York. “The $10 price point that you see from a lot of music services we use here is way out of reach from what would fly in India or a lot of other emerging markets.”

Saavn believes it can succeed in India not only through its catalog of Bollywood hits, but through technological touches that may be meaningful only to Indian listeners. One example is the ability to search for a Bollywood song based on the actor who lip-synchs it — often more memorable to fans than the “playback” singer who actually provided the voice.

If successful, Saavn Pro could give the company an advantage in India’s quickly developing digital music market, which already has a handful of streaming services, like Dhingana, as well as a strong presence in downloads from Nokia. Yet that market is still tiny for a country of India’s size and overall media spending. According to the International Federation of the Phonographic Industry, recorded music had only $141 million in trade (or wholesale) value in 2011. A recent report by Ernst & Young said that music and radio combined count for only 2.4 percent of India’s media and entertainment spending, which for 2011 it estimated at $18 billion.

Part of the reason for music’s small proportion of India’s media economy is that popular music in India is dominated by the film industry. But a greater reason is piracy; the federation estimates that 55 percent of Internet users in India go to unlicensed music services on a monthly basis. That is slowly starting to change, music executives say, as courts there crack down on infringement and legitimate digital services proliferate. Apple’s iTunes opened there in December, and Nokia says it sells 1.4 million songs a day at its download store in India.

And Indian record companies are approaching digital business without the baggage that has been complicating deals with Western labels and services for more than a decade, Mr. Malhotra added.

“The labels in India are not reluctant about digital,” he said. “It’s not like they are protecting against some established, older revenue stream. It’s all found revenue for them.”

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Ben Sisario writes about the music industry. Follow @sisario on Twitter.

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In Japan, the Fax Machine Is Anything but a Relic

Kosuke Okahara for The New York Times

Yuichiro Sugahara, whose company delivers bento lunchboxes, mostly through fax orders.

TOKYO — Japan is renowned for its robots and bullet trains, and has some of the world’s fastest broadband networks. But it also remains firmly wedded to a pre-Internet technology — the fax machine — that in most other developed nations has joined answering machines, eight-tracks and cassette tapes in the dustbin of outmoded technologies.

Last year alone, Japanese households bought 1.7 million of the old-style fax machines, which print documents on slick, glossy paper spooled in the back. In the United States, the device has become such an artifact that the Smithsonian is adding two machines to its collection, technology historians said.

“The fax was such a success here that it has proven hard to replace,” said Kenichi Shibata, a manager at NTT Communications, which led development of the technology in the 1970s. “It has grown unusually deep roots into Japanese society.”

The Japanese government’s Cabinet Office says that almost 100 percent of business offices and 45 percent of private homes had a fax machine as of 2011.

Yuichiro Sugahara learned the hard way about his country’s deep attachment to the fax machine, which the nation popularized in the 1980s. A decade ago, he tried to modernize his family-run company, which delivers traditional bento lunchboxes, by taking orders online. Sales quickly plummeted.

Today, his company, Tamagoya, is thriving with the hiss and beep of thousands of orders pouring in every morning, most by fax, many with minutely detailed handwritten requests like “go light on the batter in the fried chicken” or “add an extra hard-boiled egg.”

“There is still something in Japanese culture that demands the warm, personal feelings that you get with a handwritten fax,” said Mr. Sugahara, 43.

Japan’s reluctance to give up its fax machines offers a revealing glimpse into an aging nation that can often seem quietly determined to stick to its tried-and-true ways, even if the rest of the world seems to be passing it rapidly by. The fax addiction helps explain why Japan, which once revolutionized consumer electronics with its hand-held calculators, Walkmans and, yes, fax machines, has become a latecomer in the digital age, and has allowed itself to fall behind nimbler competitors like South Korea and China.

“Japan has this Galápagos effect of holding on to some things they’re comfortable with,” said Jonathan Coopersmith, a technology historian who is writing a book on the machine’s rise and fall. “Elsewhere, the fax has gone the way of the dodo.”

In Japan, with the exception of the savviest Internet start-ups or internationally minded manufacturers, the fax remains an essential tool for doing business. Experts say government offices prefer faxes because they generate paperwork onto which bureaucrats can affix their stamps of approval, called hanko. Many companies say they still rely on faxes to create a paper trail of orders and shipments not left by ephemeral e-mail. Banks rely on faxes because, they say, customers are worried about the safety of their personal information on the Internet.

Even Japan’s largest yakuza crime syndicate, the Kobe-based Yamaguchi-gumi, has used faxes to send notifications of expulsion to members, the police say.

After the deadly earthquake and tsunami in northeastern Japan in 2011, there was a small boom in fax sales to replace machines that had been washed away. One of the hottest sellers is a model that is powered by batteries so it will keep working during power failures caused by natural disasters.

At Tamagoya, Mr. Sugahara has turned his company’s reliance on the fax and standard telephones into an art form. Every morning, orders for about 62,000 lunches pour in, about half by fax. Most of those lunches are cooked and put onto trucks even before the last order is taken. A small army of 100 fax and telephone operators carefully coordinate deliveries, and fewer than 60 lunches — or 0.1 percent — are wasted.

Hisako Ueno contributed reporting.

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